betty: from bloomberg world headquarters in new york, good afternoon. i am betty liu. we are watching apple. world's most valuable company deliver another blockbuster quarter or will there be some surprises? markets are dipping lower as the fed [indiscernible] walgreens boosts its quarterly closing. how an acquisition helps walgreens battle cbs. -- battle cvs. julie hyman has all the latest on the breaking news. starwoodt's start with

. .t is one example we are seeing stocks surge by 9%, the biggest one-day gain in six years. this is after the wall street journal reported at least three big chinese companies are competing to buy the company, including shanghai, jim young, international hotels and china investment corp.. again, all of this according to the wall street journal. this as china has said its companies would be more interested in investing outside of china itself. spokespeople for starwood have declined to comment. w wwood owns weston, the hotels. westin and the w hotels. ibm taking a leg lower after isclosing the sec

investigating it. in with it is corporate that investigation. the share is under pressure as a result. there is a potential pharmacy deal. walgreen looking to acquire aid.t aid -- rite- e-aid getting a boost here. reported semiconductor today. fairchild trading higher. sort of pulling up wishing investors one way or another. but the major averages are lower. julie: yeah. we had worse than estimated economic data.

durable goods orders and consumer confidence coming in worse than had been estimated. we have energy -- energy prices really pulling down the energy price -- the average prices as well. -- energy prices really pulling down the major averages as well. the only group that is in the green today is health care. that is also thanks to earnings by company like pfizer and merck and bristol-myers. betty: let's get a check of the headlines. mark crumpton has more from the news desk. and athe white house bipartisan group of lawmakers have reached a tentative two-year budget agreement to avoid a debt default and reduce the possibility of a government shutdown. the proposal already faces conservative opposition. john boehner big knowledged that the agreement is imperfect, but he called it "a good deal." a voteis especially --

is expected in the house on wednesday. the u.s. and israel were the only countries voting against an embargo in cuba. vote had the highest ever number of countries voting , 191.demn the embargo in other news, the next time international talks are being held over syria's future, iran could have a place at the table. u.s. officials say, for the first time, an invitation has been extended to iran to participate. it is a shift in strategy for the u.s. and its allies as they seek to halt the civil war. iran has not yet accepted the invitation. the next diplomatic round starts on thursday in vienna. officials in jordan and israel hope to have surveillance cameras mounted around and inside the jerusalem shrine at

the center of the recent violence. they goal is to provide live streaming of account pound revered by jews and muslims. the compromise was brokered by u.s. secretary of state john kerry last week. is facing a serious struggle to cut unemployment and boost economic growth. countriesents -- the -- president zuma had a message for investors. south africaa remains a destination for investors to come here. opportunities are huge and open here. so we want everybody to come. is the moment to come. africa has more that what he 5% unemployment and one

of the highest levels of inequality. -- southhave been africa has more than 25% unemployment and one of the highest levels of inequality. students have been protesting university fees. betty: apple is set to report their third-quarter results in a little over an hour. shares are unchanged. the world's most profitable technology company will reveal how many iphones it sold in the quarter. analysts are all ears. stephen, first off, what are we likely to hear on iphones? leads toi know that it opening sales last year. we have to take that with a grain of salt.

china was included in the first weekend for the first time ever. it looks like an increase, but we are not sure how much of that is china and how much of it is a genuine increase for the phone. betty: we were talking with john butler earlier. he said that china is a big swing factor. cory johnson: not so much just for the quarter. we only had a short period, a little over a couple of weeks of iphone sales in the quarter. -- but it is going to be so important for this company. importantly, the iphone in china was 27% of revenues. forh is an amazing number this country that was such a small part of apple a couple of years ago which is now one of the most important geographies for apple. the numbers in china will be so important because they will department not just what is going on -- will determine not only was going on with iphone sales, but for the entire company. betty: that's right.

70% of its revenue coming just from iphone sales. stephen, i know you were on when the apple watchers came out. you tried it out. you genuinely liked it. a lot of people are wondering about these new products. our apple users going from the iphone to the apple watch? are they experimenting with the apple pay? steven: it remains to be seen for the apple watch. apple has not given us any numbers. i don't expect that to change today. i do think what cory said about this upcoming quarter being an important quarter is it -- is completely true. apple tv went on sale monday and ships later this week. we will see the ipad pro coming in the next couple of weeks. it will also be the first holiday season where the apple watch has been for sale. i think all of these forces coming together, apple stands to have either a huge success or a

dramatic failure in the next few weeks. betty: i thought the forecast was, no matter what, they will be able to match the numbers they had last holiday, right? cory: that is the point. the other thing that is going to be important is gross margin cared it is not just the new parts for apple. iphone oral six plus come with your number margins. the sales of the older devices could show gross margins changing. a rebound in margins might have higherr phones margins and that means more profit for apple. betty: what about the ipad? is it so important? i think the ipad is still important. let cory said, the margins on things like the iphone 6 plus

and the iphone 6 are so big. customers are buying them. if people are buying phones, they are not buying the small tablets. the apple many is dropping -- the apple mini is dropping off. cory: we have seen double-digit decline in unit growth. that is really bad news for the tablet business at apple. you have seen a collapse in revenues, but even more important, fewer devices sold. you might see a pickup and never selling price with the new ipad. but those double-digit declines are really a problem. it is really the only dark spot that we have seen in the last few quarters in apple's earnings. --ty: that is because cap because apple is cannibalizing their own ipad products? cory: there are other tablets out there that are doing reasonably well, including the

surface. there are other devices that are running on the apple platform. the macbook air macbooks are super skinny and as portable as any macbook has ever been. ok.y: thank you so much. much more ahead in the next 20 minutes. the fed releases its policy statement tomorrow. will hold any clue of what janet yellen is thinking about? s deal may give new

light to bond traders. twitter will be releasing earnings. could be something to watch given the company's struggles to add new users. and of course, the switch to jack dorsey now as the new ceo. ♪

betty: good afternoon. welcome back. it's time for the bloomberg business flash. sec is conducting a probe into the way the company accounts for revenue recognition. ibm light in august that regulators were looking into the transactions in the u.s.

shares declined on the news. alibaba's revenues were better than forecast in the second quarter. china's 32% despite slowing economy. alibaba says it has stepped up advertising to ward off the slowdown. air travel in iran was sore once the nuclear deal with six world powers goes into effect and sanctions are lifted. the accord to the international air transport association is forecasting air travel will nearly triple to 260%. it says airline serving iran could expect more than 30 million at your passengers a year, that compared to the 12 million they serve now. you can always get more business news at bloomberg.com. the fed's two-day meeting is underway. investors are anxiously waiting to hear from janet yellen. fed watchers will be searching for clues on what the central bank may do at its december meeting. who doesn't see

that happening sometime this year. markets about 6% of the or traders who think they will see something in october. i don't see who they are. : i would like to see without 6% is because my poll showed 0%. december?ow about in in december? about guest: even less likely to view have effectively a global easing platform and how likely they are to raise rates in the face of china, the bank of japan expected to ease into the weekend, and draghi making dovish comments in europe. it is highly unlikely that they would go against the grain in light of what is going on globally. betty: what is good to change in 2016?

daniel: who knows? we don't know. conventional wisdom says that they have to start raising at some point. how long can money remain free? we are going on six years. the most likely scenario is q1 or perhaps q2 in 2016. again, people said that about 2015 and we did not get it. say? to we have a lot of data to digest between now and then. it's really feels like it is 2016's business. betty: it does. daniel: how can you speculate now for was is one to happen effectively nine months from now? betty: in terms of trading activity, tom said earlier this about the bottom we saw in august and the rally since then. overall, the markets have done well buddy lot of people lost their shirt, right? daniel: it has been a really

rough time. you can talk about technicals. want -- hindsight is always 2020. it seems like it has been a bit of a pain trade. betty: exactly. daniel: is painful to watch the market go higher while people are pitting themselves carefully and sitting on a pal of cash going into q4. betty: what about the rotation and health care and into energy? you have don't think seen much of a rotation into energy. energy is dead money. logic is that there has been an upside. there is a downside compared where the commodity and the companies are trading. but when diskerud -- but when does crude gained his footing and return to the mean?

let's not lose side of the fact that it has been the best-performing sector for the past for five years, health care. it was arguably due for a correction. where we have seen a rotation is into tech. large-caply out of and into small cap. there was not a lot a surprise. those have done well of the larger stocks, they see a rotation into this. i think there is upside in the market in general because there is a lot of ople who will be chasing this rally. if you are going to follow the flows, yes, big tech is the place to be. betty: what about earnings expeditions? daniel: earnings across the board, across all sectors have been managed fairly well. betty: what you mean managed well? daniel: the bar had been set low, particularly in health care. ibo had adjusted their point,tions to a

particularly given the down soon in the market this smile -- this summer, early fall. the bar was set low. earnings are not terribly risky right now. betty: bottom line, where do you see us now and into the end of the year? daniel: the market rallies, albeit carefully. we are six years into this recovery, if you will wire we still easing?why can we get the economy kick started? we are advising a cautious tone. betty: thank you so much. still ahead, we are talking bonds this time. when it comes to bond trading, what is more important, human interaction or lightning fast algorithms? a recent deal may give us some clues on who is more valuable. ♪

betty: welcome back to the

bloomberg market day. of the nyse has agreed to by interactive data holdings for $5.2 billion. lisa abramowicz follows the market on bloomberg news. signals this acquisition a way for good old-fashioned human beings, bond traders? lisa: interactive data specializes in information that you gather, not by looking at a screen, but by calling people and asking them about what they view as a potential value, by scrutinizing deal documents, determining what potential streams of revenue might be coming in, the safety of the covenants. the granule aspects of bond trading that are crucial to giving people confidence that they are getting a good or bad

deal. in other words, in bonn trading, it is very different than, say, going online and buying a pack of socks. it is a different kind of animal. you are dealing with an abstract instrument and a lot of really smart people who are going to try to game you. so they are confident that they are getting a good deal or a bad deal or if things are trading, they want to know who is on the other side. so then why would you want an electronic trading system when it comes to the debt market? been a prettys massive structural shift in bond trading since the debt crisis, where he had wall street banks that had dramatically shrunk. you had a massive increase in the amount of corporate bond -- this is an a trillion dollar market now. -- an $8 trillion market now. such a looking at massive amount of debt and a lot

of investors, including mutual fund investors, institutions, insurance companies, and they want to be able to make a move. yet you have these shrinking wall street trading debts. you need your own money to facilitate trade and he gives market color. it gives this qualitative aspect of trading that is crucial. betty: it is contextual. are we going to see more deals like this than? ?- this then lisa: we are seeing more emphasis on information and data and they say reliance on just trading on the technology side. betty: thank you. still ahead on the bloomberg market day, it has been a season of change at twitter. layoffs, new products, and jack dorsey returning as ceo, any a change in the company's financial picture. before we had to break, let's

get a quick check on how the markets are trading ahead of all of those earnings. of course, the big one we are watching his apple. is off toe the dow sense of 1%. for the fedng meeting and what they may or may not do in december. ♪

betty: you are watching the bloomberg market day. i'm betty liu. let's start with the check of the headlines.

mark: the u.s. justice department investigating the arrest of a student by a south carolina school resource officer. the officer was recorded tossing a fema high school student from her desk and dragging her across a classroom -- tossing a female high school student from her desk and dragging her across a classroom. the girl refused to leave her math class. obama is in chicago addressing the international association of chiefs of police. paid tribute to officers who risked their lives in the line of duty. this comes in the backdrop of several an -- several instances of black men killed by police. federal investigators say the recall system for faulty tires is "broken" and leaves motorists at risk.

they say manufacturers have no ways to contact most tire owners. the national transportation safety board says only one in five recalled tires is removed through the recall process. calling for mandatory registration of new tires. in france, france holland and others paid tribute to the 43 people who died in the collision of a tour bus and -- francois hollande and others paid to be to the 43 people who died in the collision of a tour bus. most were retirees on a great -- on a day trip. the truck driver and his three-year-old son were also killed in the accident. ashton carter says the obama administration is prepared to step up its military campaign against islamic state. the effort will include more and heavier airstrikes in syria. appearing before the senate armed services committee, he described an approach that will focus largely on the cities of rocca in syria and ramadi in

in iraq.nd romani you can always find the latest news on bloomberg.com. betty: thank you. let's head to the market desk were julie hyman has a check on company movers, continuing with the transport same. julie: right. we got earnings mostly negative coming out from the transports. not strict weugh speaking a transport stock, coming out with earnings that missed estimates, blaming the number on taxes that were higher than the company expected. ups coming out with earnings as well that missed estimates, blaming that on the decline of u.s. ground shipment. and shall airways coming up with estimates --t beat

with earnings that beat estimates. earnings from the drugmakers are better. bristol-myers, pfizer, merck, all of them coming out with numbers that beat analyst estimates. did better drugs than expected. also raising forecast for these companies. that also helped the stocks. i also want to talk about alibaba. interesting earnings report because there were said -- there was some pessimism because of the general economic perception of china right now. estimates.a beat it entered into new partnerships and expanded its offerings on its website. you can see the shares are rising 3.9%. alibaba goes, yahoo! follows. finally, i wanted to touch on a couple of truck/engine makers' comments that make heavy do --

heavy-duty engines. 2000 jobsy is cutting in an effort to save $200 million annually. paccar also coming out with disappointing numbers. on the industrial side as well as the transportation side, we saw some weaker numbers. betty: thank you, julie. twitter reporting third-quarter results today. first -- the first for jack dorsey as ceo. he faces many of the same questions that dodged dick costolo. and revenue. is hardlyer base growing. victor: he may add 3 million this quarter. betty: that is barely anything. here?s going on

victor: it is management execution. they have a strong chairman. bain have dorsey and adam in the management team. they have a google relationship and place. i think moments can help increase time spent aligned. there is also the google double-click. advertisingp with measurement and attribution. multiple tools are in place. it is now about it -- about execution. so that they kenexa execute. do any of those partnerships and products you are talking about, do you think they are really going to expand the user base from what it is right now, which is really people who go to twitter to get a newsfeed and celebrities and others who use it to spit -- to spread their word? victor: there are two things about twitter. it is really engagement. you're getting the existing

users to use the platform a lot more, almost on a daily basis, yet the to spend a lot more time on the platform. change seen a noticeable in my consumption pattern on twitter. betty: do you like it? victor: i do like a, primarily for its sports content. we will see whether or not my experience is equal to everyone else's. but then you have those nontraditional twitter users, those users who have not seen a value proposition for twitter. i think that is where the marketing campaign that is set to launch next month or so will help with really convincing those nontraditional twitter users to come onto the platform. and went to get -- and when you get there, how to use it better. betty: he was the biggest market for that, the non-twitter users? it is a funny little secret that grandmas and grandpa's really driven quite a bit of facebook

growth, right? you don't hear a lot about that because it is not cool to talk about grandma and grandpa. but they are a big part of the user base. so who are they missing -- who is the missing segment on twitter? victor: my dad. on twitter. i think you dropped off in about a month. it wasn't intuitive for him. it is about getting users -- they had about a billion people try the platform. they need to reengage them in try to make the platform attractive. we have to see whether dorsey -- we have to wait and see what dorsey and the others layout. betty: what about video consumption? that is big for facebook. that is big on instagram and others. but what about video consumption on twitter? is a big for them?

it is becoming big. just on the sports content for me. for thembig driver going forward. you'll see a lot more video ads on the platform. not just in the u.s., but across the globe. that is a big opportunity for them in 2016. betty: is there any big potential here internationally for twitter? victor: the growth stories really outside of the u.s. i think they will have a harder time in the u.s. come in terms of using -- driving up the user base. the growth will come from outside of the u.s. the same mr. for facebook. -- the same is true for facebook. i think the same thing will happen for tour -- for twitter. betty: ok, thank you for joining me.

coming up in the next 20 minutes their market rally. is it off its low? we have been debating this for a while. we are going to shed light on all of this. and also, can iphone sales deep up with their previous demand? ♪

betty: good afternoon. welcome back to the bloomberg market day. time for the bloomberg business flash. megamerger iner

the works. walgreens is talking about buying rite aid. no further information was available on how much walgree would pay for the company. mosts of ups drop in the in two months after third-quarter sales missed estimates. average daily package volume fell a tense of a percent due to slowing industrial production that weighed on business-to-business delivery. revenue was also hurt by lower fuel charges. ups says a strike is unlikely and negotiations are ongoing. a vote is set for friday. stmicroelectronics is considering a bid for fairchild semiconductors. st micro, europe's largest chipmaker, is looking to boost -- strengthen its

sec is looking into some transactions in the u.s.. shares are down today for ibm. you can get more business news at bloomberg.com. much more ahead on the bloomberg market day. there counting down to market close and earnings from apple, the world's most valuable company by market cap come as we had to break. here is a look at apple's revenues for the last six quarters.

betty: welcome back. what is driving this reversion rally we have seen in stocks? one theory is bearish investors not wanting to trade.

increased in august and september to levels not seen since 2011. point out that short interest have not budged. 3% of all shares outstanding, roughly the same as at the bottom of the august selloff. this came up again when we spoke with michael rourke yesterday, who pointed to the short covering as a reason why you should actually sell this rally now. what did you dig into? oliver: he brought up some interstate points. when boils down to is two different types of shorts. you have short interest that we have looked at many times, which is sort of across a benchmark. but it is on a company-specific basis still. if you have a terrace view on a specific company and you want to

borrow shares or sell them with the intention of buying them back in the prediction that the company is good to go down. theoader shorting across best etf, that is a little bit different. y est, that is a little bit different. if you look at that data, it is somewhat compelling. we still had the shorts, the short interest on the etf climbing. now it has come down. there is a little bit of a caveat. etf, youlook at the have to think of how shares are he deemed and created. it gets a little kabul gated. redeemed and are created. it gets a little complicated. be pushing towards a

pity big cover. a lot of people have a lot of money out. those who miss what or rourke was saying yesterday, let's play that back. or rourke: that is pushing the markets higher. way fundamental stories that have been week for the past year, that is why they are seeing the benefit of a broad market rally. it is not people saying i want to own these stocks and these companies and long positions. be enough toannot fundamentally affect the market itself. he is looking at this as a sentiment indicator, isn't it? oliver: maybe both. because he sees a short covering happening, if you want to sell, there is good to be a buyer out there right now. but in terms of how much buying

power that could be behind this, that was the just of db part -- jpmorgan's note. it on a company by company bases, there could be potentially 90 billion still. this is about a week ago. to 10re from 7 billion billion trading on a daily basis, that is potential buying power. -rourke thiswith o morning. this hasn't come down a lot. that doesn't necessarily mean that everybody's going to cover. self-evident, but you have to keep that in mind. just because there is buying power out there, it does not mean that it will come into play when you want. betty: thank you. speaking about stocks, let's head to the market desk where julie hyman has last check on the markets right before the close. julie: we are still going down heading into the close of trading. we have had worse than estimated

weakness -- worse than estimated data. also the earnings reports are not great today. so you look at the three major averages, we've got declines. you see energy continues to be the biggest wager. health care continues to be the shining example of strength today with some better than estimated earnings. consumer staples just kicking into the green in the past few minutes. digging into some of these individual groups, energy stocks and the weakness we are seeing are a combination of energy prices being lower. exxon mobil and chevron getting hit by that parent and consol energy coming out with earnings that missed estimates. so it's numbers are weaker. but it has been quite the underperformer for the year to date. and there's weakness on top of that. if you look at energy today, the underlying energy prices -- oil

prices continuing lower, although natural gas rebounded after earlier touching below two dollars per btu. it has come back up again. crude remains lower. it is down for 10 of the past 12 sessions. really pulling back significantly after a rebound that had happened prior to that. industrials also seeing so make as. that is the second worst-performing group after energy. this does have to do with earnings. we are seeing ups earnings miss estimates and union pacific declining along with the smaller a rail freight brokerage company that missed estimates. last quick check -- and i think he will be talking about this in a minute -- apple and twitter. twitter actually gaining to the close. earlier, the stock was little changed, but now getting some strength. apple has of doing a lot today -- apple hasn't been doing a lot today. betty: thank you so much.

we will be talking about apple. anticipation is building for those results. the company is scheduled to report in just a little over 30 minutes from now. analysts estimate earnings on $10.8 million on revenue $51 billion. but they say it comes down to the iphone and how many the company sold in the last quarter. john, first to you. you and i talked this morning. it really comes down to the iphone sales. john: it really does. over the past three or four years, iphone has been one of these runaway hits for apple. back -- we are in the last quarter of the fiscal year. in the fiscal first half, it was 69.3% of revenue. call it 70% of revenue.

bithen saw it dip a little in front of the introduction of the iphone 6 s this past quarter. but it is a huge part of revenue for apple. .o there is a lot riding on it as we talked earlier, there is a lot riding on china because that is where the growth in the iphone is coming from right now. a lot of it. betty: there's also a lot riding on the market for apple's success, right? joe: if apple comes out today and destroys earnings and then surges, it is hard to imagine the overall market being down and vice versa for a long time. -- and vice versa. , if you ownede apple, you run the index. it is just so big. it is almost a $700 billion market cap. you can't not be a big deal when you are that big. betty: obviously, we are all watching the iphone.

, whicht about the ipad hasn't been hitting its targets? how big a deal could that be? john: the ipad became a victim of the iphone, large screen iphone a particular. as af you look at tablets category, they ran into trouble with the introduction of these phablets, like the iphone success, a very large screen. 5.5-inch screen or larger. they're up to six inches now. it is like holding a pie plate to your ear. [laughter] joe: i have the iphone 6 plus. john: you use a tablet. joe: ever since i got this, the likef every a knowledge -- my laptop usage -- i took a trip last week and i did not open my laptop once. i had my desktop at the office, but i did not open my laptop once because i had this and i was able to use -- to do all my work here. the mainstream is

cannibalizing the ipad. john: as we get into this quarter and beyond, i think new products take on a whole new level of importance right now. let's say iphone sales begin to plateau. the only thing to really pick up that slack isn't going to be the older category products. it is not a be ipad. it is probably not been to be the macs. increasingly, it will have to be the watch, apple pay, apple music, apple tv -- not the hardware, but the software, the content coming in. joe: which do you think is most likely to be the next engine? might behought it music given their history. but i would be willing to bet it is the watch. betty: has anyone used their music, by the way? john: i have apple music.

joe: i have not used it. betty: i haven't used it either. john: it's like any new product or service, it takes time to get it right. i think we are in that phase right now with apple music. betty: john, thank you. thank you as well, joe. that is it for the bloomberg market day. the market closes at the top of the hour. we are awaiting does apple results. we have other earnings to watch out for. that includes twitter, panera bread company kkr, gilead, and a whole lot more. so stay tuned to bloomberg television. ♪

. . ♪ (ee-e-e-oh-mum-oh-weh) (hush my darling...) (don't fear my darling...) (the lion sleeps tonight.) (hush my darling...) man snoring

(don't fear my darling...) (the lion sleeps tonight.) woman snoring take the roar out of snore. yet another innovation only at a sleep number store. scarlet: we are moments away from the closing bell. i'm scarlet fu. joe: and i'm joe weisenthal.

alix steel is off today. scarlet: u.s. stocks closing lower. the s&p's lighting for a second day, but remains on track for in tw.t monthly advance joe: the question is --"what'd you miss?" scarlet: the fed prepares to announce tomorrow if it is raising rates. joe: it won't. plus, apple earnings in just half an hour. will they be punished for being too big to grow? and twitterew ceo boot theo rea company. we're not really doing anything and stocks. global stocks are lower. oil prices are down. natural gas