from bloomberg world headquarters, good afternoon. alix: here is what we are watching at this hour. the fed took no immediate action on interest rates this week. we have more wall street reaction to the decision. scarlet: pfizer is in discussions to buy allergan. what a merger could mean for the industry. danza -- billl us live in talks about those fare wars and much more. scarlet: let's check in with the after yesterday's surge following the fed's no decision. of a delayedsort reaction. they signaled that they were openly the door for a december

increase yet stocks rallied afterwards, particularly the financials leading. but that is faltering today. in part, it is because we are seeing some of the utilities give up the gains we have been seeing. we have the imap. the you -- the utility stocks that moved down when bond yields move up for two reasons. they have relatively high dividend yields so they compete with treasuries. second, they have relatively high debt. so if yields are going higher, that means the cost of service that debt goes up. health care and energy hoping to mitigate some of the losses were limit the losses. i wanted to look at the 10-year note. up .216 percent. almost a 10-basis point move at this point since before the statement yesterday. yesterday, we did see the dollar move up, but versus the euro,

the euro -- the dollars down. something us to throw into the max was this -- the mix was this morning gdp number coming in. sachs same time, goldman is reiterating his call that the dollar will reach parity for the euro. it is saying now it could happen as soon as december after the fed statement yesterday. alix: some of the rhetoric i heard after the fed yesterday had to do with oil prices holding up. thatinteresting to see give back today. julie: energy were the -- energy was one of the leading groups yesterday but so are financials. alix: thank you so much. now marklet's check in crumpton. mark: good afternoon. in thera is underway u.s. house of representatives. paul ryan of wisconsin has been sworn in as the 62nd speaker.

at age 45, the youngest in 146 years. is not until you hold this gavel, stand in this see all 435ut and members of this house, as if all america is sitting right in front of you -- it is not until then that you feel it. the weight of responsibility, the gravity of the moment. ryan's election to the post was preceded by a farewell address by john boehner new said he leaves congress with "no regrets and no burden." agingworried about its population says that couples may now have two children. that and's the one child rule that was placed 35 years ago. a comes after a meeting of connie's party leaders. -- communist party leaders. angela merkel is in china on a state visit. germany is china's biggest trading partner.

would they said that they buy 31 airbus planes for about $17 billion. u.s. secretary of state john kerry is in vienna joining other world leaders for talks aimed at ending serious civil war. civil-- ending syria's war. iran is joining the negotiations for the first time. is a look at our first word right now. you can find the latest at bloomberg.com. scarlet: the u.s. economy grew slower than expected in the third quarter with gdp coming in at a 1.5% annual rate. alix: for more perspective, we are joined by todd. thank you so much for being here. if you strip out those inventories, gdp was actually around 3%. how do you categorize the economy right now? on --it is not humming or

humming along. it is more the same. it is a dull economy. there are really only a couple of sectors that seem to be doing well. automobiles are selling very well. iphones are selling very well. -- if ithem together weren't for texting while driving, i don't know what would be driving gdp forward. consumers are kind of tentative. certainly the industrial sector, durable goods have fallen. five out of five federal reserve board districts in the regional report said things are actually slowing down. so it is hard to call this a robust economy. scarlet: the inventory overhang of skiers the real economic activity. is gdp this year, whether the second quarter or the third number -- third quarter number we got today i'm is a good gauge of what is going on? todd: the use us -- the u.s. is having to generate growth by itself because the rest of the world is still, if not flat on

its back, awfully flabby or flimsy. if you look around the world, you see china has slowed down. japan seems to be tipping back over. so the u.s. and mexico are in good shape. but even canada to our north, because of the collapse of commodity prices, has tipped into new recession. so we have to this growth by ourselves mostly. therefore, we really aren't going to be able to achieve the 3% or authentic 4% growth that we obviously -- that would obviously make a mertens feel better about themselves. listen toesterday, what the philadelphia fed president had to say. >> it would be hell for they could become more specific about what it is going to take over the course of the year -- it would be helpful if they could become more specific about what it is going to take. over the course of the year,

-- they haven't been. what would be the data criteria you would look at most closely? todd: here's what the fed should do. in december, they should tweak interest-rate to a little bit, maybe an eighth of the point. what they should make it clear. we are not doing this because we are concerned about inflation. we are doing this as a technical matter to prepare the markets for more normalized operations. so they should begin the process but not turn it into a major market moving position or something that is a real commentary on the strength of the economy, but as a matter of technical change. if they do it as a technical change, then they can repair the markets to accept something more normalized. at this point, it has just been

back-and-forth. there is no point at looking at every little data point. the american people know the economy is not terribly strong. the question is can the fed move off of zero? i think there is just enough spread that they can move above zero. so communication has run its course. it really needs action to back up what they are saying so far? type: i think so. otherwise it is like a rubber band being pulled back. the more to and fro, the more tension that is created. the fact is, other central bank's are easing. if the fed tweaks a little bit higher, mario draghi at the european central bank told us last week he was dovish. the bank of china is dovish. i don't think it could be cataclysmic for the said tonight's things in a thoroughly point. alix: you said the economy is kind of ho-hum right now. what about the argument that monetary policy is actually tight right now? it is actually not lose if you look at the natural rates.

todd: here's the real question. our businesses and individuals who are seeking loans able to get those loans on terms that seem reasonable? if you asked that question three or four years ago, the answer is no, despite 0% interest rates. small businesses and businesses were saying it was nearly impossible. banks were no longer lending to homebuyers. you don't hear that kind of sentiment now. so by that kind of measure, i would suggest that the 0% interest rates have really flushed through the system. scarlet: to follow on that, an interest rate increase, even a small one, will that halt the momentum? todd: i have trouble using the word "momentum" with the economy with a whole lot of umph with it. the reason why the initial move could be market shaking, market shattering is the fear that this

is the first of a procession of a relay race of one hike after another. alix: they have been pretty clear that that is not what it's going to be. the lack of clarity to me seems when the first rate hike will be. the trajectory has always been very slow and steady. in fact pushed out even more. todd: here's something to look for. i do not believe that the consumer sector is terribly strong. it is ok. andding money on iphones automobiles, that's ok. halloween sales appear to be pretty go -- pretty good when you speak to retailers. that may be a leading indicator for christmas sales. the time of the next fed meeting, they should have pretty good data from black friday over whether christmas will be a debacle or whether it'll be strong enough. if it looks as if christmas spending will be strong enough following thanksgiving, then the fed can do a little bit and then run away for the holidays and refused to be interviewed again. scarlet: so the fed should raise

bolster theay to markets as opposed to a way that predicts how consumers will behave. todd: exactly. technicalve that the ability of the fed and the money markets can withstand a slight change in interest rates. because it has been a long time and the tools of monetary policy have gotten awfully rusty. alix: the fed was to make clear ok ande jobs picture is overseas instability has called down. obviously, it is the lack of wage growth that has been plaguing the fed. what do you think is structural though as we see middle income jobs shot down and those workers moved to a lower income bracket, effectively capping those wage gains? todd: look at it this way. a week or two ago, from plates -- front page headlines, twitter was laying off a percent of its workforce. capitalizationt

is it like ford motor company. itsord laid off 8% of workforce, that would be about 20,000 workers. twitter laid off a percent. it was something like 336 workers. my point is we are in an economy that is so lean and companies have become so valuable, requiring so few employees. and that is a structural challenge. how are we going to create enough jobs in this economy if you can create multibillion-dollar companies of the backs of just a couple hundred workers? alix: you mentioned the people's bank of china and mario draghi, and bank of japan's turn comes up tonight and a lot of people are saying that the incoming one will move first before the federal reserve. does the fed need to go before the bank of england can tighten? todd: i don't the the federal reserve board needs to wait. i don't think either has to wait for the other. certainly mark carney, who heads up the bank of england, who is a

canadian, is quite familiar with the north american economy. think that these central bankers really do conspire. they don't necessarily alert each other. the bank ofthink england or the federal reserve board needs to gain position or even give notice to the other. alix: thanks so much. more coming up in the next 20 minutes of the bloomberg market day. it could be the biggest deal in the history of the drug industry. allergan confirming it is in merger talks with pfizer. and shell reports its biggest quarterly loss. how bad is it going to get? scarlet: and spirit airlines find lower this year. allowing competitors to match its lower fares. we will hear from their ceo coming up. ♪

alix: welcome back to the bloomberg market day. it is time now for the bloomberg business flash. that residential real estate market may be cooling off with pending home sales of previously owned homes unexpectedly falling last month. a drop of 2.3% was the largest since the end of 2013. scarlet: marathon oil, the first major shale producer to cut its dividends. payoutn has slashed its and the reduction is expected to increase cash flow by $25 million. since the drop in oil prices,

and a jury -- energy companies have tried to maintain their dividend by cutting elsewhere. alix: offering cheaper ways to connect gadgets to the internet. starting in the first quarter, it will offer options that will use less overhead so the devices can connect to the web for less. most web-connected devices look into the internet via non-cellular apologies. my apartment will keep talking to me which is very scary. [laughter] let's turn to julie hyman. earnings winners and losers, let's start with yelp, which is an earnings winner today. the company coming out with sales that rose by 40%. according to analysts at bloomberg intelligence, tv campaigns and higher mobile app

usage and the sales force is adding ads. on the flip side, we have buffalo wild wings. that company is cutting its earnings forecast saying they are going to grow by a single digit percentage this year. the fire -- the prior forecast was for 13%. the company is blaming this shortfall on higher labor costs and parker -- in part. at wwe, the home of world wrestling. shares are up -- down by 9.5%, excuse me. the company's earnings looks like they had beat estimates. but forecast for paid subscribers to remain unchanged in the fourth quarter is disappointing versus some analyst estimates. been thends, which has best-performing stock in the s&p 500 today up better than 12%

after the company is raising its earnings forecast for the full year following a following -- following a positive third quarter. most recently, it had a, -- had an acquisition of night apparel. alix: thank you so much. there is still so much more to go. scarlet: absolutely. starbucks tonight. first solar. coffee prices hedging. i'm excited. [laughter] alix: it could be the biggest deal in the pharmaceutical industry. pfizer looking at allegan. we will break it down in depth. ♪

ofrlet: a beautiful shot

midtown manhattan. i think it will go up to 70 degrees today. out on thes gorgeous way to the train this morning. a beach day after we get off air. we are talking about drugs now because pfizer is getting closer to breaking up and moving out. it has confirmed to bloomberg it is in talks to acquire allergan. if that transaction goes through, it will be the biggest deal in the history of the pharma industry. legalt: allergan has its domicile in dublin and would allow pfizer to move to an overseas address worried would pay lower taxes. purchased by activist earlier this year. i want to bring in jeff. this is now the third attempt to do a texan version? -- a tax inversion? jeff: that's right, the third time by pfizer. astrazeneca is truly a foreign company based in europe, a lot

of employees in london and in the u.k.. scarlet: british politicians got involved in all of that. jeff: that fell apart. in the summer, they made a run at the prior audi come a few welcome activists -- prior allergan, if you will, actavis. allergan.is buys they need to have a company that is at least half their size where they can get the inversion deal done which is why pfizer keeps making these runs because they are obsessed with getting their tax rate down into the teens. on the flipside, you wind up having an enormous price tag. and a government that seems to be strict when it comes to their m&a.

jeff: absolutely. carl icahn is anti-inversion. their tax rate is about when he 5% at pfizer. if they do this deal, they can cut that in half, somewhere in the neighborhood of 13% to 15%. so they could pay it per to good premium here on allergan and still make a lot of money down the road because they cut their tax rates are much. how the government will react, we're not sure. perhaps they can get into the middle of the deal and say you have to sell off a budget of assets or we will have some antitrust issues because you have too much of the drug market. but there is no opportunity or situation where they will just block the deal. does seem like any cut of rules from congress will be retroactive. even if they pass it now, what you have a new congress and new president, could it not worry pfizer later?

jeff: absolutely. 50/50 this deal gets done. happened justhave a week ago another company is -- now the news is out there in the company has to confirm it. it feels investors who want to get the deal then. but then it becomes a problem because it plays out much more publicly than the typical deal does. as for how tc will react, who the heck knows? you knowblicans say, what, that is how the tax code is written and the company should do what they have to do. people like donald trump are pushing back against this. who can say. scarlet: you said these discussions are still early. they began a week ago. why would pfizer confirm it? its interest to get that out there to make sure everybody knows it is in talks? confirmed at first because they inverted years ago

or when they got taken over by actavis. europed take over kos in that force them to double joe can from the negotiations. then pfizer came on said we confirmed with a confirmed. now we will all be chasing the next steps and what the offer will be. scarlet: any idea on the price tag? jeff: not yet. alix: bloomberg is saying $145 billion. somewhere between one hundred $45 billion and $150 billion sounds right. scarlet: falling oil prices are hitting shell pretty hard. ♪

scarlet: welcome back to the

bloomberg market day. let's check in with the headlines. for that, mark crump and has all the numbers. : a changing of the guard today in the u.s. house of representatives. wisconsin republican paul ryan has been nominated -- has been elected speaker of the house. before he handed over the speaker's gavel, john boehner delivered his farewell address and received a standing ovation from his colleagues. congress withves "no regrets and no burden" and called the house the great embodiment of the american dream. republican presidential candidates try to break out of a crowded pack in colorado. marco rubio defended himself after a florida newspaper called on him to resign for not showing up for recent senate votes. rubio: in 2004, john kerry

ran for president missing 67% of his votes. sentinel"the sun endorsed him. so this is another example of the double standard that exists in this country between the mainstream media and the conservative base. said that hisrump four casino bankruptcies were a good thing because they taught him how to restructure debt. u.s. secretary of state john kerry is in vienna for talks aimed at ending syria's civil war. for the first time, iran is taking part in the negotiations. iran and russia both support syrian president bashir al-assad. nato may increase the number of troops in countries bordering russia. the wall street journal reports to 4000d add up troops. to deter russian

aggression. the army is try to figure out how a blimp got away from his handlers. free offoot blimp broke should a in maryland and drifted north before crashing in pennsylvania. no one was hurt, but the tether lines severed power lines along the way. you can always find the latest news on bloomberg.com. thelet: mark crumpton with numbers in the words. tox: standard chartered said raise $4 billion of capital. shares are falling over 3% right now in london. there is no final decision on raising this kind of capital, but this is the next step for the company. it gets most of its revenue in asia. it is an emerging markets-focus lender. it has two years of market slide. scarlet: this is really the theme across the banking

industry right now. credit suisse saw a lot of concern about needing to raise capital by selling shares. deutsche bank coming cutting the dividend for this year and next, is hoping to avoid having to raise capital. this is coming as regulators have increased their rules, the capital rules, for these different banks while capital market trading is slowing down, really putting pressure on where they can pull money. standard chartered -- scarlet: no final decision has been made yet. shell is coming off of a tough third quarter. , the company'sg worst loss in the last 16 years. scarlet: but is it doom and gloom? thank you so much for joining us.

skip, the slower lining for me in the report is that a covered in its dividends with the money they earned? that seems unheard of in the oil industry. skip: right. i think that is where these companies are trying to head. they are turned to say, can i keep my activity level constant and protect the dividend? what else do i have? do i have anything left over for discretionary spending? this has been a year were the answer to the last question is no. i think that is what they are -- they are turned to play this game for the long term. companies like shell and the other majors, they look to play this game out over decades, not quarters. alix: that is different from the emp guys. we heard from bp. they are committing to the deepwater rigs. that is exactly what opec wanted to cut. what is the difference between shell and smaller emp players?

>> they have two levers to impact their ability to control cash flow or to -- forward. we will see were oil prices go. but we will likely see budget cuts in 2016. scarlet: i wonder if there is a company that is able to take advantage of lower oil prices right now and increase their spending so they are in a good position when oil prices rise? are they also obsessed with reducing their expenses? skip: they are focused on reducing expenses. but will -- but what will be part of the 2016 story, we do think there will be further capital cuts. but we wouldn't be surprised that some of those companies are putting a little bit aside. so the right opportunity comes along, they will seize on that opportunity. i don't think they will capture or plan to go after something in

a low oil prices averment. but a lot of companies will be tried to find a way that, if the right opportunity comes along in the low oil prices vermin, i will be financially in a position where i can go after it? but enough less money if you see a piggy bank. the cell is basically don't want to sell any capital market -- the sellers do not want to sell and the capital markets are still in a bind. what is the incentive? peter: the debt market is further tightened and the options have smaller players. they will have to look for an exit. and one of those exits is m&a transactions. it is oil darwinism. the strong will eat the week ultimately. scarlet: skip, what is your take on m&a and the lack of it so far. -- so far? skip: it is not that they have gotten anything wrong.

what the equity markets is looking at right now is looking for a way to encourage efficiency and improvements in productivity. a focus player that is focused , the marketsta think they have a better opportunity to capture productivity gains than someone who is more diversified. what might happen is the equity markets may change the flavor of the day and later on they might say, you know what, i once a buddy who is a bit more diversified because they are i wanto be a bit more -- somebody who is a bit more diversified because they are going to be a bit more nimble. it is not that the equity markets have gotten anything wrong. they are trained to emphasize something today that they might change the focus on tomorrow. scarlet: in the current environment, should some of the bigger oil companies, the diversified companies, break up? skip: that is a great question. quite often, we get asked the opposite, should they go off --

go after the small guys. i think what we will see is some to whattudy similar talk's he where they spun off a california business into a standalone business. companies will probably be considering options like that. it will be a function of -- can i get better value selling assets as a whole? and if i can find a buyer, is my portfolio better off by spinning it off? alix: you can look at the results from conoco tomorrow. conoco no longer has a refining business and exxon does. and for exxon, the refining business is really going to define them. you see refinery moneys really going to help them over the short term. scarlet: absolutely. universalook at your coverage, peter, what are you looking for in terms of -- they're so much disagreement on where oil prices are headed? peter: there are two things

under the control. it is their capital spending plan, which i expect to be cut in 2016 as a result of the kind of mindset that is changing to lower for longer is here to stay. the second thing they can change is reducing their operational expenses. that means headcount, reducing things like drilling times, completion costs. these are the kind of things we will look forward to in 2016. the ones that can do the things effectively other ones who will survive and thrive. alix: thanks so much. scarlet: coming up, in the next 20 minutes, deutsche bank eliminating 35,000 jobs from its workforce. ceo's plan?new alix: we are going to hear from spirit ceo in just a few minutes. the fed has spoken. we will you know what that means for your investment.

♪

scarlet: welcome back to the bloomberg market day. it is time for the bloomberg business flash. more now on the news that broke moments ago. bloomberg news learning that standard chartered having meetings as british regulators are increasing scrutiny on lenders. while standard chartered has discussed the option of raising capital, no final decision has been made on whether to proceed with the share sale. the london-based bank may need as much as a billion dollars to address a funding gap. new york community bancorp

in a deal valued at about $2 billion. shareholders will receive one .hare of common stock the deal values astoria at 19 point -- $19.06 per share. scarlet: time warner cable posting third-quarter earnings that beat analyst estimates. you know, relators are deciding whether to allow charter communications to buy time warner cable for $55 billion. you can always get more business news at bloomberg.com. alix: let's take a look at how markets are doing all over the world. fell for a's kospi third day. sam song is experiencing its long as winning streak in six years. i think there is a buyback

somewhere in here. samsung.o things for third-quarter results and a surprise offering. buyback.lion u.s. billion netver $45 -- $4.6 billion. .t is tricky to compare samsung is a much more diversified company. scarlet: now for a look at how the european markets are closing or have closed. deutsche bank and barclays posting some disappointing results.

mark: european stocks falling for the third day while investors pondering what the fed will do in the december meeting and the prospect of higher rates hurting commodities. the worst-performing industry group. lieberman capital also recommending selling rio tinto and bhp billiton. the stoxx 600 this month has risen by a percent, the biggest monthly gain since 2009. on the data front, it was euro area confidence that took many by surprise. we had an unexpected rise for the fourth second -- fourth consecutive month. a busy day for earnings. 35 stoxx 600 humphreys released earnings all this thursday session. -- companies released earnings on this thursday session. this is the stat i love. the oil price route is worth

$500 billion since the end of last year from the bloomberg world come oil and gas index, which tracks energy stocks like this. that is a lot of money. let's get to georgia bank come -- let's get to deutsche bank, 7% down. yes, it is still going to pay dividend for two years and shrinking its workforce by 26,000 by 2018. but is the strategy to thin on detail? that is what analysts are saying today. he didn't provide a path to growth as he scales back the investment bank and sheds businesses. -- look at no.5% here, up 10.5%. nokia, up 10.5%. stock rising the most since

september 2013. what happened in september 2013? that is when it sold its handset business to microsoft. a lot has happened since then. scarlet: a blast from the past. thank is so much. alix: abigail doolittle has the latest live from the nasdaq in midtown manhattan. abigail: we are still looking at earnings over here. so let's get right to a. msp -- let's get right to it. -- nxp had been looking for an increase. customers are pulling back on orders in the face of a slowing economy. the ceo talked about not seeing demand returning in the near term. some are seeing it as a buying opportunity. the consensus price target is

125, suggesting shares could rise nearly 70%. another disappointing earnings report out there today, gopro. the camera maker put up a very disappointing third quarter, missing street analysts on the top line, the bottom line, got his fourth quarter below street consensus estimates. jpmorgan saying the shares are in the "penalty box." quarter, heeast a reduces estimates, cut the price target to 55 from 75. and in the wake of that negative , a supplier toa gopro, shares are off even though kevin cassidy says he still finds shares to be attractive. his buy rating and his price target of 115. scarlet: that is an interesting reaction. coming up on the bloomberg market day, cheaper gas and competitive prices. spirit is hitting some turbulence of the. we will speak with the ceo next.

in the past, margins for this company are insane. they're so great. scarlet: but customer satisfaction not always so high. alix: very, very true. ♪

a turbulent been year for spirit airlines. it lost half of its value since the beginning of the year. the low cost air carrier is known for its bare-bones business model. scarlet: but with the cost of fuel falling and legacy carriers introducing no frills flights, is starting tos heat up. ceo ben baldanza is joining us from washington, d.c. on your conference call, you

said pricing pressures from the legacy airlines will continue for a while and maybe even longer than what many people expect. could you give us more color on that? what will that look like? i we pass the worst or will he get worse before it gets better? fuel prices started dropping in late when he 14, we saw the industry had a lot of capacity. in order to fill that capacity, prices have come down, which is great for consumers. but it puts pressures on yield. fuelpect, as long as prices are going to stay about the siam, we will see prices where they offer for the long-term it now. we don't see an easing in the revenue environment really until capacity pulls back a little bit, which we don't see happening, or fuel prices start to rise again. alix: what happens if fuel prices stabilize? we are not going to see 50% decline again in oil prices, but we will not see 50% rally. what do your margins and up looking what -- looking like?

ben: we have been a high-margin airline for a long time. spirit has been profitable since 2007, even when oil went to 140 7000 -- $147 per bell in 2000 eight. we expect to be an outperform or to the industry bucket on a $147 per barrel in 200 baldanza. -- in 2008. we expect to be in outperform r to the industry bucket on a margin basis. scarlet: why make changes with a scalpel rather than with a chainsaw? ben: we watch where we fly very closely. and we trust the metrics of where we fly very closely. virtually, all of our planes are any the kinds of returns we expect to return right now. so making wholesale changes as

hunter may be suggesting that she knows our model well -- it would actually reduce earnings. more appropriate because, by tweaking here and there he little bit, we can react to the market a little better. changes are necessary because we just produced a 27% operating margin for the third quarter. we are guiding to 21.5% to 23% for the year. those are still pretty good numbers even though they are not quite as high as we thought earlier in the year they would have been. alix: how much money do you think you will make next year versus this year? it is unclear we will make less money next year. that is uncertain right now. the revenue environment is very cloudy right now. we feel very good about our costs. we have been on a really nice trend of downward axial unit costs. and we expect flat the band is where we are going to see next year in costs. so it comes down to the revenue environment. a more punitive environment might suggest a little bit lower

earnings next year. but you can paint a world where it is flattering. so it is uncertain right now. of it depends on where legacy competitors price or tickets. investors hoped the industry was passed any kind of price strategy they had compared in -- they had in the past. i would like you to compare contrast of the price words -- price wars we have seen in the past. ben: we think the pricing in the environment right now isn't so much aggressiveness against spirit or other low-cost carriers. we think it is really supply and demand with capacity. a lot of seats have been added into the market. if you look at dallas-fort worth, for example, we have not grown in dallas since 2013. but the two large players in dallas, american and southwest, have each added capacity greater than spirit has in dallas in that timeframe. and if you extract that to the rest of the u.s., you see carriers going to earth -- 2% or 3% on very large basis.

feeling all those basis means prices are coming down for a while, which is good for consumers. but it puts pressure on the revenue environment in the short term. scarlet: your stock has doubled in the last month. what is the catalyst you see to see -- to get the stocks moving again? ben: to get investors to understand how resilient our model is. the reality is there is a lot of chatter. but the data still show that our performance is very strong. our earnings are very strong. the addressable market for spirit has gotten bigger. cost carriercent going down. our cost advantage is getting wider. alix: thank you so much. we will be right back.

1 p.m.t is scarlet: welcome to "bloomberg

market day." ♪ scarlet: good afternoon. alix: here is what we are watching at this hour. with a penalty with a zero, what is the impact on global markets. scarlet: georgia bank announces a new pastor profit. what is it mean when a bank gets this lien? first we want to head over to the market death were julie hyman has been checking on things. stocks are not down quite as much as they were earlier. still seeing some declines across the board. that is wirp. we can start their. -- there. this is futures possibility and

pricing the chance we will see a rates in recent at the next -- rate increase at the next several meetings.we saw a jump in the december probability . upward see the movement in the chart here. that is having a ripple effect around the market today. let's look the major averages. we are still seeing declines across the board. the s&p has heritage the going to a 10th of a percent now. the s&p down 1/10 of 1% at this point. we see concerns to some degree about interest rates going higher. market producers knew it would happen, it was a question of when. we definitely have seen a big movement upward in the 10-year note yield. % as people are repressing the expectations for the fed.it felt quite sharply in the gold market today

. gold prices heading lower. biggest drop since april as we see a decline of 2.3% . interesting ripple effect being felt. it is sort of on a delay as we talked about earlier that we did not see or we saw more of a positive reaction yesterday that is now getting turned on its head today. alix: we got some mushy eco-data. the third quarter gdp was weaker than we expected but we kind of knew that packet inventories of around 3% and home sales a little mushy. indicatorward-looking which on the spectrum you should pay a little more attention to, gdp more backward looking. we are seeing the homebuilders down by 3.2%, the biggest drop since the end of 2013. we did not see a broad market reaction, but definitely see a reaction specifically since there's home sales data is coming on the back of last week's new home sales number

that was also below economist estimates. scarlet: thank you so much. we will check in with julie again in 30 minutes. alix: let's check in on the bloomberg first word news. mark has more. mark: it is the dawn of a new era in the u.s. house of representatives. congressman paul ryan today was sworn in as the 62nd speaker. he wasted little time offering his colleagues a direct assessment of the chamber. >> let's be frank. the house is broken. we are not solving problems. we are adding to them. i am not interested in laying blame. we are not settling scores. we are wiping the slate clean. his words were preceded by a farewell address from john boehner who said he leaves congress with no regrets no burden. concerns over the aging population and potential labor

shortages of prompted chinese officials to eliminate the country's one child rule. couples may now have to children, putting an end to the rule that was ordered 25 years ago. the role came today after a meeting of communist party leaders. johnsecretary of state kerry is in vienna trying to hammer out a plan to end the syrian civil war. it includes russia, european allies, and hiran. russia and iran support the syrian president bashar al-assad. he is killed more than a quarter million people. a dramatic rescue operation in the edgy and see saved 242 refugees. the great cause carpal them from the water after their ship capsized in high winds and sank. seven people were killed, including four children. more than half a million refugees have reached greece this year. we have live pictures from fort lauderdale, florida.

the associated press reporting a plane caught fire on the runway today at fort lauderdale hollywood international airport. the ap says flames engulfed one engine of the dynamic airways boeing 767. airport spokesman is saying the fire was quickly put out. so far, no word on injuries. that is a look at our first word news right now. you can find the latest news on bloomberg.com. back over to you. scarlet: thank you so much. the possibility of a december interest rate increase is rippling across financial markets and confusing investors. treasuries continue to fall. stocks rallied yesterday. today, the s&p is seeing its best rally since 2011, one that has added one trillion dollars. isx: joining us now bloomberg's senior economic correspondent brendan really. what part of the rally has to do with holding his ground despite the stronger dollar versus the

fed? >> the oil as a commodity has been moving in part because of what has been going on with the dollar and the concern about this surge of 50 million barrels of iranian crude that may slump over the market once the sanctions are fully lifted. the energy story is not the critical part of the story. what is going on with the federal reserve, glover earnings, and valuations are more critical. alix: it has been critical to the s&p rally. stocks will also maybe take a light blow. we had the stronger dollar and oil held up. can make the case that yesterday was a technical day. phil: you could but energies are 10% of the markets. the factthat the energy market had a good day was nice for those investors that own energy stocks, but it is a relatively small portion of the market. brendan: we were just talking also about the gdp numbers and we don't get a little bit, ballistic at the-- but let us

take a look at the personal savings rate. are we still leveraging? when will the and? -- end? phil: it has been out significantly over the last year or so. as we saw energy prices, gasoline prices have fallen from four dollars to two dollars nationally over the last two years. the rule of them is that every penny changed at the pump translates into $1 billion of consumer discretionary spending. in an $18 trillion economy, there is a full percentage port of gdp. with a lack of six the 12 months, that is starting to stimulate the economy. the savings rate is better, consumer spending is doing better. all of that is good. the important point is that over the last six months or so, consumer spending has improved. the savings rate has come down from 5.5% to 4.5% to feel some of the spending. scarlet: when you step back a

little bit here because you were onset yesterday when it came out with the announcement. you looked through the data in the statements. is it actually as hawkish as we thought? brendan: backing off the language of how they are paying attention to the international markets. are they paying attention to growth or financial turbulence outside the u.s.? i think we know the answer now. they are paying attention to turbulence.as long as things are settled and we understand what the trends are, we can move forward. i am looking forward to tomorrow's number. phil: we will see two numbers that are important tomorrow. to want to see a tick up 14. spot on with the analysis of the fed commentary yesterday. the market was totally freaked out a month ago by the discussion of china. what we were looking for in

yesterday's meeting was not a change in policy. there would be no changing rates. we were looking for changing the gdp numbers and the consumer portion of that was actually much better. i think it was a a .4% -- up 8.4 %. we wanted to see that the whole international and china situation was less troublesome today than at that meeting in september. i think that is why the market rallied. brendan: it was volatility. is already inn recession and dragging the rest of the world including the u.s. with it. that chinese that i told us that was not the case and we wanted to measure the fed got that message and i think the message was well received. alix: do things actually have to get better for the fred to hike or can they not get any worse? for me, that was a question reading into the statement yesterday. phil: that is a great point. we are also in that camp.

there are a couple of things we think the fed needs to see. the first was the china gdp number a week or so ago. number two are these inflation readings tomorrow, which we think are critically important. the third thing is a week from to seefriday, we want the labor market report start to reverse some of that weakness we saw in august and september. august and september are typically very quirky months. we get that. adb has been running at 200,000. that suggests we should get a move up. market is waiting to see those numbers as well. brendan: we have two more core pc numbers. i think what is going on and what you saw the conversation before the september meeting was the discussion about the phillips curve and if it still works.

everybody is looking at those numbers and going unemployment is down and where is the inflation? if we don't see that, maybe things are not working as we expected. phil: that is why the eci tomorrow will be important. scarlet: there are so many different ways of measuring inflation when you back out food and energy costs. take your pick and show whatever you wanted to show. alix: inflation is actually pretty good and decent. the best is really good as well so how do you make a fed decision when the fed can pick and choose whatever metric they want. brendan: there is a trimmed main cpi. it. is one way to look at it is the same as with the value of the dollar.it is almost all are irrelevant. the fed looks at the trade win of the dollar. that is that it issues publicly looking at. phil: that is an argument we get from clients a lot.

they say what is the fed looking at? they do not eat? they do not drive anywhere. if they had to go grocery shopping and filling out there takes, they would be thinking differently. brendan: we take out got because the prices are volatile but does that change expectations long-term? real people driving real cars. scarlet: it does for the breakeven rate. phil: it does that is why waiting rochus so important. if you are personally doing something better than the rate of inflation, then it really doesn't matter. in an environment where we have been in since the great recession where wage growth has been happening and you are not doing any better, you're losing ground to inflation. alix: thank you so much. we have much more coming up on the "bloomberg market day."

deutsche bank is eliminating 35,000 jobs from its workforce. what is the ceo's plan? it does not involve raising capital. alix: a 15.5% return over five years. what is the secret to his success? we will give answers that you were not expecting like roads and highways. thelet: shares dropping most in four years. what is causing the loss of appetite for this chain?

alix: welcome back to the "bloomberg market day." scarlet: it is time for the bloomberg busines flash. halligan is in merger talks with

pfizer.it has entered into elementary funding discussions with pfizer. says there is no certainty of a deal on the horizon. allergan's market value is $112 billion. shortrevenue did come up unless with the second-largest u.s. payments network set a stronger --set a stronger u.s. dollar would hurt over the next three years. first-time claims for unfunded benefits stayed near a four decade low. jobless claims rose to 260,000. high demand for labor is encouraging employers to hold on to their workers. scarlet: you can always get more business news at bloomberg.com. alix: let's head over that were markets desk desk or julie hyman has a check on some of the company movers. julie: i have a weight loss theme going on today. nutrisystem coming out with its looked like they

beat estimates but the companies coming out with a fourth quarter forecast for earnings and sales that leave it room to miss estimates. shares are tumbling down by 27%. a record one-day drop for the stock. the pain does not end there. take a look at gnc. that company cutting its forecast for a full year earnings is well -- as well. analysts are looking for 2% growth. the company's third-quarter comparable sales coming in well below estimates. analysts have been estimating they would rise in the u.s. in company-owned stores and franchise stores. instead, they felt. gnc shares are taking a big hit as well. it is spreading to elsewhere within the weight loss industry. if you look at vitamin shoppe, we are seeing a decline of 11% today. weight watchers is also taking a hit. weight watchers falling along

with the rest here. no doubt quite as much. down by 4%. the big news on weight watchers recently has been oprah. disclosed she had a stake in weight watchers, the stock is up by 136%. it is still down more than 30% on the year. nonetheless, still benefiting from oprah. alix: it is ok to take a pause. julie: it is not falling as much as the other weight loss to. scarlet: thank you so much. alix: still ahead, the heart is small caps on has a 50 per 5% return over five years. how roads and highways are playing a major part. ♪

scarlet: welcome back to the "bloomberg market day." index is russell 2000

weakening after its best one-day gain this year. for more, we had to carol massar and cory johnson. thank you so much. we welcome everybody on bloomberg television to bloomberg radio. we will talk a little bit about this forecasting universe because it has been underperforming. eric marshall from hodges capital management, great to have you back with us here at bloomberg. tell us a little bit about the universe for you guys. have you found more opportunities? even adding positions? eric: we found this is a really unique time, especially to be looking at small and mid-cap companies because as the market is sold off in august and september, it really created a betweenal of disconnect the valuations and the intrinsic

values and stock prices. are generally more volatile in these types of. periods. is more important to be focused on individual stocks election and that is what we have been doing. we have been adding to our higher conviction names. cory: how do you look for these names? what are the characteristics you look for? eric: we are focused on being bottoms up. we like to study what is going on in the underlying businesses. regardless of what sector they are in, we like to find things that have a secular growth story to them. for instance, if we are looking at a consumer name, we want to find something that can do good regardless of what happens with the broader consumer spending out there. something who is expanding to new markets or has

some type of unique ability to grow their business regardless of what happens with the macro environment out there. one of the reasons we like to talk to is let us talk with some of those small-cap names. services up about 2.5% this year. up almost 1000% in the last seven years. eric: this is a company that is way underneath the radar. it is not very well followed by wall street analysts. they are going through a period where they are consolidating an area of the market that is really ripe for consolidation. there are a lot of smaller mom-and-pop cemetery funeral th s that are coming to

a mature stage of the existence. there are not many consolidators out there. we like the cash flow characteristics. there is a lot of economies of scale in a business so carriage has been one of really two public companies out there consolidating the industry. they have been able to make acquisitions and do so at a very creative way. something that is not sensitive to the economy. late another name you guys is a fascinating name. namesell eggs --another you guys like is a fascinating name. they sell eggs and they are off to the races this year. it is drawing the attention of a lot of short-sellers. about what the disconnect is between had prices which have been rising and distinct shortages. eric: yes, this has been a year in proteinility

across the board has been dramatically exaggerated by the bird flu earlier in the year, worries about the bird flu starting back up this winter. you have had a long volatility in grain prices, which is a key ingredient in producing poultry and eggs. we like them because they are uniquely positioned. they have 15% of the total egg market in the u.s. we see them as having the ability to do $10 to $11 of earnings this year. those earnings have been exaggerated by unique market conditions, but we think a more normalized earnings power for the company is somewhere between five dollars and six dollars a share. the stock trading in the mid 50's we think is very interesting. at 10 times earnings, we think that stocks are attractive. they will pay a special dividend here before long. we think the long-term prospects

for the egg business, although it is affected by commodities and currency, looks very attractive. carol: i haven't every morning. egg saying -- i have an every morning. just saying. thank you. we tossed it back to you guys on tv. i always think of low-quality stuff when we face. alix: is true. everyone says are those low-quality not evidence? scott whistle a virginia joins us live to recount a busy day on capitol hill. alix: john boehner stepping down and paul ryan sworn in as the new house speaker. a look at what is next for ryan. ♪

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♪ scarlet: from bloomberg world headquarters in new york,

welcome back to "bloomberg market day." let's start with the headlines. mark crumpton has those. mark: thank you so much. the republican point man on matters dealing with budget on taxes and mitt romney's running mate. now, paul ryan has more heavy lifting to do. today, the wisconsin republican was sworn in as 62nd speaker of the u.s. house of representatives, and at age 45 is the youngest speaker in 146 years. rep. ryan: it is not until you hold this gavel and look out and see all 435 members of this house, as if all of america is sitting right in front of you. it's not until then that you feel it. the weight of responsibility, the gravity of the moment. mark: his election to the post was preceded by a farewell address from retiring speaker john boehner, who said he leaves

congress "with no regrets and no burden." scott rigell represents virginia's second congressional district and joins me now from capitol hill. thank you for your time, sir. rep. rigell: thank you. mark: talk to us about paul ryan. he says that under his leadership, things in congress will be different. he said "this is not about settling scores." do you agree? rep. rigell: absolutely. this is a good day not only for the house of representatives, but a good day for america. paul is the right person to lead us right now. he not only has the policy expertise, but he has the people skills. people like him. if you watch as he went down on the house floor, he gravitated to the democratic side. hugs, people were interacting with him. that is distinctive, but it is also deliberate. it is his way of saying, look, we are going to make this work.

we are first and foremost americans, and there is a new degree of optimism here. it is not irrational. it is sober minded about our fiscal challenges, but there is a sense of optimism, and i'm delighted he is our speaker. mark: we will get to those challenges in a moment. as you know, at the dawn of new leadership, there is always a sense of optimism and hope, but as the american people are well aware, congress is dysfunctional. you all cannot get along. what is paul ryan going to do not only to get key legislation but two chains the toxic atmosphere in washington? rep. rigell: i am a businessman and public servant, so i am results-driven. i am not here for accolades or talking points. what paul talked about is substantive rule reform, changing the process by which the house works. much more of the work is going to be done in committee. this is critical.

there was a unanimous, spontaneous standing ovation when he talked about these things. this is not cheap rhetoric. this is substantive. i was telling my friends in my congressional district, they said, looks like republicans are in upheaval. i said, it's going to be all right. some good things can come out of convulsion. so these substantive rules changes and process changes, they are good for this institution. ark: congressman, as you know budget deal has been passed, which you voted for. does that put you at serious odds with the right flank of the republican party? had he gotten pushed back because you voted for the deal? rep. rigell: i do not follow the facebook trends. i don't know if there is any direct push back. i knew it was the right vote, principally because it funded our military, and that is a key priority of mine.

i think it should be one of every member. those who voted differently, i do not take fault with that, but what has got to happen, mark, what we did yesterday, it was like fiscal vicodin. it makes you feel a little better, but does not address underlying issues. we have to pass a long-term agreement. there's no better person to lead us through that dan paul ryan -- and i don'tan, think there is a better plan than the america first plan i introduced. the washington post picked up on that. we will keep introducing. , because something has to be done about revenue and mandatory spending reforms. mark: do you see that as something that is, the mentoring to the -- complementary to the budget deal, or does it have to have more scrutiny as a stand-alone measure? rep. rigell: it could have gotten -- gone either way. we did not get the attention to get it layered on top of the

bill yesterday. are is aware of this, as many members on the democratic side. i am reaching out for democratic support of this. it is not easy, because when you grab onto this, really substantive in nature, there is pain involved in it, groups that will say, we know we need to do something fiscally, but don't affect us. look, we cannot let that stop us. we have to do what is right for the next generation. mark: sir, if i might, the costs and savings under your sequester plan, how do they differ from what we see now? rep. rigell: i would reverse 75% of the sequester, which would first get us back to $564 billion on the days defense budget. we did not even get to what the president wanted. that really troubled me, and i almost voted, no on the agreement under this.

we are 548, not 561, which all the personnel and the dod say was the minimum we needed, so i am not letting this go. it would have done this through a balance of revenue and expenditure. a three to one ratio of mandatory spending reforms offset with a dollar of revenue through principally high income individuals, and over 20 years, it will save us $2.5 trillion. it is the third rail of politics, grabbing both mandatory spending reform and then, if there is such a thing as a fourth rail, i am a in a thoughtful and numerically driven way i will grab that fourth rail of revenue. i know because of political reality, we have to have a little bit of that, anything to get it through the house and senate and get it to the president's desk, so i will keep fighting for. this speaker, paul ryan, because of his background, is hardwired

to address these fiscal issues and get them to the house. , joining usrigell live from capitol hill. we should mention that his america first act received bipartisan support from the center for responsible federal budgets. thank you, sir. you can always find a latest news at bloomberg.com. over to you. alix: in the next 20 minutes of the bloomberg market day, buffalo wild wings shares plunging following its third-quarter earnings report. how a shift in the sports schedule ate into profits. and, china abandoning its one child policy to boost a sagging economy. they say it is already having a big impact on some consumer stocks. lax standards at many factual facilities could impact drugs used around the world.

scarlet: welcome back to the "bloomberg market day." alix: time for the look at the biggest business stories in the news right now. standard chartered has held discussions with bankers on raising at least $4 billion, as british regulators are preparing for a second round of stress tests for lenders with exposure to emerging markets. the london-based lender may need as much as $8 billion. scarlet: the new york times is reporting the biggest increase in digital subscribers in three years, with now more than one million six grabbing online. meanwhile, print sales are still

falling. alix: the billion-dollar mark for the second straight year. princeton collected $1 billion -- harvardter collected $1 billion in gifts. you can always get more business news at bloomberg.com. scarlet: let's go to the markets desk. julie hyman has the latest. julie: thank you so much. let's look at what is going on with stocks right now, falling near the lows of the session. i wanted to focus on one group contribute into the decline group.the semi conductor the philadelphia semiconductor index is dropping sharply today, nearly 3% down on the host of disappointing earnings reports. start with mxp. the dutch company is down the most in four years, on an

intraday basis down the most ever after forecasting a decline. customers have pulled back on orders because of a slowing global economy, and higher inventory of unsold chips. this is a commodity business. with the magnitude of the shortfall here that was so surprising to investors, what accounts for the incredible drop we see in this stock. what else we are watching, sd micro electronics, saying they plan to scale back manufacturing because of weakening demand in china. what is it going to do? fairchild semi conductor, bloomberg news has reported they might be making a bid for fairchild. the ceo says today he has no plan to make such an offer. elsewhere, speaking of potential m&a, texas instruments and, beim integrated, r.i. might

-- t.i. might be potentially interested in acquiring them to compete with analog devices. such a deal could face regulatory antitrust hurdles. pacific crest continues to view texas instruments as unattractive. finally, fears logic rounding out the chip tour. the intraday chart, the stock was briefly higher today, and forecasts the estimates. it is getting dragged down by negative commentary elsewhere in the industry. buffalo wild wings bases its brand on sports, beer, and good times, but that is not a lot to high five about in earnings. the company missed estimates on third-quarter profit and sales, dropping from 13% to single digits. today, the stock is suffering

the biggest intraday decline in more than five years. this morning, ceo sally smith " andoomberg talked about the earnings miss. sally: we had a challenging third quarter. although we executed very well, we saw a shift in some of the sporting events happening in september. less football, less paper view, and that and some pressure on costs resulted in a miss on earnings this quarter. erik: what about same-store sales? you are rapidly growing, with a lot of stores around the country. how do you compare same-store sales? sally: we had a really nice third-quarter. same-store sales came in at what we were expecting. september was weaker because of the shift in the calendar, and then we reported october was a little weaker than we would have expected. very close to what we had taken in price.

we have over 7000 restaurants, and the shift in the calendar, i think, has affected us more than we expected. >> are you having problems with minimum-wage legislation? sally: you know, minimum-wage certainly affects the labor line. we have seen labor climb throughout the year, and some wage pressure, although it is moderated now as we go into the last half. we saw some increases in health care benefits, as well as workers compensation. we are anticipating increased labor costs on an aggregate basis, but we have take that into the forecast for 2016. >> one of the ways you offset higher labor costs is by raising prices. the problem is, other chains have figured out you have a good idea, so they are doing wings and beer and televised sports, and that is putting pricing pressure on buffalo wild wings. get throughable to

this price increases over time, or might you have to hold or possibly cut prices to get to where you want to go? sally: we have a new menu out next week, which does include a price increase. we think if we can continue to offer a compelling guest experience, upgrade our restaurants, and provide the greatest viewing, we give guests a reason to come. >> what about stores in the oil patch? that is a place where people are struggling, who might normally go to a buffalo wild wings. will you raise prices where jobs are suffering? sally: we just acquired 41 restaurants from a franchisee in texas and new mexico. we have patches of a couple stores. overall, texas has held well, for us, from a sales standpoint. we are certainly cognizant of it, and we have to be very careful when we take a look at pricing. we take it to cover commodity and/or labor, not necessarily to

drive the bottom line. we took some price in august, at some of the higher wage states, they have not seen a drop off in traffic, so we will approach any price increases cautiously as we go through 2016. scarlet: that was buffalo wild wings ceo sally smith this morning. now we are joined by michael halen, senior restaurant analyst for bloomberg intelligence. do you think sally answered the question? did she make a case for why buffalo wild wings can still grow? michael: there's not much of a question it can still grow. the question is how fast it will grow. there is concern we are hitting an inflection point with same-store sales growth. they have been used to mid to high civil digit sales growth every year -- mid to high signal digit sales growth every year. and now they are posting boatswain voltages. is this an inflection point -- now they are posting low single digits. is this an inflection point?

that makes it hard to make a case at a 27 times multiple. scarlet: the dependence on the sports calendar hurt them in september. now they are hoping for a world series. mark crumpton is crying right now. [laughter] how do they get away from reliance on the sports calendar? michael: they have always been reliant on the sports calendar. it is kind of curious they are blaming it on the sports calendar, because we knew the headwinds were here. i guess one they did not really expect was the mets making it to the world series. there's less buffalo wild wings in new york than california, so san francisco was a better team to make the finals, unless it runs seven games. it is still a big part of it, but there is maybe more to the story here besides the sports. scarlet: what else? michael: it could be development. the chain has reached 70% of

their ultimate goal in the united states, and it becomes trickier to open really good locations, and they could be cannibalizing some of the business of the current stores. alix: it's interesting that they are buying some franchise chains to grow and intimate changes faster, whereas burger king turned itself around by franchising most stores. it is a different strategy. michael: it is different. i don't think it is necessarily a bad one. we are seeing commodity pressures easing, and there is labor pressure, but we see commodities easing in general, so i don't think it is a bad plan. texas could prove to be full's gold. they bought the chain thinking they could expand. they spoke in the interview about raising prices by taking drink discounts away. in texas, the consumer seems to be earning a little bit. michael halen, thank you so much. scarlet: coming up, china is

abandoning its one child policy. a look at why, and how it will affect the economic for -- outlook for economic growth. ♪

scarlet: we have been telling you about china's decision to abandon the one child policy, hoping that by getting rid of one of its most of the graphic -- ambitious demographic experiments in human history, they can spur economic growth. the chinese birth rate has really collapsed. incredible what has happened since the policy was introduced in 1979. at the time, the thinking was the birth rate of almost three children per woman was a drag on growth. you see the slide down following the cultural revolution. then the steady descent once the 1990's began. alix: a look at that in a

different capacity, showing the population growth since the 1970's to 1999 was about 1.5 on an annualized basis, and now it is 0.56%, showing you the decline in china. scarlet: the question is, will the government getting rid of the one child policy actually do anything to chains the situation? i think about the government in singapore, japan, south korea trying to do the same, birthrates stagnating. it has not resulted in much danger. a big part of it is the cost of raising a family and women in the workforce. scarlet: michael mcdonough has spent four years covering china. do you feel this policy is a game changer for them? michael: not exactly. you look back to the announcement, in 2013 they essentially ended the one child policy back then. they modified it so that if one parent was an only child, you could have two kids. certain ethnic minorities could have more than one child.

i think that this is just, it is symbolic, and is basically a continuation of that reform. but the impact already happened in 2013. scarlet:e imct was kind of limited, too. michael: it is. if you think about it, as companies move up the income ladder you tend to have less and less children, so they were in a sweet spot of having more kids, and now they are higher up the income ladder, so you would expect the birth rate to be lower, though not as low as singapore and korea and other countries. alix: the other information is that the target for the next five years for growth is around 6.5%, 6.53%. what is it now, if that is their target? i know it is 6.9%, but reality? model that have a tracks chinese gdp growth on a monthly basis, indicating growth for the quarter of 6.6%, so not far off what was reported. other people have estimates that

vary widely, but we would say about 6.6%. scarlet: that transition to a consumer-driven economy, led by export -- not led by export investments, does that mean slower growth? michael: i don't necessarily think so. if you look how fast china has been growing, it is not sustainable. it is healthy for china to have slower growth. we got somehings, information this morning. we did not get a lot of details. we were able to extrapolate from this. the concerning thing was the 6.5% growth target, which it looks like they are going to set. it is a bit aggressive. it is ambitious. and it makes you wonder how serious they are with the reform agenda, or are they abandoning part of that for growth? a wide deficit this morning. tax revenues are still up, but they are spending so much that

you are seeing a budget deficit. michael: in order to support 6.6% growth, while you are doing this rebalancing, it is causing them to do some targeted stimulus, which they have to spend some money, yes. alix: michael mcdonough, thank you so much, chief economist of bloomberg intelligence. also spent several years in china. coming up in the next hour of "bloomberg market day," fda inspectors in china have made some troubling discoveries. we will bring you that story next.

>> it is 2:00 p.m., 6:00 p.m. in 2:00 a.m. in hong

kong. welcome to "bloomberg market day." ♪ ♪ from bloomberg headquarters in new york, good afternoon. here is what we are watching this hour. a potential blockbuster deal. pfizer is in talks with botox maker allergan, which would lead -- be one of the biggest drug industry acquisitions ever. and, the man who did not even want the job is the new speaker of the house. tol ryan says he would want do away with business as usual in washington. where does he start? first, julie hyman is standing by. julie: we see a little decline in stocks today. part of that has to do with a fed hangover, people trying to assess what it means that the fed is opening the possibility of raising