good afternoon, i'm betty liu. here is what we are watching at this hour. stocks are tumbling, the s&p having its worst day in a month as traders start to accept the possibility that the fed is going to hike rates next month. is another oil deal in the work? -- take overd offer from the ministry buyer. two major stories involving bill gross today. investors pouring money into his janus fund while his former employer pimco demanding that his lawsuit for wrongful termination be thrown out. a lot is happening on this monday. we are one hour from the close of trade today. julie hyman has the latest at the markets desk.

julie: the worst day for stocks since late september. definitely a significant pullback here. any big up orn down days in quite a while. the 1% drop coming as a bit of a shock to the system today only 62s broad-based, stocks were trading higher in the s&p 500. onlyties has been the group in the green. right now i'm changed, all of them are down at least 1% in today's session. if you look at the best and worst individual stock wise, the drags include exxon lower along with oil prices. microsoft coming off a recent winning streak and priceline.com falling after forecast came in below what analysts had been expecting.

competition in the online travel industry. the stocks that are doing well today have specific reasons for doing so. apache getting a takeover approach from we are not quite sure who yet. there are some specific stories here but otherwise a real slow. give us more about the backdrop to this decline today. julie: the fed is part of the reason. you have to consider the context, the idea that valuations for the s&p 500 has been higher. trading at more than 18 times earnings, around the highest in five years. are considering the evaluation. then there is the question of where we are on technical

levels. this is the 200 day moving average and were falling back toward that level. 2100 andtten towards it's been a difficult area to breakthrough for stocks. i know you will talk to mike reagan shortly and he talked about that being a little bit of a cap, putting a lid on things that 2100. betty: thank you so much. mark crumpton has more from our news desk. obama andident israeli prime minister benjamin netanyahu, it was a chance to mend fix it -- mend fences. relations between the two leaders and the two nations have been tense over several issues, deal withthe u.s. iran. today the president decided to focus on areas they agree. obama: is no secret we

have had disagreement on this , but we don't have a disagreement on making sure that iraq does not get a nuclear weapon. mark: both men added that despite a recent wave of violence in israel, they have not given up on achieving peace in the middle east. minister david cameron promises he will campaign to stay in the european its demands are met. he is not satisfied with things as they are. he will make a speech tomorrow. u.k. could says the survive without being part of the eu. the president of the anniversary of missouri has resigned over protest of the way he handled racial issues. more than 30 african-american football players at the school said they would not play until president tim wolf quit. black student groups have been complaining for months about the way they are treated on campus. anti-dopingonal

agency is accusing russia of complicity in widespread doping in coverups by its athletes. the group is recommending banning russia from international competitions, possibly even next your's games in rio de janeiro. >> we advised the ministry in advance that he would not likely be pleased with many of the findings made in the course of our investigation, and those he is going to have to live with. what would hope is that russia will seize the opportunity and move forward and to take a lead in attacking a problem. mark: the board recommend lifetime bans for gold and bronze medal winners from the london olympics. russia's track federation said it will defend itself against allegations that it oversaw doping by its athletes. you can get more on these and other breaking stories at the

.ew bloomberg.com betty: more now on the market and the possibility of a december rate hike by the fed weighing on the stock market and pushing volatility higher. joining us is the chief global and business strategist at charles schwab in boston. he says we are not entering a bear market. mike reagan is joining me as well. let's start with you and follow on from what julie was talking about. it was a little bit puzzling, why suddenly we saw this acceleration in selling. toeveryone on friday seemed be comfortable with the notion that the rate hike was coming after the jobs data. perhaps not so much comfortable with the fact that next year could bring a lot more rate hikes that people were expecting. , wet is kind of surprising

keep going back to that range we were in at the beginning of the year where 2100 and change in , then we saw the volatility the in august and this tremendous rebound since backs of a handful of stocks doing a lot of heavy lifting. apple, google, microsoft, anyone exposed to the cloud. it makes you wonder if that is -- isat heavy lifting that all they've got? the rebound wasn't quite as strong as it was from august. thatlso have the notion the first quarter is generally pretty bullish. i'm wondering if we saw that in october. do you put any stock in that idea that the fourth quarter is usually bullish?

>> if you look at the last five one of the things i love to look at for the g 10 countries, they succeeded expectations and if it's falling they missed expectations. in november and december the line has been rocketing of, meaning they have been exceeding expectations. better than expected economic data should encourage better prospects for earnings next year and maybe give us a tailwind. betty: but better than expected economic numbers from where? spikes that is the thing. if you look at the index, they have been coming broadly from the g 10 countries. it's all the big nations. in general the data has been a little better than expected. ,etter auto sales in china better data out of europe.

we've seen a number of these it hasleases that started to improve. i'm not saying its blockbuster numbers, but better than expected. it may be just what the market needs to begin to get itself in the right direction. >> do you think we have seen all the evaluation expansion we can expect in the cycle and now it is all a matter of earnings? the fed raising interest rates plays a little bit into the story there of how people view valuations. rates going up, you're not willing to pay as much for a highly valued market as you would otherwise. so is it really just waiting for the earnings to come in? today, whatresting we may have missed is they are still keeping prospects for better economic growth next year. so does the imf and the bloomberg consensus of economists.

better sales because of better global activity next year means better earnings and better growth and we have seen this year. that is the key to getting stocks moving again. on the back of earnings growth. better mobileion growth numbers. if you look at investing in the for those who believed in the whole growth story, investing in it has not quite work out. you probably cannot see this but our audience can. it's almost back down to where it was before the recession. you had basically the road returns. be very careful in anything tied to commodities are heavy manufacturing. what has done well over the last five years in particular our service oriented industries. china. an economy like

that's where you want to be putting your incremental investment dollars. that will endure for 2016. >> it seems like it's a market that is trying to find its next leadership group. i don't know if it feels that way to you. does it matter that it appears questionable where the leadership is going to come from? there were questions about pricing. where do you see the leadership coming from if we do go higher? >> it needs to come from the cyclical sectors. there are some early signs that we maybe starting to see that. but the consumer has to be there as well. in particular, the emerging market consumer. we have to put the rubber to the road. we are seeing better sales numbers in china and other places. 80% of the world consumers, that

could be the next key long-term driver of stock market success. there is much more ahead in the next 20 minutes of bloomberg markets. is a merger coming on the rails? of norfolk takeover southern in a deal that would consolidate the north american rail business. contracts may finally free that banks from having that too big to fail designation. an bill gross has a big october. is it just a temporary win for the bond king? plus more on his lawsuit against pimco. ♪

to bloomberge back markets. i'm betty liu. time for look at the biggest stories in the news. his biggest regret is he is not in a position to buy more shares. he made his remarks today and defended his firms stake of 21 million shares. shares have plunged, down nearly thanrom the peak of more 250 dollars in august. priceline is forecasting earnings below wall street estimates. $11.10 profit will be behind estimates of $12.38. the company is facing stiff competition. priceline has made five acquisitions so far in the past year.

and scandal plagued volkswagen plans to offer gift cards to some of its car owners. it's a goodwill gesture to owners. they would get a $500 card and a $500 voucher for oil changes, service, or merchandise from dealers. you can always get more business .ews at bloomberg.com the second biggs railroad in canada is said to be considering a takeover of u.s. carrier norfolk southern. they have already held early stage merger talks with the virginia aced company. shares are higher on the news. pamelato bring in richard with more from the toronto stock exchange. this would be a merger of two giants in the railroad industry. give us the details on what we know so far. >> it is preliminary.

the information that bloomberg has acquired is that they are in talks and financing is being raised. but this is a sensitive area, regulators are sensitive to the fact that there are four national railroads in the united states and two in canada. consolidation has been a touchy subject. pacific made a run for csx last year and it was struck down by regulators. but certainly it is a topic that ,s supply perhaps increases perhaps the regulations need to be updated. that is the thinking coming from cp. canadian national is the larger of the two canadian pacific railroad is smaller than norfolk southern. challengeshave a few

in raising this type of money and capital that it needs to take over the $24 billion value norfolk southern. but that is what is on the table at this point and the market likes it. cp has been down by about 16% year to date. you see both of them flying to the market. both gainingre ground, which is interesting to see. bloomberg tv canada launches next monday. onres of apache on the move news that the exporter has gotten a takeover offer. they are now working with goldman sachs on a defense strategy. apache, weet to don't know the buyer yet. as pamela was referencing, interesting timing here to put this deal together right after keystone was rejected.

>> i guess we have an oil deal and a rail deal. the, canadian year.c tried last it's something they have been very interested in doing. the other companies in the sector have all publicly said they think anymore consolidation will get smacked down by regulators. betty: you can count on one hand how many railroads are left here it is is going to be the last major railroad if it gets through? it's very difficult to see further consolidation among the

majors. you might see some smaller deals and there might be some small divestitures that others could and no one likes that. me what is going on with apache. ,> we think about two weeks ago it sounds like they rebuffed this and hired goldman sachs to the best things for them to do next. what we know is that they received the initial approach and seemingly have not gotten back. everyone in the sector has been under pressure, apache more than most. one of the main reason is because they are not as focused

as some of the people in the space. they've had an explosion in the north sea. they have struggled in a sector that is already under pressure. thank you so much, and hammond. still ahead, the broader markets are down. we will check on how options are trading. that is next. ♪

welcome back. time for a look into the options market. julie hyman is standing by with more. julie: thank you so much. me is a derivatives strategist at mk m holdings. we have been talking a lot today about the fed and the fallout

from friday's jobs report and the sort of delayed reaction we appear to be feeling today. when you look at the options ofivity, is it a matter people taking another look at the fed or is there something else causing the selloff in stocks today? >> i'm not sure there is anything else. people are very much focused on the fed. we took a look back at prior how u.s. cycles to see equity sectors performed and how performance was across asset classes. people were anticipating a fed rate hike in september. a couple of things to think about as it relates to the option market, no matter how well telegraphed is the beginning of a monetary policy tightening cycle, the market

historically has been surprised. the s&p 500 at the three-month mark in each of those prior periods has been down about 4.5%. >> which is amazing considering how well it tends to be telegraphed. >> the other important piece is, it does not induce an environment of structurally elevated volatility. by that i mean after that initial increased volatility, u.s. equities are lower. 3.5%.p 500 is up about andoesn't mean there is elevated floor under equity volatility as the fed goes through its tightening cycle. >> you're talking about a trade that does not have to do is

equities at all, it has to do with the dollar. >> the u.s. dollar index has been a pretty sharply over the past month. something that is interesting about the dollar is once the fed begins to tight, the dollar typically has declined in each of these prior rate hike cycles. then down following the rate hike. ,he other important information it's relatively flat. we saw great demand for that and it would be more elevated that it is. >> thank you. we will be right back. ♪ the only way to get better is to challenge yourself,

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markets. mark crumpton has more from her news desk. mark: president obama is telling israel's prime minister the countries must work together to fight terrorism, despite their differences over the iran nuclear deal. the president met with benjamin netanyahu in the oval office today. it was the first time they had met fate -- face-to-face in over a year. following his meeting with prime minister, the president promised a full investigation into an attack in jordan today that left eight people dead, including two americans. a u.s. official said those killed were part of a state department police training program. russia is now focusing on the fromt of terror at home supporters of islamic state. speculation is growing that a bomb brought down a russian airliner over egypt last month. thousands of russian vacationers are heading home from egypt aboard special plane sent by moscow. russia suspended all flights to

31pt following that october crash. hillary clinton made it official in new hampshire today. she filed paperwork as the democratic presidential candidate. rival,n democratic bernie sanders, called his paperwork in new hampshire last week. arecarson and donald trump almost tied for the lead in south carolina's republican presidential primary. the university poll has mr. carson 28% followed by trump at 28%. the timing of the survey overlaps what recent reports of discrepancies and mr. carson's background. marco rubio is third with 11%. the rest of the republican field is in single digits. get more on these and other breaking stories 24 hours a day at the new bloomberg.com. i mark crumpton. betty: wall street banks are

launching new effort to get rid of the two big to fail designation. trading and lending agreements would allow certain contracts to remain intact for as long as two days after a bank fails. the thinking is that it will time totering banks jump in and set up a healthy version of the bank. the financial stability board estimates that the world's biggest banks would need to raise $1.2 trillion to prevent another round of bailout. as a former director of the treasury department's office of financial institutions policy under president obama. so you are familiar with all these rules and regulations around this. why does rewriting the contracts make a difference? >> you have to go back and remember the dodd frank. there was a provision that gave

them a one-day save on these type of contracts. bill, weinished up the recognize it does not always work for multinational corporations. in u.s. the provision law but it does not stop counterparties in the u.k. or asia from seizing collateral. and we saw this during the lehman brothers crisis. >> everybody started seizing collateral and it accelerates the demise of the entity. a variety of government start looking at how to solve the problem. they begin by looking at legislation is hard, but start with the biggest dealers and see if we can get an agreement to repapered the transactions with each other to agree that there will be a stay. the contract now includes these provisions. make a big it

difference to go from it to a 48 hour window? >> it does, actually. different people are in different crime zones. a major multinational bank will have a large presence in the u.s., london, and single or. you have to coordinate with each other. it might be that the bank has a going concern that because someone has jumped the gun. how significant is this toward getting rid of that too big to fail label? >> you ask the right question. i think they thinking initially was that starting with the major dealers and making sure they to the same goes a long way. they have expanded. they have moved on from

derivatives and their talking about other firms. the hedge funds of the world happened to be be cash lenders. they're trying to figure out how to bring these guys into this regime. it is a big change. they have some legitimate points. the banks had a concerted interest in trying to make sure that it works, given the outrage over bailouts. and the bank is subject to a , with last resort towers and things of that nature. buy side firms don't have that. as a result, you have to wait. what happens to the collateral, is it worth less? fsb came out and put

these rules out. >> it's trying to get agreement on some type of regime were all will allowntracts governments all over the world to coordinate on the resolution process. what is interesting is that the fsb is serving as a quite the international regulator. it has members from all the major central banks in the world. people come together and commit to doing these things and then they go home and implement. fsb has done a lot of good and it's hoping to make sure everyone is somewhere on the same page. much. thank you so

much more ahead in the next 20 minutes of bloomberg markets. pimco asking a california court to throw out bill gross's lawsuit. we will give you details on the unfolding drama from our reporter who covers cisco. when the fed does decide to raise interest rates, will they be surprised on this? we will give you the market wrap for the day and what you might have missed. ♪

betty: welcome back.

we are climbing up from lower lows of the session. abigail doolittle has the latest live from the nasdaq. i know you have been watching priceline all day long. >> rice line is one of the big losers over here at the nasdaq after the company said its fourth-quarter profit forecast will be lower by 7%. increasing competition could be responsible. the shares do trade at a this could discount, attract investors considering the earnings growth rate. the stock is having its worst day since august 2012. turning to another worst performer here at the nasdaq, when resorts shares of about 9% at this time. one analysts estimating growth gaining revenue for the month of

november is now down around 30%-40% versus the higher estimate of 30%. investigators clearly do not like this news. nn's been a rough year for wy on investor concerns of continuing revenue decline in macau. thank you so much, abigail doolittle. time for the bloomberg business flash. the latest sign that retailers are relying less on black friday to lure shoppers, target is planning a 10 day holiday sale they gets underway on november 22. the so-called 10 days of deals will offer discounts on electronic, kitchenware and toys. a seaworld executive says the company will stop running the

orca whale shows added san diego facilities. officials also said they have acquired the rights to a rude off the reindeer team park and will offer merchandise tied to animal rescue efforts. this year's bird flu outbreak means turkeys will be more expensive for your thanksgiving meal. are the lowests for this time of year since 2009. you can always get more business news at bloomberg.com. pimco is firing back at founder bill gross over the lawsuit surrounding his departure, asking to have his court claims thrown out. the news coming in as investors pouring $5.6 million in two bill gross was janus fund.

john joins us now on both of those stories. let's take first the pimco filing which basically says this is more about bill gross and reads like a screenplay than it does about actual fact. >> is about reputational warfare. they basically said the case should be dismissed because the contract he claims was breached really did not exist. he did not really have a contract. they go on to basically say the basis for his complaint is groundless and baseless. betty: so what are the chances that this could be thrown out? >> that is why they play the game. bill gross's lawyer responded they made a procedural

argument. they think they will stand and prevail in court. it depends on which side is making the argument. betty: so what is the next step? >> there will be a whole series of legal back-and-forth filings. pimco has filed to have a hearing in march to have the whole case dismissed, just on the basis of lack of any reasonable basis for the case. and a little bit of good news for bill gross, it seems lasthe's had inflow in the few months. >> based on our analysis of what you subtractere, the performance of the fund there was you find

5.6 million dollars of additional money there. we don't know where that came from it this point. belonged tohe money bill gross in the first place. maybe he has added more or it could be some investor thinks now is the right time to put money with him. >> he has had hundreds of millions of dollars flowing out of the fund, right? >> he had one really big the positive that was withdrawn by george soros. the fund has about $1.4 billion. $700 million is what bill gross put in of his personal funds. betty: certainly more draw my

head for bill gross and pimco. think about this, higher inflation. joe, what are you smoking? [laughter] >> people who have been predicting higher inflation for the last several years, they all look like fools, we should get that out of the way. the wage number on friday suggest it is possible there is tightness in the labor market that could spill over into elsewhere. headline inflation is almost certainly going to go up. headline inflation could go over 2%. you look at the diminishing

slack in the economy and the end of the oil effect and it is not hard to argue that inflation will be higher. it does not mean it will be a runaway inflation or anything like that. but i think it is questionable the extent to which people are factoring that into their expectations of the year. why don't we have inflation yet? obviously no one theory failed to pan out. it's not hyperinflation, but if is anave the 5% rate accurate depiction of the state of the labor economy, it's not easy to say there really isn't that much slack left as the economy continues to grow.

>> are people changing their forecasts at all on the fed? and englanderk to who talks about the possibility of a kill risk. when people see that when the december,probably in it will be a slow and gradual pace of hiking. if inflation kicks in higher than people expect, then you could have a series of ripple effects throughout markets. it's enough of a possibility and that wage number last friday confirmed it, that perhaps it should be considered to be a risk factor. so it's not out of the question. stay here for the next hour, we

will speak to citigroup on exactly this question. the markets close is just moments away. here's a look at some of the companies that reported earnings this morning and how they are trading now. ♪

betty: welcome back to bloomberg markets. markets are closing for this monday at the top of the hour. julie: no more closing off the lows of the session so that is that it than not. it was looking like the worst days since september 28 but things are improving to some on this delayed reaction to the jobs report on friday as people assess what a fed rate increase in december would mean.

utilities remain the sole group in the green today. and consumer discretionary and financials continue to leave the declines here. are seeing a little bit of a bounce from the lows of the session here as we head into the close. not much of a leg up but a little one. if you look at some of the biggest laggards, here is the little leg up that we have at the end here. through the different groups representing energy stocks that have been underperforming along with oil prices. recentft coming off its rally and priceline falling on its forecast, disappointing investors. a, talks to buy

norfolk southern. are the ofr -- here movers. finally that latebreaking news ist citroen research targeting another specialty pharmaceutical maker saying the company also has some distribution reimbursement questions. not many details as up yet but the other stock target it is trading higher today. only mistake was not being a to buy more shares because he doesn't have the funding to do so. ironically valiant recovering a little bit has made the target go down. he seemed to disavow that. betty: thank you so much, julie hyman at the markets desk.

all of her as we head toward the close. all of her, did we look at what happened today is a referendum on the head in december? oliver: it is a mixed message. the market was last on friday and wednesday you come in and the market is down pretty far. there might be a distinction between investor concern about what the new rate environment looks like for the long term and what it might actually mean from a practical investing standpoint going forward in the short term. if you look at these sectors that were the highest volume rate sensitivee sectors, banks, utilities. traded today.ily estate, it at real is down, but utilities are up.

the banks did poorly today as well. i don't see a very clear trade here based on rates so it is a little murky, i think. betty: so what do you think is going on then? >> my former editor hated on the head. we are -- hit it on the head. for the better part of six months, with 2100 at the top of the s&p. we are back in that sort of environment. just to touch back on the fed again, we cannot discredit the idea that there was a meaningful shift in the numbers that came out on friday. investors might point to 25 basis points, that will not make a huge difference in the short term. when the dollar concerns are , those are material things that could have impact on corporate earnings, which right now are not doing very well.

betty: is the expectation that we will just continue to see volatile trade until december? >> i think so. toward the end of the year, i don't think it's all clear like it was after coming out with the october rally last year. some chips need to fall into place before you can sign off on all things being clear. betty: thank you so much, oliver. that does it for today on bloomberg markets. be sure to tune into bloomberg television tomorrow for interviews with some of the biggest names in business. ♪

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stocks tumbling lower amid a global selloff. the s&p following the most in a month. joe: the question is "what'd you miss?" scarlet: does the fed's path need to be re-examined? joe: plus as the fed pairs back on monetary easing, what does it mean for emerging markets, especially china? alix: european creditors need a release aids to payments. we get a live update from brussels. began, of course, with the markets. off the jobs report, people betting a rate hike will happen december. people forgot what happened on friday and