betty: stocks are heading south again in today's trade. bill dudley signaling a rate hike is approaching for >> i think it's possible that the conditions the committee has established could soon be satisfied. marketis u.s. job becoming too hot to handle? we speak with david kelley who says job growth could lead to a possible recession in 2017. sales information out in october. macy's stock is down. what is the status of retail with holiday shopping around the corner? away from ther

close of trade and i've led to the market desk where julie hyman has the latest. : losses have been accelerating in the past half hour or so. we see a relatively high volume today. a lot of volume on a down day. 10%the s&p 500, volume above the three-day average. on the nasdaq, a decrease in volume. though investors are paying some attention to the fed commentary today. general theme being we will see a gradual pace of liftoff. also commodities are a heavy weight on -- heavyweight. materials the biggest but it is broad-based selloff. that has been the case throughout the day.

health care, industrials, financials all down more than 1%. i want to take a look at the underlying commodities where we see a good amount of selling today. crude oil falling after the weekly inventory number raised. gold falling to about a five-year low today. copper futures falling as well. this after we got some credit ta. betty: a lot of worries driving people out of stocks and commodities. they running into treasuries? julie: running isn't the right word. locking, strolling. a bit of buying in the treasury market. -- 10 yearr yield yield moving down a bit to 2.32%. in the dollar is actually

falling today as well. we see some of the commodity currencies today but overall, the dollar falling. it seems like there is not a lot of refuge in today's session. betty: thank you so much. let's check the headlines. crumpton ason, mark more from our news desk. mark: the university of missouri has appointed a recently retired black minister as interim president. theael meditation will lead university system until a permanent replacement is found. the announcement comes three days after the university wolfe andesident tim chancellor resign because of a lack of response to racial incidents on and off campus. there is still milk claim of responsibility for a pair of deadly suicide bombings that took place minutes apart today

in beirut. 180 were injured. the attacks took place -- kurdish forces in iraq say they are free taken one of the militant groups main supply routes. today's operations sees highway jar --ing through said sijar. the next round on talks of syria's civil war resume. russia accusing the u.s. for hijacking talks. moscow didn't show up. at the first round of the end of last month, more than a dozen nations agree to launch a new peace effort involving syria's government and opposition

groups. hillary putting forth a $40 billion plan to help adapt to new climate change policies. her proposal calls for the production of health benefits for minors and families and will help them retrain for new jobs. it would use tax incentives and grants to help coal dependent communities repurpose old mine site and attract new investment. you can get more on these and other breaking stories 24 hours a day at bloomberg.com. jobs claims held in november and are offering at a 16 year low. is the strength worth a second look? guest thinks so. david kelly is a chief global strategist at j.p. morgan.

our interest in a recent quote for you said there is potential for a recession risk in 2017. isthe first thing to realize the unemployment rate itself is one of the most stable predictors and the economy itself. the unemployment rate comes down to a very steady pace to between half a percent and 1%. this time, it's no different. at .8 per year. a year from now, we will be at 4.2% and april 2017, 3.8%. that's all good news but the other thing that important is in the last 45 years, we've never been low 3.8% to last thing to realize is when the unemployment rate troughs, very often does it

follow a recession. it's kind of like when you ride a bicycle slowly, it's easy to get distracted. naturally growl more slowly so it's vulnerable to be put into recession. we could if we got lucky stay at a low employment rate bucking the historical trend. normally when it hits a trough, everyone feels great and within a year from you are in a recession. betty: is that almost always caused by the fed? >> partly. the economy itself grows more slowly. it's growing at about 2.1% at an annual rate but a lot of that is because of unemployment. the early stages of the fed tightening in to help the

economy. the later stages tend to hurt. the problem is the fed tends to pile on with rate hikes at the time the economy is growing more slowly. they are late to the game and they think they're addingthe pro pile but they're doubling of the medicine. they tend to over hit the brakes. a typical mistake is they move too late and too much. julie: the reason they would because move too far is inflation. they are worried about these inflation expectations. we heard from buildup the earlier today. dudley earlier today. >> some survey measures of long-term inflation expectations are at the low end of the range is we've seen. betty: good of a possible inflation is going to be so low and slow moving that that

scenario doesn't really play out? not my greatest concern. low inflation is good because it's mainly by commodity prices. that puts money into consumers pockets that keep spending growing. some of these surveys are misleading. my point being that if there aren't going to be big inflation pressures going thatrd, there wouldn't be incentive by the fed to really go and embark on a very strong tightening cycle. maybe we might see this one and done for a while. >> we could but i think the economy will speed up as you go to next year but there is no labor supply and that's why i think this economy is only capable of doing 1.5% growth. if you try to push it more than that, it's going to overheat.

it overheats at a slower speed. i think the economy would overheat at a slower speed and simulate growth. they are good for consumer spending. a great danger we overheat into the end of 2016 and the fed says we do need to push up rates. is a tricky business. they've got the timing wrong before. julie: when you say recession risk in 2017, how big of a risk are we talking about? >> it's quite difficult. there are more variables than certainties. than: are we saying more 50%? 20%? >> more than 25% anyway. trying to predict the sessions thereafter depend on government policy.

if we did comprehend to the immigration reform between now and then and we could increase the labor supply by bringing in more skilled workers, that will buy us time. if you think we are going to get action as of washington on comprehensive immigration reform or tax reform, if we get these slow the nextuld recession. those who you one of thinks the fed is going to go in december? >> definitely. almost anything will scare them. they are very skittish so there are number of things that could happen between now and the middle of december. like the markets. they shouldn't let that this place them. betty: they've shown themselves to be very aware of the markets. >> that is true. betty: thank you.

much more ahead in the next 20 minutes. strange things are happening every day. we will show you some charge that may seem a bit odd and explain what they mean. traders are still digesting these comments from regional fed bank presidents. how is the looming rate hike affecting the options market? of the next two months cannot be understated in the retail business. as we head toward black friday, a change of strategy. we will explore its impact on the bottom-line.

betty: welcome back.

let's take a look at how the averages are trading right before the close. it has been a pretty brutal day. you can see the s&p 500 down 1%. the past sevenn sessions we have seen the smp fall and today, it has joined a gal and returning to the red. the dell has also fall in and is pretty much near its session low right now. treasuries are rallying for a third day. we've had several fed speakers. bill dudley very much in line with the janet yellen. given the labor market and improvement, he noticed the economy is solidly improving and it appears an interest rate hike is likely but there's a lot to

happen between now and next month so we will keep our eye on that. meantime, some unusual things going on in financial markets. things are running counter to long-standing financial logic. place.unusual and out of should traders be worried? joining us is tracy holloway who identified about these strange occurrences. sounds kind of spooky. bond inventories. what's going on? >> corporate bond inventories is one of the strange things. goldman sachs analysts this week pointed out the inventories of corporate followings have dipped into negative territory for the first time. you cannot really have negative inventory. the banks now have a net short position in corporate bonds,

which is something they never have before. this feeds into all of these bond market liquidity worries we've been talking about. is negative inventories are something that had never happened before. and analysts say they have been contrarians on the liquidity issue but now they think it's actually a problem. betty: synthetic credit tightening. tiger than cash credit. >> this is a closely related topic. if you don't have liquidity in the cash bond market, not to figure out a different way to

trade bonds. one of the ways is using a bunch of derivatives. is the spread now of the cbx index on corporate index versus the spread in the cash market those should be relatively aligned. but there's been a divergence. arguably because investors are seeking out derivatives in order to trade the bond market. another weird and wonderfully unusual thing happening. betty: it seems overall, there are some market moves. >> we talked about historical patterns being upended. it's related to the liquidity issue. the idea we are getting some big moves in markets more frequently. these are things on the chart right now.

it's something that should happen every 62 years but seems to be happening a few times a year. think about things like the rally and slash treasuries. those events are happening more frequently. these are things we need to be thinking about as we exited the low interest rate regime. betty: what do you take away from that overall? >> i don't think we should all run for the hills. i think what it speaks to is we have had a huge sea change in the financial system. new players coming into the market. we haven't really seen that function outside of a very low interest rate environment. some of the cracks we are seeing now are evidence of how much things have changed and how much they could change in the future.

betty: thank you. still ahead, stocks are trading much lower. the dow off 200 points right now. we've look at how options are faring next. ♪

betty: time for a look at the options market. julie hyman standing by with more. julie: we had a selloff today. joining me for today's options insight is the managing director iur capital. -- he is from london. nice to see you. we haven't seen this selloff here in u.s. stocks. it's been's accelerating.

looking through the end of the year, you think things will recover. bust friday's jobs report was quite a pivotal moment to the equity markets and what a traditionally good part of the year. we initially saw a mixed reaction and now we really start to see that. i think we will have a roughly solid under the year for equity markets. the next big moment for equity inkets is the fed meeting december. julie: do you think the stock markets will be able to shrug it off if we do get a rate increase? we have seen competing evidence because sometimes we have seen came up withllen the last statement, stocks rallied and on the job report, we didn't see a rally.

hike innk a rate december would be a positive thing for the market. we've had a time of several months now for uncertainty for the broader market. i think it's time to go in terms of a rate hike. once we get that out of the way, it will look ready good overall. -- pretty good overall. your trade is looking at december specifically and you are looking at the s&p 500. describe your trade to me. we are normally a seller premium overall in the s&p 500 and are looking to keep the premium we receive. ist we are looking at looking to sell out on the opening come back and basically just looking to keep the premium. we can manage the risk between

the december period. what would be the risk for you if you do see the s&p fall and going lower than the trade you are looking at here? >> we can do a couple things to adjust the trade overall. this is quite a big psychological level for the market 2000. unlikely itk it's will be retested during the second half of november. but likely, some choppiness we believe 2000 is a big support level. julie: overall, you say you think the market will react

relatively well to the fed raising rates. are there any groups where you think we could see more of a downside? a rategative reaction to hike in december, we could start to see the 1900 levels being bridged again. that will be quite an extreme. julie: thank you so much. we will be right back. ♪

betty: you are watching bloomberg markets. let's check with the headlines.

mark has more from the news desk. mark: president obama will meet with the leaders of germany, the u.k., italy, france to discuss the fight against islamic state. the leaders will gather in turkey. russia, which will not be in attendance, is circulating a new proposal to end the syrian serval war -- civil war. the president leaves saturday for turkey. its first meeting with the newly elected canadian prime minister. of obama awarded the medal honor today to a retired army captain who tackled a suicide bomber in afghanistan. the 32-year-old is credited with saving one dozen other soldiers. he was critically wounded when the bomb exploded but he has learned to walk again after 33 operations. the metal is the nation's top military honor for battlefield

bravery. the prime minister said even though the partnership between india and britain is a strong, they must set higher ambitions. the u.k. is the largest investor . federal transportation officials are still trying to determine what caused a small business jet to crash into a four-story apartment complex in ohio on tuesday. all nine people aboard were killed. forn of the victims worked the same florida real estate company. because it was recorder is -- the cockpit voice recorder is being analyzed. betty: thank you. let's go to abigail live taking a look at the dow. two nasdaq performers

that have gained, including -- arehares of j.d..com climbing higher today. the company said that orders for its electronic and home goods were up 132% year-over-year. merchandise volume was up 140% and the mobile transactions accounted for 74% of overall transactions. the company underscored all of this strength. perhaps discrepancy in strong sales similar to what were just reported could be enough to help break this range the stock has

been trading in since its ipo. another stock trading higher, net he's -- netease. the strength was driven by ains.e games -- g shares are trading at a record high today. betty: thank you. for retail.week tomorrow, the october retail sales numbers coming out. this morning, kohl's reporting. those are coming in better than estimates, giving a boost to the sector after macy's sounded the alarm. >> jcpenney was coming from the floor. macy's was close to the ceiling. macy's coming down a bit and

jcpenney's is coming up. they are still one of the nine dollars stocks. there is no comparison at this point. suddenly, pennies has inventory they didn't have. it is filled with inventory. >> is it still the thinks people want to purchase? >> two weeks ago when i went in, they had signs out that said front and family, 25% off. press not a good signal. they're are doing much better but you cannot make a fair comparison between macy's and pennies. >> the consumer shift is away from clothing to electronics and gadgets. what does that mean for macy's who cannot really make that much on that? problem right now. based on fashion, there is one sector doing well and that athletic and leisure wear.

if you are a sneaker manufacturer like nike, one of ,he retailers like foot locker under armour. those guys are doing well and i think the department stores have tried to shift their inventory to get into those categories that they don't have the critical mass. >> all of those specialty owngories have their standalone retail and those retail stores are experienced now. how does macy's even get in there? my kids don't want their nike products from macy's. >>. a fundamental problem. macy's brought in finish line to do their footwear. they signed an agreement yesterday with lens crafter. they're tried to make the department store more productive and increase the productivity with things consumers want. they did this with best buy as well. to doy are also tied

those malls, still struggling. the most still have to find a way to drive people back. >> all traffic is off 5%, 6%. there is no sense that will improve over christmas. betty: what can be wake -- what can we make of all of these ups and downs? i will turn to another man who knows the retail landscape very well. he is chairman at intuit consulting. he said he is right. >> he is. is consumerssue spending their time in different ways. traffic is off. on thatnt stores relied

for a long time. they are now trying to catch up. apparel has changed in terms of what consumers need. tech is winning. food, cars, home. it has shifted so much away from apparel and the competition has changed in apparel. what they do with their space is that they question. nordstrom has done a good job. they're partnering with online people. they said we want to get the consumer coming to nordstrom. we'll care if we make less money but we will build a traffic pattern.

macy's is scrambling. they are trying to get that guarantee of getting paid for their space. betty: is that a smart move? >> gets what europe, japan has done forever. there is a trend toward that. we see that go even faster. people need space. distribution is the big issue for new concepts. where do i go to sell my product ? if you can guarantee the margins, macy's will give you space. how do you make the space more interesting? betty: but it's not going to be other apparel makers. it will be like an eyeglass company or a warby parker. >> it has to be other product categories. the consumer has to be drawn.

traffic is the metric. conversion is important. if you don't have traffic coming cannot make it work. it comes as a result of consumer.g the think they're recognizing should best buy have a space within macy's? should apple have a space? betty: who knows if apple wants a space? >> the experience is better in their own stores. i don't know. they draw traffic. betty: why didn't this work for jcpenney? >> they had not moved at all. they didn't make it very interesting. emotions are running rampant. it will be a brutal christmas again. inventories are high. pennies never updated their stores. betty: they tried. >> they have 1000 stores.

down to it,lly got they couldn't turn it around fast enough. the president was doing a lot of right things. he didn't have the time to execute. betty: since then, it hasn't really gone anywhere. it still makes $12 billion in revenue. it's a shadow of its former self. >> joe is right in that it looks better but not enough to really turn the corner. betty: i very interested in gap. banana republic sales down 12%. >> i would also say be careful because of old navy. ralph lauren hired the executive and i think he is a win. everything i've read about his -- i went to the store to see what he had done. if stuff is still in the store.

i would be scared of what happens even with old navy down the road. i think gap stores have a long way to go. betty: people were chuckling when they said there were product of skeptics -- product acceptance challenges. which means that people didn't like your product. >> it looks boring. there are a lot of retailers out there scrambling and getting to over sorted. companieshe apparel are all over the place in searching for what is that new item. the a couple brands out there. victoria's secret looks great. they are kind of a unique luxury. there is not a lot that looks terrific. betty: thank you.

much more ahead in the next 20 minutes of bloomberg markets. the commodities route is that in a big way. copper hits its lowest level since 2009. bill dudley says liftoff could soon be satisfied while charlie evans says future increases will be gradual. what this all means for investors. sam investigates the companies and technologies in industries that will put a dent in the universe in 2016 at 9:00 p.m. eastern time right here on bloomberg. ♪.

betty: the california public employees retirement about $3 billion in assets. the sale includes 43 international funds from its real estate portfolio. powerbook capital partners already considering getting out. the retailer was acquired six months ago. a select number of banks asked to give options for the company's. they could elect to keep the business following the review. apple talking to banks about creating its own mobile to mobile payment system that will

allow users to send money directly to each other through their phones. -- service you can always get more business news at bloomberg.com. a six-day selloff in the stock accelerated. metal prices showing no signs of recovery. going tois commodity impact the inflation outlook? one of the many topics discussed today. that theo disclose chairman of bloomberg lp is a senior and dependent nonexecutive director at the glencore. this is expected. more trouble ahead. >> it looks like we had this balance at the end of september along with the general comeback in the stock market.

a lot of things related to commodities, metal. it has been really ugly lately. copper making new lows. has been quietly tumbling and in the last couple days, people started paying attention to it again. betty: what does it mean that it's below a pound now? >> it's kind of symbolic, i guess. a lot of shares based in the u.k. are nominal amounts. there are very few big-company stocks in the u.s. that would trade below a dollar but that's more common there. generally, the selloff is what's remarkable. it rebounded a bit but at one point, it was getting obliterated. the route we are seeing, would you attribute most of that

to china? >> we did -- it was not an impressive week for china. people have been talking about we need to see the chinese data stabilize. the data this week does not really look like stabilization. we had credit creation out today that was much weaker than people expected. the industrial output numbers from earlier in the week were some of the worst levels since the crisis. the volatility in the shanghai composite has subsided. the real economic data -- betty: retail sales were up. >> that is true. there still a long way to go in terms of china's outside impact on the rest of the world. it's the demand for commodities still influencing a lot of different countries. betty: thank you. what'd you miss" is coming up

to discuss the fed and much more. we are heading for the market close at the top of the hour. the low of the session for the dow, down 230 points. we will be back. ♪

betty: welcome back to bloomberg markets. markets are closing in just about 10 minutes. julie hyman has your market check on this brutal day. julie: brutal day. stocks continue to tumble into the close of trading. it looks like we will close pretty much the lows of the session for the major averages. we have been talking all day about the commodities drag on the major averages.

still a very broad-based decline here as evidenced by the map. all red here. energy materials, utilities, all of them down at least 1%. i've also been watching the volume here for the individual groups. we see a big upsurge in volume for the industrial. it's about 70% above the 20 day average. enormous surge in volume there. let's look at these movers. w.w. grainger is leading the decline down 5.7%. the company released a 2016 estimate. the midpoint of that range is below what analysts had anticipated. they also spoke about a tough industrial economic condition that will continue into 2016.

caterpillar the climbing as well. declining as well. the biggest drags on the s&p 500 include energy movers. we seen a lot of financial weakness throughout the session as well today. sort of a roundup for you of the drags we see on the major averages. betty: thank you so much. julie hyman at the markets desk. clear moments away from the close. the markets focusing on several of those set speakers today, including the normally dovish buildup league -- bill dudley, kind of changing his tune. joining us now is michael regan who was at the speech today. how was it received? the most interesting thing i thought he said was in the question and answer period or someone asked him why not wait until you have reached the

inflation target and if you need to be aggressive, you could go 50 basis points at that time. he said he doesn't believe in that route. he said i don't believe in waiting to see the inflation. betty: unlike larry summers. right.: fed policy has a lagging effects of a want to get ahead of it even if they are not quite at that 2%. that was kind of striking and really hammers home the notion that december is likely now. he did talk a bit about how financial market volatility like we see today could be one of the things we are watching. it could be one of the things that delays. looking at the markets today, the stock market is down significantly. treasure yields coming down a little bit but not a ton.

the fed fund futures trading is pretty much where it was. if anything, it was just reinforcing the fed is going to raise rates in december. michael: absolutely. people are getting pretty convinced it's the most likely scenario. obviously a terrible jobs report for this month could change things. panicky moves in the market. that sort of thing could delay them. at this point, it doesn't look like this amount of volatility is enough. --ty: did you get a sense the fed shouldn't be watching markets but did you get a sense he was very aware of the volatility?

michael: definitely. it is another variable in the decision-making as was the international picture. he -- as well as the international picture. he made some comments about china. he believes they're trying to turn the tide into transitioning into a service industry. he cited strong retail sales in china. it sounds like he has his eye on china but it's not really worrying him enough to move the needle on december. betty: mike, thank you. that is it for the bloomberg markets. index is headed for its sixth loss in seven sessions. ♪

thee are moments away from closing bell. >> i am joe weisenthal. "what'd you miss?" i am alix steel.

"what'd you miss?" >> i am scarlet fu. "what'd you miss?" ♪ >> u.s. stocks get pummeled, .elow president said it's time to get off zero. what it means for the market. joe: how fractured repossession rates could affect the fed exit. green,alked to jeff whose ideas of bridging the income gap are getting attention. >> we begin with the markets, another down day. the dow off by triple digits. notable