>> from bloomberg world headquarters in new york, good afternoon, i am scottish folk. i am alix steel. here's what we're watching at this hour. consumers giving more money in their pockets. this is a bad to -- sign for the holiday shopping season? scarlett: employees are looking to cash in. alix: never mind el niño. nickel niño could recap making your trip to the grocery store more expensive. first, let's get started on today's markets with julie hyman where she has had a chance to sit through all of the data. even though we curiously

got a consumer confidence number they came in above estimates. a curious disconnect there. retail sales number is really reflecting this now concern over what is going on in the retail industry. that is one of the things weighing on the major averages. if you look at the bloomberg terminal, you will see the consumer discretionary stocks of which retail is a part is the worst are forming group followed closely by tack being dragged down by cisco. the worst-performing stock in the s&p 500 this far and away fossil. huge decline in shares of the watchmaker after the company came out with cells that missed estimates. the company blamed it somewhat on currency. even if you take out the effects of currency, net sales in constant currency still fell by 8%. also shares have been tumbling as a result. they are down by about 30% today. scarlett alix: department store sells heavily roller coaster ride.

julie: overall, the tenor has a negative and i was added to by nordstrom today. they missed estimates, sales missed estimates, profits missed estimates. nordstrom is not blaming the issues on the weather. they said it is not a seasonal issue. people are buying codes. overall, traffic was down. internet businesses up, on the business is up, but is this is down. shares are down 17%. nordstrom rack is down 2.2%. we are seeing a through two other off-price retailers. down. down, ross is we are seeing jcpenney, with a forecast for the fourth quarter that is causing some concerns. those shares are down by 12%. if we have time, a couple of quick charts, one of them is retail traffic from shopper track. this is the number of visits that people make in a month to retailers. over the past 18

months every month that number has been down except for one month. the other number i want to look at is on average, the percentage of sales that are online at retailers has been going up and up and up. fewer people going to the physical stores. torlett: one you don't go the store, you don't buy the random thing you don't need that the stores caps on. scarlett: i am pulls shop on amazon all the time. it is what i do. let's check in on bloomberg first word news. >> the united states say it is reasonably certain that a kilby islamic state extremist known as jihadi john in syria. he was the focus of a u.s. drone strike on a vehicle near -- colonel steve orrin, the

spokesman, told reporters in a videoconference from baghdad that an assessment is still being conducted to confirm and wa he is dead. earlier, we heard from john kerry. the kerry: we are assessing results of this strike, but the need tot associated know this. your days are numbered. you will be defeated. a if confirmed, it would be coup for western allies in the fight against islamic militants and homegrown extremism. the u.s. and its allies are stepping up attacks on airfields controlled by the islamic state. -- oil fields controlled by. oil generates $40 million a month for the islamic state. the fields are spread throughout eastern syria. on another front, iraqi kurds are reporting a victory over the

militants. their fighters say they are now in control of a strategic city in northwest iraq. russian news reports say moscow is banning it gives national carrier from flying to russia. the move comes in the wake of the crash of a metrojet plane in the egypt sinai peninsula last month. that been as effective saturday. meanwhile, the final seven seconds of the cockpit recording will be sent to a company -- country with the inabilities to analyze it. the investigation team says that the recordings include a last-second noise. no word yet which country the recording will be center. the fda is out with new safety rules for produce including new oversight of farms, making sure workers are trained to wash their hands. irrigation water is monitored for harmful bacteria. there are also new rules to ensure the safety of improved -- importing food for the u.s. market. that is a look at the first word news right now. you can get more on these and

other breaking stories 24 hours a day at the new bloomberg.com. from the bloomberg first word desk, mark crumpton, back to you. the big economic data point of the day was retail sales rose less than forecast in october. with just two weeks to go until black friday, already, retailers are counting on a busy holiday shopping season even more. alix: for more perspective, we are joined by lindsay, chief economist joining us in chicago. salesid you make of this report, especially compared to the jobs number we have? to the university of michigan sentiment index which was also better? lindsay: it was a disappointing report which suggests that the consumer is still under a lot of pressure. as we look out to the final weeks of the year. juxtaposed with the october employment report, it was a nice headline increase. remember that october comes against a broad to -- backdrop of extreme weakness since october and september.

it is clear that the labor market is positioning itself for modest job duration and it still lackluster wage growth. the october increase was nice, up by 4%. on an annual basis, we are still talking about 2.5%, that's trend range we have been in since the end of the great recession. consumers appeared to be optimistic about future growth in terms of income down the line. right now, it seems to be stunting their shopping habits. against this backdrop we have get -- gas prices that has stayed low. if you come inside the blue terminal, this is the average unleaded gasoline price in the united states. we went all the way down in december. we have come back a little bit this year by midyear. we are heading back down to the two dollars level, currently averaging $2.19 a gallon. clearly, gas prices have not recovered the way we might anticipate. can we draw the conclusion, now?

lindsey: that is what is good frustrating about these numbers. consumption on an annual basis of 2%. it comes against a backdrop of more than a year of sustained low energy prices. many economists were thinking that to dollar gasoline would be enough to drive consumer spending up to point percent. instead, we are seeing retail sales stagnant around the 2%. if gasoline prices begin to reverse course, that could put more pressure on consumers. could it be that we are just measuring the wrong metrics in retail sales overall? e-commerce, we are spending, we are buying, we are just spending different a. does this metric accurately measure the economy? does.y: i think it if the consumer was strong enough, we would see simultaneous increases across all categories rather than picking and choosing here and

there, goods and services, different bundles in our shopping basket month-to-month. in tumors may still be spending on food and beverages and online shopping, but they are not going out to eat, not buying apparel, not buying electronics. strong consumer sector, you would expect a simultaneous rise across a plethora of different categories rather than just picking and choosing strength in individual categories month-to-month. services retail food were up 1%. that is a sign of weak conditions. raises concerns of consumer frailty and possibly even recession. would you be willing to go to far? lindsey: we are not forecasting a recession, but we are forecasting concern that the consumer will continue to lose momentum as we go into that key holiday shopping season. if that happens, the economy is likely to stay at this sub 2% pace for the second consecutive quarter which makes it personally -- virtually

impossible for the fed to initiate a rate increase. we are still talking about modest higher and gains, nonexistent inflation, and the fed has pointed to the consumer --tor in the october sector consumer sector as the silver lining in the economy. if we begin to see a pullback, there are very bright spots left to suggest that we can withstand a rising rate environment anytime soon. 2016 ratewere in the hike camp on the dovish side. my we see a payback in the next couple months? the job report was killer. if you have a job and wages go up and you are making more, you will spend. past we look at this as a indicator rather than a leading indicator? ndsey: i would like to think that the fed is looking at the economy through a broader lens then at one data point. i would like to see a continuation of those positive data points. october's employment increased needs to be confirmed in

november and december and possibly january and february. we need to see and improving trend rather than a one-off report. certainly, if the fed begins to focus on the calendar or begins to feel bullied by the market or community members are -- committee members are growing impatient, we may see an increase sooner than later despite the fact that the fundamentals are on the weaker side. alix: quickly, bottom line, this is not a dealbreaker in december? sey: the door is open for a rate increase, but the door is not -- inflation is the sticking point. further deflation on the producer side is making it difficult for the fed to justify a rate increase with half of their mandate not met. alix: thank you so much, great to have you. scarlett: much more coming up on bloomberg markets. silicon valley startups are staying private for longer and it makes investors want to cash out.

how it is bringing change to the secondary market. alix: we will tell you which one has investors crooning over a rising rate environment. scarlett: forget el niño. we will tell you about a possible weather pattern on the horizon back to turn green markets upside down. ♪

alix: welcome back to bloomberg markets, i'm alix steel. bloomberg business flash, some of the biggest business stories in the news right now. the u.k. front office is charging 10 former deutsche bank employees of manipulating e+++

urigor. six former deutsche bank ratings including a high-profile trader in berkeley employees will be charged with conspiracy. they will appear in a london court on january 11. scarlett: mylan is set to attract a series of para go shareholders today. about 20% of parperrigo shareholders tender their shares. alix: bigger an estimated 5% in october. the company says their established kfc restaurants rose 10%. overall results were hampered by a 9% drop in pizza hut of all things. also reiterating its fourth-quarter forecast expects instant door -- in store sales to grow as much as 4% in china. you can always get more business news at bloomberg.com. the: heading back to

markets were julie hyman has been the the index. we are on an upswing in the half hour. julie: a little bit. we were down, closer to .8%, even a percent drop. coming back a little, you see a down only .3% for the s&p 500. it doesn't seem to be necessarily a big catalyst for that upswing that we see in the markets. about theearlier retail data that we got out today. that seems to be putting pressure overall on stocks. we have been seeing some buying in the treasury market. yields seen a drop in all week for the 2-year note. in particular, .85% today. the tenure is 2.28%. we are seeing a distribution of assets -- the 10 year. this disappointing economic data. the trade in the currency market is a little more murky. let's look at the trading partners for the dollar. looking at the yen, the dollar is rising versus the yen.

not going in the same direction as healed. also raising versus the euro. we got gdp out of the third quarter for the eurozone which was disappointing. the pound is also falling versus the dollar. the trading that we are seeing in the treasury market doesn't coincide with the trading we are seeing in the currency market. lot on theot doing a economic data. very little change right now. i want to point out what is going on in oil. it doesn't seem necessarily economic growth -- although, retail sales being down is not good news for oil prices. oil down another 2.3% today. it is on track for the worst week since march as we have seen three consecutive days of decline. shook the markets again by saying that the oversupply is about 3 million barrels globally. that was a big surprise. non-opec production not rolling over you. ise. is adding to the mala

w g.i. falling more than brent. brent only off by .5%. china is doubling up its margin requirements. this announcement coming after the local markets closed. the requirements will be raised to 100% from 50%. it is aimed at preventing a repeat of the excesses that led to the stock market laps over the summer. alix: learning from the mistakes. let's look at the economic backdrop. china's economy is also on the slowing cap. the government is on stimulus mode cutting interest rates six times in one year. more easing may be needed as this week's dataset on credit shows. we take a look at the overall growth in outstanding credit, it is not holding up. credit is the orange line moving lower. new credit is also lower your on your. that is a broad measure. they are trying to help and it does not seem to be working. scarlett: people are wondering

whether we are getting to be like japan. costs, profits, high existing debt, uncertainty about the outlooks. companies are not incentivized to go out and borrow and invest. if you look at pboc loan demand, there data fell in the third quarter. there was stabilization. that is a blue line. it raised hopes that maybe the government could pause if there were more interest rate cuts. maybe this is a signal that you need to accelerate interest rate that's. alix: even more to get us cost up to accelerate demand. scarlett: if you look at government spending, they are doing what they can in terms of expenditures. that rose for a fifth month, a 30% -- 36% year on year. look at the revenue line. the orange line has been faltering. that is money going into government coffers. you see the balance going down as a result. that this may reflect official concerns of the activities -- efficacy of monetary policy and you have

this easing of stressed corporate balance sheet. alix: michael scheuer is looking at a different looking at and supply versus m2 supply. m1 supply is cash and that is rising. m2 supply and compasses credit. that is now lower than m1 supply for the first time since december of 2010. looking at the right hand side of the chart, m1 supply is rocking it which means the pboc is helping cash and the system. it is having a more difficult time with loan demand credit. scarlett: a conundrum for pboc. alix: coming up on bloomberg markets, startups are staying private for longer. how are companies a caught -- accommodating employees who want to cash out early? ♪

scarlett: a beautiful day in san francisco.

welcome back to bloomberg markets. speaking of san francisco, silicon valley startups are staying private for longer. investors, company executives, employees are becoming more eager to cash out early. late when they cash out, stage investors can buy in. this chart shows a lot of late stageng into funding for private tech companies. for west coast wake up, join from san francisco bite bloomberg technology reporter adam who wrote this story. this trend is nothing new. people who want to cash out of the privately held shares. talk about the demand on the other side. back to when facebook, before he became a public company, the secondary market exploded. employees and investors looking for opportunities to cash out. it was much more ad hoc. there were brokers who facilitated those deals. now, it is becoming more professionalized.

there are different ways for early investors and employees to cash out. a lot of companies themselves as a way to keep control over who owns a stake in the company are facilitating some of these deals themselves. alix: who is buying? when these early employees cash out? am: it varies. one person we spoke to said they would get calls from wealthy individuals looking to buy stakes in hot startups. there are more institutional investors, a lot of late stage investors are fueling the high valuations among startups. they buy back in to increase their states. these big mutual funds or asset managers, they work with huge amounts of money. bigger money than what an early stage venture capitalist would use. they are trying to lie and in a big way. alix: then something happens

like what we saw this week of fidelity. snapchat investments i about 25% -- does that mean that these big money players shouldn't be in the private startup game? that they don't know how to value these companies? is an interesting dynamic. these startups are getting a wake-up call in terms of what it is like to be working in the real market where you have a mutual fund, as of managers who have to mark to market. this is a new way that they have to learn how to operate. how this affects the secondary market is that there is a general anxiety and some investors are getting antsy that the valuations these companies have my not last forever. selling now is looking pretty attractive. put into context for us what square is doing. they are going ahead with their ipo even on the pricing is disappointing relative to the last round of private financing that jack dorsey got.

15. 46 versus the $13 now. quickly, is as a desperate move on to it as part -- on twitter smart? adam: this is a way to price demand. in a want to price it too high and have stock or down on the first day of trading. ipong investigators by into would make them unhappy. pricing at lower is a way to lose demand for the ipo and have investors buy in. scarlett: thank you so much, your tech reporter based in san francisco. alix: still ahead on bloomberg markets, we take a look at what etf's you should be avoiding as the fed considers a rate hike. ♪ we live in a pick and choose world.

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gift the best sleep of your life to your whole family. only at a sleep number store. right now save $500 on the veteran's day special edition mattress with sleepiq technology. hurry, ends sunday! know better sleep with sleep number. alix: from bloomberg world headquarters in new york, welcome back. i am alix steel. scarlet: i am scarlet fu.

we will check in with mark crumpton. mark: u.s. military spokesman steve warren says they are reasonably certain they kill the islamic state militant known as jihadi john, a british citizen identified as mohammed emwazi. officials say he was the masked man who appeared in several videos showing the beheadings of western hostages. drone attack was one in a string of targeted strikes on islamic state leaders. a meeting this weekend could be a make or break one for international peace efforts in syria. they will try to decide which of syria's fighting forces are common energy -- enemies. at least 14 people have been killed in fighting between kurdish rebels and turkish

security forces. this comes just days before the g-20 economic summit in the region. says seven force members and seven civilians have died. hillary clinton is reportedly more than halfway there. an associated press survey shows she is supported by a clear majority of more than 700 insiders who will vote at the party's convention. bernie sanders and martin o'malley on saturday at 8:00 eastern time. fanduel and draftkings are suing to stop a new york state dan, sufferg they will irreparable harm if they are shut down for illegal gambling. new york has the most fantasy sports players in the united states. the company stand to lose $35 million in combined annual revenue. the latestorder is

in a string of bands. you can get the latest at bloomberg.com. i am mark crumpton. alix: it is one of the most inductive -- smitten investors double ind nearly -- a rising interest rate environment. scarlet: there is a problem. to etf has incinerated close $8 billion as hopes of higher rates and sweet profits keep getting dashed by the federal reserve. etf is eric balchunas, our expert. most actively the traded etf's. eric: it is the largest leveraged etf in the u.s.

this oneuld say about is yes, it has incinerated about $8 billion of cash, which is more than six, old miners, russia, other bottom calling kind of plays. 2.8 billion in an environment where you lost 80%, you wonder how big and popular this etf will get if this trade starts working. i talked to one money manager. they said when this trade works it could be their best trade ever because if we get into a prolonged rate rising environment, this thing should profit from that. leveraged etf's tend to do really well if the play is moving in one direction. it still has not had its day in the sun. as of now, it is a seductress. it has brought in money and rates have not risen. that is really

confusing in the rate environment is the volatility we have seen. there is no longer a one way up or down. how to leverage -- how do leveraged etf's do with a lot of volatility? eric: they do not do well. overall they promise you the leverage every day. many have daily in the name, so they reset that leverage amount every day. the reset it is all over the youe with volatility, and do not get your two or three times. tbt is interesting. point,ings me to another even though it is used more by the traitor crowd there are some money managers who have talked about using this as a duration keller because it is -19 years. if you have all of these bonds in your duration, you throw in -- is a portfolio management tool as well. the corrosion about the daily

resetting is the catch. scarlet: i was just wondering, how do people use this etf? to what extent do they use it as a hedge? it is not a one-way bet. bet: really it is used as a from the trading crowd as rates rising but as a portfolio management tool to bring down duration. alix: is there an inverse to this? is there a leverage to the downside if you want to play a lower rate environment? eric: then you would just go for a leverage treasury etf, or you could go with a long dated regular treasury bond etf. alix: what if i want to play a rising rate environment, is there a way to do this? eric: totally. one of the most popular ats is k re:. most people might have a financial etf but this one is highly correlated to the 10 year a regular stock in two

yes because regional banks in particular get more of their revenue from lending out money. these are going to be most sensitive to a rate increase in a good way. we have seen 250 million go into kre in the past does go weeks alone. scarlet: have they lost money the way they have on tbt? eric: no, this is a regular stock etf. there is nothing weird going on and it is up about 5% since that meeting when the fed left the door open for a rate hike. alix: what do we need to totally avoid in the etf world if interest rates rise? eric: zero. literally the etf at the biggest duration, 26 years. these tract bonds with a coupon payment history doubt. payment is stripped out.

past five years, this has been pretty popular because rates have crept down. does very well, but if you think rates are going to rise, i would go nowhere near that one. scarlet: volkswagen is set to seek as much as 20 billion euros in bridge financing, looking to manage -- to raise money amid the fallout of the cheating scandal that continues to dog its sales numbers. out, i also want to point we learned that volkswagen has put a pause button on it. it is going to need some kind of loan to help it survive. trading isrman closed for the day but if you come inside the bloomberg terminal, this is a chart of the u.s. listed shares. there are u.s. shares of volkswagen, you can see that long leg down. it is a reaction to these

headlines that they are said to be seeking as much as 20 billion euros and not -- alix: volkswagen has about $200 million -- billing euros better maturing this year. aside from moving operations forward and investing capital, they have payments that have come do. eric, thank you so much, air ball tunis, eric balchunas. scarlet: we will be heading to asia or the biggest commodity trading houses got creamed after reporting falling profits. niño, therever el is a new weather pattern on the horizon. el nina. scarlet: we will take a look at how the valiant fallout is leaving shrapnel in one mutual fund in particular. ♪

scarlet: welcome back to bloomberg market, i am scarlet fu. alix: i am alix steel. scarlet: here's a look at some of the is the reduced -- biggest business stories. the falling cost of food and new model light trucks are to blame.

the gauge was down 1.6% from a year ago. alix: sales at u.s. retailers rose less than forecast in october. increased 1/10 of a percent after being little changed in september. analysts were looking for a gain of 3/10 of a percent. hoping forfthansa is a return to almost normal operations after the conclusion of its longest strike. --a protracted labor flight labor fight that led to thousands of canceled flights. the total number of cancellations during the week long walk out is 4700. you can always get more business news at bloomberg.com. alix: it is time to get you caught up on all the action around the world. there was pressure all around, the hang seng posting a big drop.

traders along and nolan are slumping. let's turn to southeast asian correspondent. no repeat of a one-time gain. it's performance comes on the back of results yesterday where it's profits plummeted 84%. has hadodities commodities traders, slower growth in china has not helped either. do not forget that noble and hola have been the target of shop seller muddy waters. companies are trying to busily regain investor confidence by implementing new strategies. europe, the u.k. fraud office is charging 10 for --e deutsche bank officers mark barton spoke with bloomberg

news investigation reporter suzy rig about the latest into industry benchmark rigging. mark: who has been charged? >> for deutsche bank leaders. another big name from barclays. mark: how long has this investigation been going on? >> since 2012. it comes to 23 in the u.k.. mark: and it goes to trial when? >> it could be a while. it usually takes a couple of years, particularly because these individuals are based overseas. mark: does this mean about the

frauds office? thehey are not done with investigation yet, and they are definitely chomping at the bit. alix: that was mark barton talking with suzy rang. for a look at u.s. markets, abigail doolittle has the latest. abigail: we are taking a strong look at cisco, one of the big stories with the network communications giant down near the lowest, down 6.6% after the company missed its fiscal first-quarter revenues. they are blaming a weak global economy along with a strong u.s. dollar. said we sawbbins general uncertainty from a macro perspective. we can see that shares have been trading in a sideways range all year with shares now toward the bottom of the range. well investors see something

here that they like to step up and support shares so that they do not drop below support as they did before? only time will tell. we know that shares are down, as well as those of flextronics. 45% ofount at least revenues -- 45% of revenues. revenues.of a saving grace could be that flextronics trades at a discount to its peers. perhaps that will offer a rebound. turning to the nasdaq, down 9/10 of 1%, the fifth straight day in a row that the composite index is trading off. a down week so far at the nasdaq. scarlet: thank you so much, abigail doolittle. we have more coming up on bloomberg markets. a little drought may be what the crop needs.

will la niña save the harvest? ♪

alix: welcome back to bloomberg

markets, i'm alix steel. scarlet: i'm scarlet fu. if you wanted to know the impact of el niño on the weather, just go outside. we have not really had a winter. .orget about that nina may be the factor we are not accounting for, especially crop.t summer's yield grain prices have been falling for three state years -- straight years. increases the possibility of a dry, hot summer in the midwest, transforming the grain market. bjerga,us as alan bloomberg reporter for food in our culture. could you take us through the distinction of el niño and la niña and where we see the impact around the world? alan: right now we are in what

is considered to be a strong el niño pattern and that brings havoc around the world. severe drought in places like australia and brazil. other areas will have heavy rain. for the united states, el niño can be good for grain production because it brings fairly mild weather to the u.s. corn belt and we have seen that the past few years. the crop of being, as gets built up, commodity prices go down. the stocks just keep going up. farmers are looking for some sort of relief that may come from la niña. scarlet: is at a given that we will get la niña after el niño? alan: it is not a given. if you take a look at data going back to the 1950's, the last five strong el niño's have been followed by a la niña five times. you would see a switch in weather patterns in a hotter,

drier summer in the midwest which would lead to lower yields and higher prices for farmers. it could help work down some of those inventories, but no, it is not a sure thing. is there a way to quantify the impact? we are going to have corn and soybeans be higher, and cocoa and sugar below are. alan: we could. you just kind of described it because of the way the weather pattern will affect the tropics versus the united states. the question is, when and where? alix: when we had the drought a few years ago it did not just affect the crop that year but four years after. what are the longer-term impacts of these weather patterns? alan: that especially happens when you have flooding and that is not so much a problem for la niña in the u.s.. world,r areas in the

when you can see some flooding as the weather pattern shifts, that does have multiple year affects on crops. have drys., when you years, it can affect the market. we have just seen the results of the 2012 drought play out in beef prices. scarlet: have farmers already planted more anticipating the la niña conditions? alan: no. what you see now, you see the winter wheat crop going in. if we did get into la niña, you would see worse weather, prior weather for the summer crops painted in the spring. probably not likely happening during the planting season or before it, thanks to climatologists. it is just something farmers have to be watching. alix: that is why it is so crucial for the farmers to be

able to hedge. what about the global impact? importers like india get really hit when these weather patterns change his food prices can be so volatile, and that is in part why we saw the spring take hold -- the area did spring take hold five years ago. alan: just earlier this week, i was part of a wargames situation for an imagined hunger crisis in the 20 20's. you were seeing more frequent el niño and la niña climate change. there is a belief this could be happening more often and when this happens, you have year-to-year unpredictable volatility in commodity prices, you have a recipe for unrest. trickles downlly to the farmers' income as well. have heard prices

companies that depend on farmer income to buy stuff. prices, see higher crop what we see that trickle through equipment sales and drank -- grain sales? alan: that will be fascinating to watch. the boom times are pretty recent so the inventory is still fairly a returnif you did see to higher prices and farmers being able to build up some profitability, you could see a rebound from his country -- companies as their inventory gets a little bit older. alix: thank you so much, alan bjerga joining us from d.c. really tradeties on this fundamentals and not necessarily as much on the dollar or stocks or anything like that. scarlet: why are they so much more shielded from macro conditions than other economies? alix: no idea. sugar and cocoa are really affected by these weather patterns.

gold and copper are more affected by the conditions in the market. that is why these kinds of situations are so fascinating for the stock. scarlet: copper affected by the way the chinese are actually using, looking for returns. they are using copper as their carry trade to buy higher yield assets. alix: you are not necessarily seeing that in the corn market. not as appealing in the corn market. scarlet: coming up in the next hour of bloomberg market, we have a technical look at the market. we will explain why a wall street technician is harris about the market. ♪

alix: it is 1:00 p.m. in new york and 2:00 a.m. in hong kong. scarlet: welcome to "bloomberg market."

from bloomberg world headquarters in new york, good afternoon, i am scarlet fu. alix: i am alix steel. stocks are in the red pressured by retailers. scarlet: the valley and has some investors feeling pretty queasy. one mutual fund in particular that is feeling the pain of its investment. alix: is there a dark cloud over cisco? scarlet: we want to head to the markets where julie hyman has been tracking the movements and that bit of a comeback we made has faded. yes,: by the way, spoiler, the six week streak is over. alix: it is an ugly week. julie: indeed. we have seen a little bit of

volatility but things are headed back lower. rally, little attempt to we are back down by about 6/10 of 1%. i want to mention it being roughly halfway through november that we are on track for not just a bad week but a pretty bad november in terms of returns. this is a heat map month by month going back the past five years. here we are at november with his 2.2% drop. you can see it is worse than the other novembers we have had track toand maybe on be the worst since 2008. in terms of today's session, we are talking about retailers are really the big drag. continueoups declines to accelerate after the companies numbs miss estimates and see declining sales. nordstrom, similar story there.

downgraded on concern over stagnating sales. that seems to be a big theme today. alix: but we are off the lows of the session for stocks. what is helping them? julie: i was going to say mylan. it is the best-performing stock in the s&p 500 today, because of its deal with perrigo not going through. perrigo shareholders not voting for this deal to happen, you can see shares are up 30%. perrigo -- are up 13%. perrigo is down nearly 7%. if you take a look at my bloomberg terminal at the push and pull we are still seeing, i would say it is oil but energy stocks are still down. material and health care are the best-performing groups. scarlet: her answer is always oil.

any question. julie hyman, thank you so much. alix: we want to check in with mark crumpton. officials military say they are reasonably certain that the extremist known as jihadi john was killed in an airstrike today. has been seen in numerous videos showing the beheadings of western hostages. officials say his death eliminates a symbolic figure in the group's reign of terror. >> we are reasonably certain that we killed the target that we'd intended to kill, which is jihadi john. it will take some time to be able to finally know if we have had success. mark: if confirmed, his death would be a coup for the western allies and particularly for homegrown extremism. john kerry is in vienna for a

critical international diplomatic meeting on the crisis in syria. he won't meet with foreign ministers of turkey and saudi arabia as well as the yuan special envoy for syria. they had talks with top diplomats from roughly 20 nations on saturday. more violence between israelis and palestinians. a palestinian shot and killed two israelis driving in the west bank, and a third is really was wounded. moscow is banning egypt's national carrier from flying to russia in the wake of last month's crash of a metrojet .lane in the sinai peninsula the final seven seconds of the cockpit voice recording will be sent to a country with the capability to analyze it. the recordings include a last second noise. if you pay more and get last when -- get less when buying your thanksgiving turkey, lame the bird flow.

the supplies are down two thirds this year, wiping out 8 million turkeys in 15 states. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. i am mark crumpton. scarlet: thank you so much. alix: turkeys and eggs, it is brutal. you are not going to be able to make your piecrust. it will be painful. scarlet: time now for a technical field on the markets. the s&p 500 broke its 200 day moving average. that orange line being the long-term trend line. what does this tell us about where equities are heading? alix: joining us is chris brown. 200,t only broke below the but the 100 today. chris: we are in a tough spot.

i would watch the 2010 neighborhood. are going to sustain some of the progress we made, that 50 day needs to hold. this market has been led by a select number of very large cap stocks and if you have not owned those, it has been tough to find returns elsewhere. are you talking about facebook, apple, netflix? chris: i am surprised that apple is included because they have not acted well. we are worried about that stock and think it goes lower from here. there are related aims to apple, sky works that do not act so well. when we think about the market this year, if you have owned the 10 largest stocks you are up about . if you have owned the s&p, you are flat.

this is very concentrated in a select group of stocks. alix: what we typically see is tech tends to lead the market. you pointed out that about 60% of stocks are above its 200 day moving average. chris: where is the other half. with ther problems rally we saw in october is you never got that big expansion. the big question i think we need to address, is this rally that we saw, is this the start of the next bull market? high data should be better and we have not seen it yet. scarlet: what does it tell you about the durability of the rally? chris: given some of the narrow leadership, we want to be backing away from risk. the seasonal is still a tailwind. i do not want to understate that, but it is time to maybe harper some gains and take some profits into the end of the year. alix: looking at consumer discretionary, it is knocking

about -- this is it, sp y, equity port. what is contributing to the spy today? about 23 points of the spy is being knocked down by consumer discretionary. where are we in this phase? chris: i think the sector is honorable and if you look at the small-cap version of the sector, that made all new lows. expedia --etflix or i think that continues. i think the consumer is honorable. scarlet: especially when you look at the department stores. it is five companies in the s&p 500, nordstrom's, macy's, and kohl's. alix: looking at the consumer discretionary sector, it is above. in theonly 43 stocks

sector are above their own 200 high. onion, iteel back the is not as broad as it may seem on first lash and we see that in a lot of different sectors. scarlet: we're not even done with earnings -- retail earnings season yet. chris: we looked for the first market capamazon's exceeds that of walmart. employs 2 million people and amazon employs 150,000. --rlet: alix: oil, when are we going to break below $40? chris: i think it is happening this year, happening sooner or later -- sooner than later. a lot of investors are trying to call a bottom and want to be involved in the space. makeve already seen brent

two month lows and energy spreads are starting to move wider again. we have to watch that. that was one of the warning signals in the third quarter when oil rolled back over. copper made new year lows. watch glencore here as well. alix: who is long left in oil to sell at this point? the last few weeks we have almost been in a bear market. lows have to do with apathy. i think people have to hate it more before it can work. scarlet: in terms of oil, is it just a function of what the dollar is doing? it will probably strengthen. chris: we are very bullish. i think euro will trade to parity. we are one of seven and i think we will be around $.90.

the spread between u.s. yields and german yields is one of the rightist -- widest on record. alix: thank you so much. chris baran, head of technical analysis. scarlet: helping us caps off the week, a volatile week. coming up in the next 20 has droppedeant over 70% since august. short investors be running away? alix: jet engines are known for being loud but imagine being able to talk on the phone while standing next to one. scarlet: remember those up for whatever bud light ads? they really angered a lot of insensitives approach to women, but things are changing. womener company's friendly campaign. ♪

alix: welcome back to bloomberg markets, i am alix steel. scarlet: i am scarlet fu. alix: it is time for the bloomberg business blast. does people familiar with the matter say volkswagen is working with banks to put together more than $21 million in bridge financing to show it has adequate liquidity. as dw globals deliveries dropped 5.3% to 490,000 vehicles last month. scarlet: campbell soup is recalling 355,000 cans and spaghettios due to a possible choking hazard.

pieces of red plastic were found in a small number of the cans. campbell says the plastic is food grade and not harmful if swallowed. alix: can plastic be foodgrade? recalling souls from 2014 to 2016. the company says no crashes or injuries have been reported and the recall is expected to start on december 22. you can always get more business news at blaber.com. -- bloomberg.com. scarlet: it is foodgrade. hymanhead back to julie who is not eating plastic. julie: it does remind me of those candies that you had as a kid, the wax bottle that you chewed on. alix: which is so gross. why would our parents let us eat that?

julie: i'm going to pick on despicable and something you mentioned. maybe stocks got a little bit of a list -- lift as oil is lower. this is a five-year chart of the correlation between the s&p 500 in oil prices. over the past five years, there have certainly been times when it has been higher. we are quite to an inverse correlation but the correlation is about 0.4 at this point in time. it is hard to say that all of the time on oil is up it is good for stocks and all of the time when oil is down it is good for stocks. in terms of what is going on today, oil is seeing something of a tumble on the iea data that you heard alex talking about of stockpilesms and just generally on the recent stockpile data we have gotten from the u.s. as well yesterday. oil is down nearly 3%. if you look at the weekly

numbers, down eight and a half percent. this is the worst week for oil that we have seen since march. to get back to the idea of stockpiles and inventories, this is one of my favorite charts that i bring up periodically. this is the stockpiles in the u.s. going back five years. we are 100 million barrels below -- above the average of the fact -- past five years. even when oil inventories have been down, the gap has only narrowed to 90 million barrels. alix: what is so fascinating to me is that part, the fundamental part they not be leading oil as much as other factors. there was this report out from stock jan a few weeks ago. the proprietary model that breaks down things like macro, the vix versus equities, the dollar, and liquidity. they are contributing quite a bit to the dollar's move.

about 37% of oil's move is due to macro. to -- -- 57% is due julie: you would think the fundamentals would be poor enough to support the action we have seen an oil prices. scarlet: what is remarkable is the macro concerns really take center stage in mid august. august 15 when the china stock market collapsed, macro took over. julie: we will have to see how that plays out. scarlet: thank you so much, julie hyman. valeant debacle, we will discuss. ♪

scarlet: welcome back to bloomberg markets, i am scarlet fu. alix: i'm alix steel.

continuing this sad about, sequoia is the largest -- continuing the saga, sequoia is the largest holder. two sequoia directors quit, just decided to take off. carol massar and cory johnson have more. carol: thank you so much. valeantto talk about and the close ties it has to a mutual fund, and with us is peggy collins. the valeant story continues to unfold. talk to us. the sequoia fund has been around since about 1970 and has ties to warren buffett. he pointed some of his clients to friends of his, one in particular he had studied at columbia with.

this firm called rain can ease and goldfarb is the investment advisor to sequoia. they are the biggest shareholder as of the latest data we have at bloomberg in valeant. that is why they have come to the forefront and been embroiled surrounding/scandal valeant and its practices. cory: there were some interesting changes, resignations of the board and so on. >> one of the things that happened last month, which is quite unusual, two of them quit. sharon osberg is a longtime friend and still bridge partner of mr. buffett so that certainly was surprising to a lot of investors. resignations happen within like five minutes of one another. >> on a sunday in october. cory: that was on a long-term plan. >> exactly, so very unusual.

another thing shareholders has said to me is, we do not understand because the sequoia fund managers themselves did not send us a letter explaining why they had resigned, and they did not hear from the directors that quick directly as well either. i spoke to one of the directors, robert swagger on the board of the sequoia fund. he is 94, very sharp, and has been an advisor on the board of directors for the fund since it started. he said he was surprised that they had quit. i spoke to him just after that announcement and he said he was surprised to clearly it was not something done in person. >> was he surprised about the size of the investment the fund had in valeant? 29% of their assets is in valeant. >> that is huge and it is one of the things i think can be taken away, if there is any lesson to

be taken out of this mess, people often that have two big concentration and one stock, whether it be 401k or a mutual fund, that can be really risky and that is one of the questions that is still remaining related to the sequoia fund. how did they let that state get so big and why? they got into valeant early on to they still are up on the stock in a big way. cory: there clearly are big believers in the story and therefore did not have the information, a very complicated relationship with their specialty pharma companies. it has been a surprise. the sequoia fund, going back to what we were talking about, about warren buffett and its ties, a lot of investors in the sequoia fund believe, and the fund has mimicked them.

of buffetted a lot teachings. i think everyone is like this, it is human nature. when things are going great, people do not ask a lot of questions. when you see a massive drop in a stock and you are like, how did this happen? a lot of people are saying, was there a shift in focus in the fund of taking on more risk, or did they really just believe so much in it and are sticking by it? to,he director you talk what responsibility did he feel in terms of what the fund was invested in? >> he said he really still believed in those managers and their talent. he had listened to bill ackman who defended valeant about four hours a couple of fridays ago. i did speak to miss osberg as well and she declined to comment on the airtime story. i asked her why she has not

spoken out to shareholders and she said, i feel that information comes best the fund management itself and now that i'm no longer associated with it, i prefer not to talk about it. >> this story just gets more interesting by the day. peggy collins. it is friday the 13th. scarlet: thank you so much, carol massar and cory johnson. alix: it is friday the 13th. scarlet: i did not think about it until now. alix: still ahead, cisco earnings disappointing sending shares down the most in two years. how they are trying to fire up some growth. ♪

alix: from bloomberg headquarters in new york, welcome back to bloomberg markets. scarlet: let's start with the

headlines on first word news this friday the 13th. mark: the united states says it that itnably certain killed the islamic state extremist known as jihadi john in a drone strike in syria .ppear he was even several videos showing the beheadings of western hostages. a spokesman for the us-led coalition fighting islamic state spoke with reporters in a videoconference from back that -- from baghdad. celebrity --isi isil celebrity. there was a siicant ow to their prestige. he was not a manager that major technical figure. mark: an assessment is still being conducted to confirm his death.

it would be a cooper the western allies in the fight against islamic militants and homegrown extremists. ardish fighters declaring victory over islamic state. they raised their plaque in the r.ty of sinja the kurdish assault has the support of u.s. were plants -- warplanes. they now control a road that was a key islamic state supply route. jonathan pollard will be released from federal prison next week. he was a naval intelligence analyst who was arrested in 1985 for selling secrets to israel. parole this year and will be released next friday from a federal prison in north carolina. a judge in utah has reversed his decision to take a baby away from her lesbian foster parents and place her with a heterosexual couple. the move comes after the ruling led to widespread backlash. scott johansson signed an order

that will allow the nine-month-old baby to stay with the two women. utah officials and the couple filed court challenges demanding that the judge recently order. best rescind the order. -- that the judge rescind the order. cisco's ceo chuck robbins reported earnings yesterday at the closing bell for a first full quarter. scarlet: earnings disappointed, shares falling the most in two years off by 7%. robbins is more optimistic than ever about the company's future. he spoke with stephanie ruhle and david westin and erik schatzker. joining us now from san francisco with more on cisco because we don't have the sound available from chuck robbins is ian king. a pretty extreme reaction in the

stock. is it justified? >> anytime anyone of these investors are worried about a legacy company, hp, ibm will come out and say the outlook is not that great, they are triggering these underlying concerns which are that these companies are missing out on the giant transition to the cloud. it was not anything in particular that cisco reported. the numbers were not bad. the outlook was not great but not terrible. it's underlying concern driving it. bellringer can be a for the rest of the tech industry. i was interested in what chuck robbins said about china. we had a very strong quarter in china from an order's perspective. growing over 40%. companys the first tech

to forecast the slowdown in china over a year ago. and we hit the bottom here in china -- have we hit a bottom here in china? >> it is a much more complicated situation than that. all the companies in asia that are heavily dependent on the bad.se economy were pretty what they said about china was a bit more specific because you remember a couple years ago, had the security leaks situation and that is what really got cleaned out in china. we are getting a bounce back specific to cisco from the bottom rather than cisco coming up and saying hey the chinese economy is great. thank you so much for joining us today from san francisco. what i found interesting in this

report, thanks to our analysts at bloomberg intelligence, cisco's legacy business still dominates in terms of revenue. the switch and router business clearly is the one that is driving so much of the revenue. the growth rate has slowed down, but in terms of overall mix of revenue, still accounting for 59%. alix: it is the story of big tech companies trying to transition. we want to hear from chuck robbins who spoke on bloomberg . >> when we think about the enterprise and we talk about our enterprise business, it's important to understand it's like 500-700 customers around the world. when we look any broad representation of customers that would normally be characterized customerrise, the fortune for 50 envelope, that business is 25% bigger than our enterprise business.

envelo and below. that is a good sign and also supports the fact that our portfolio resonates with customers. when you look at the large multinationals, they see some global uncertainty. theysee macro challenges, tend to pause first because they have more exposure. we looked at our enterprise not have a we did bad quarter, we had a reasonable quarter. it was in the low end. but we feel pretty good about that business right now. >> is it time for the new man on the job to think radically about cisco's product mix? great new products and i know you have more and they will probably grow at a pretty fast rate. there is the rest of your company. some of it is legacy, some of it is not growing quickly. might you consider doing areething like emc dm w

so that they have an opportunity to price your products properly? they looking at your forward will let 11.6 times and they're not happy. -- forward multiple at 11.6 times and they are not happy. simply one focused how fast the technology drives the business result they're looking for. every customer is looking for how they become digital. walmart talked about the need to move to digital. the real issue is that they want that architecture, they want technologies that work together when they come in the door. this is the region for our strategic -- reason for our strategic partnership to get the customer the better experience faster. we will continue to expand our portfolio. we made three acquisitions, we announced for we announced four strategic partnerships.

we will make the moves we need. >> you are a recently new ceo at cisco. you are thinking about the next three years, next five years. one thing that seems certain is that the role be more and more digits flowing through your equipment. we know that part of the market is growing. as you look for growth for cisco, is it taking market share ? to what extent does increased innovation increase productivity and reduce the demand for your product? i like to think that our technology and our products are part of an increasing productivity as they have been for the last 20 years. you think about what is happening today, we built this company based on 15 billion devices connected to the internet. by 2020, that will be 50 billion. escalating from there. as we see companies add more and

more things to the network, or digital initiatives, we will see continued distributed environment that our companies working. minds,u are connecting retail, oil rigs -- we will play a key role in connection but taking the data that is actually available from those connections and helping our customers gain insights from that data was effectively and securing the solve- security can only through the network because with look at these packets when they hit the network and we will play a big role in connectivity come insights, analytics and security. scarlet: chuck robinson speaking on bloomberg this morning. up -- ae volume, pump new jet engine that is 75% quieter than its counterparts. light thinks it has a way to win over female

consumers. scarlet: october retail sales disappointed. ♪

scarlet: welcome back to bloomberg markets. time for the bloomberg business/. we heard from loretto mr. a strengthening u.s. economy is ready for higher interest rates. 2.25%edicted growth of this year and next saying there should be a gradual path obtaining after liftoff. alix: the father of

minnesota's governor has died. he worked his way up to president of the family store offshootiscount target into a national retail chain. scarlet: lulu in talks to add time warner as an investor -- hulu in talks to add time warner as an investor. you can get those stories and more at bloomberg.com. alix: let's send it over to the markets desk where julie hyman has the latest. a basket of the good and bad of the day. julie: yum! brands moving on china news. shares of 3.5%. same-store sales and its

restaurants in china grew an estimated 5% last month. the company has had some ups and downs in china. laggingness has been ever since 2014 when there was a scandal that involved one of its suppliers selling expired meat. yum! brands has bowed to investor pressure to spin out that china division. we are looking at lumina, replacing cigna in the s&p 500. when you get these announcements come you tend to have the sto ck thrived because those who benchmark their holdings against the s&p -- looking at yelp today. mark upgraded yelp to an outperform from set to perform. he cited a highly attractive risk reward after the stocks recent underperformance. there is unique core and strategic value at yelp. on the downside today, we have

-- droppingucking the most ever, 24%. this after the company's preliminary revenue came in below analyst estimates. tyco international also falling today. the fire detection and security services company gave an outlook that fell short of analyst estimates because of the energy markets and sluggish global growth. forlet: thank you so much those when his losers in the stock market today. alix: this week, we've been looking into the year ahead, the transfer 2016. the subject of our special issue of business week. scarlet: today, we turn our attention to engineering.

an engine that is 15% more fuel-efficient and 75% quieter. we lived in the jet age for 70 years. one of the greatest innovations of the past century. linking points and people. the jet engine is with some drawbacks. , eat up tons of fuel. many people have tried to make improvements that few can claim to have in at it as long he's an engineer 66 pence to his name. thats had this one idea could radically change the jet engine. simple but incredibly difficult. he and his colleagues have been at it 30 years. they think they finally have cracked it.

-- an engineer with 60 patents to his name. >> the problem with a conventional gas turbine engine is the fan generates thrust in front of the engine wants to spin slow for efficiency. the turbine driving the engine wants to spin for faster emergency. attach the turbine directly to the fan. you've created something that is also a problem. >> the way we solve the problem of compromising the fan was introducing a gearbox and a shaft that reduces the speed of the fan and that's the turbine spin faster. each component can now spin at an optimum speed. >> why would you want the fan to spin slowly? it seems counterintuitive. >> the reason you want it and to spin slow is when it runs very

fast, it will generate shockwaves because they're going supersonic. that generates a lot of drag. it, the fan becomes more efficient. >> that translates into a 15% reduction in fuel consumption. it is a very real effect on an airline's bottom line. >> they will save $1.5 million per airplane per year. >> and engine that burns less fuel also emits fewer pollutants. an engine that is much quieter, 75% quieter. it's me. no, i'm still in florida. i'm standing in front of a jet

engine. we are testing out how loud it is. you can hear me, right? right.l i love you. by. -- bye. it works! whitney says we might fly on a plane with these engines as soon as the end of the year. currently, they are being tested around the clock for two months making sure birds will not break them. technologyhen new arrives daily coming through your project is a 30 year project seems insane. he's hoping his breakthrough will pay off for a long, long time. scarlet: i'm glad they addressed the whole issue of the birds. all that engineering for this engine that could be destroyed by a couple of birds. alix: that concludes our look

ahead to 2016. scarlet: ads featuring kenny will this bikini-clad models not hitting the right note with women. are they ready to change their marketing to? tun?rketing -- tune? ♪

scarlet: it is an advertising truism that sex sells. sexism does not. alix: but lights up for whatever campaign backfired with critics. anheuser-busch is planning a super bowl campaign designed to win back women with a nod to real-world issues like he will pay. scarlet: miller courses committed to more gender friendly marketing. new us first about this

enlightened budweiser ad. >> we will find out. they pulled me that they are releasing a campaign that will launch during the super bowl that looks at how people come together drinking bud light and when people come together, you can solve the world's toughest problems. one of those problems is the issue of unequal pay. they are saying it will have a lot of humor, a lot of celebrities but also be substantive. that's what they say. alix: what about changing the product and packaging to appeal to women? >> both of the two big u.s. companies, miller coors and a be in beth have introduced new b inbev. -- a be i

miller coors has introduced a number of products, different shandies. invest in sweet flavors and they are taking that concept and putting into action with these new kinds of products. scarlet: this pressure on these beer companies to be more demographically inclusive, they're looking at the dollar signs. this is an untapped market for them. how have they done with women in the past? beer ads havewhat done in the past, they have not been the key demographic. , millerbeer drinker coors told me has traditionally been men between 21 and 29. ofen make up about a quarter beer consumption. they are looking at this over the past 10 years, they have lost 10 points of market share to wine and spirits.

are looking at this and thinking 51% of the population only 25% of beer consumption, there is a missing link here. alix: take a look at bud light, what is their biggest competition? coors light or wine and bourbon? >> it is both. one thing the big beer companies have said they are trained to do is take back occasions from wine and spirits. they are being threatened by those companies -- they have a lot to gain by having a broader appeal to women. scarlet: by shifting their focus and strategy come are they worried at all about losing their core audience? >> they said no, they are not worried about it. millennials tends to hang out

with more diverse groups of people and because of that, maybe targeting a broader audience, they are saying could attract more of the core male audience as well. they don't seem to be worried about that. alix: thank you so much. something like bud light or coors light, you can drink 12 sixpacks and not people. does not be full. makes it good for sporting events. 's,you drink six ipa bye-bye. scarlet: mylan's hostile bid for perrigo failed. ♪

david: is 2:00 p.m. in new york .n welcome to bloomberg markets.

from bloomberg's headquarters new york, good afternoon. consumers keeping more money in their pockets october retail sales disappoint. is this a bad sign for the holiday shopping season? a bitter pill for mylan. perrigo shareholders reject a possible takeover bid. first, let's head over to the markets desk with julie hyman for retail talk. julie: one of the things weighing on stocks today. we had retail numbers for individual retailers and the overall economy. advanced retail sales coming in below estimates. around the lows of the session at the moment. i've forgotten to call up the chart.