from bloomberg that glitters in new york -- headquarters in new york, i'm david gora. -- gura. int the first rate hike almost a decade could mean for the economy. will trending below $40 a barrel. what walmart could be one of the biggest winners. apple is working on making ipads even slimmer. the company is reportedly opening a lab in taiwan to work on display technologies. what that means for the company and suppliers. inocencio has the latest with a lot of green. ramy: the has been with us to the whole day. market covering your session highs, keeping up the momentum from this morning. dance around 1% in the first few minutes. the s&p 500 is the biggest

gainer, up 1.5%. this is the best two-day rally we've seen since late october. let's see which s&p sectors are actually leading those gains. and is the imap function, as it has been all day, energy has been the leading sector, up by 2.6%. you can see across the board, all 10 sectors of the s&p are in the greenhunter energy financials are not too far behind, up by about 2.6% and health care up by 1.6%. i want to talk to you about nymex crude, it's holding its games today as well. right now, up by 3.4%. sort of your session highs, we saw session highs about an hour or two hours ago. in theains are nudging best two-day high. we're still at six-year lows. david: health care the way in

that sector. ramy: there are quite a few stocks to stock about. valeant is also rising, with valiant shares pretty much soaring, up 18%. accelerating gains within the past half hour or so. this is after reaching a drug distribution agreement with walgreens. it looks i can investors are looking at the deal as more legitimate than an earlier deal. a new 20 year deal may lead to a $600 million cut in valeant's u.s. drug prices. hownt to take a look at this is performed against the s&p. up nasdaq biotech index is 8.76% year to date. the s&p is down by about .4%. key biotech indexes are on track to be the s&p for the sixth beer in a row. as i said, this year is not as

big as in years past. because of some corrections in the second half of the year. and concerns over drug pricing and government regulation. the question into 2016 is whether that has been priced out of the markets, and whether companies can find a strategy to increase profits. david: ramy inocencio at the market desk. we continue to follow developments in los angeles. brendan greeley has more from the news desk. lawdan: los angeles enforcement and city leaders are defending the decision to shut down the school system due to an e-mail threat. it was a tough decision, but the safety of students and employees was their main concern. >> i made this decision to close the school based on past circumstances. i could not take the chance. as it relates to one student, or our staff that serve our students. david: law-enforcement officials say the threat was e-mailed to a

school board member and appeared to come from an ip address in frankfurt, germany. brendan: new york city officials say they and many officials receive the same threat. mayor bill de blasio said it came in the form of a generic e-mail and that new york officials quickly concluded it was not credible. getting on the same page against terrorism. saudi arabia announces leading a 34 nation islamic notarial alliance to fight terrorism. largeludes countries with armies, pakistan, turkey, and egypt. secretary of state john kerry is meeting in moscow today with vladimir putin and other officials, coordinate attacks against the islamic state in syria. republican presidential candidates square off tonight in another debate. this one in las vegas. lead in raced into the iowa. trump and 10 have been friendly, but now with the lead,

donald trump may be more aggressive. a russian spacecraft with three astronauts has docked successfully in international space station. ,ne of them made history today being the first briton to represent the european space agency and the orbiting lab. he will spend six months in space. more on these and other breaking stories at bloomberg.com. i'm brendan greeley, david. david: fed officials risk making a mistake, it will be difficult to fix if they hike rates. that's a warning that larry summers gave in an interview with tom keene in dubai. larry: in a world where error is inevitable, it's much better to make easily reversed errors than to make difficult to reverse errors. i believe a decision to delay rates runs risks that are easily reversed by subsequently raising rates. where is the decision to raise

rates, if it proves to have been the wrong decision, is a much more difficult decision to correct. david: for more on the risks surrounding the fed expecting to raise, i'm joined by michael. effect,ing that in there is some risk to raising rates of having to go back on it. michael: that's been the risk all along. forever,'t apply that's been one of the reasons why they've held off much longer than a standard policy would suggest. in the committee's judgment, the gun to the point where the risks are coming too late and having to catch up, which could be costly, he understates the cost of perhaps having to catch up if it gets out of hand. it seems like their judgment is at the point where the risks are starting to tilt in the other direction. david: i want to get your prediction on the announcement

we will get tomorrow, without some strong movement in the credit markets. we are seeing those come back to normal, or more normal today. we had china look at a different balance of currencies. would you think will happen? michael: the fed can't react to every day today move in financial markets. the decision-making processes been underway since the middle of last week, anyways. as far as tomorrow, we do expect a hike this far in the quarter. we expect the statement will convey no presumption that they are going to be moving in a study manner after tomorrow. the interestexpect rate forecast to show generally a gradual pace of increase, similar to what we saw in september. overall, i think the message coming out tomorrow will be -- we are hiking, but don't assume we are off to the races in terms of future hikes. david: i wonder what if anything

we learn about future hikes tomorrow. ira member talk of an implementation note coming with this announcement tomorrow. are you going to be able to learn to much more about what will happen in the new year? michael: it will be a novel aspect of what we are going to see. a lot of it is really technical details. the terms of what we are going to learn about future hikes, i think they're going to say we're going to do this once, respond and observe more data, and then we will redesigned as we get into the new year. another dual have any sense of a set plan for how policy is going to proceed from here on out. david: how will the committee assessed the accuracy -- efficacy of what it does? michael: they are in no rush. they have to watch economic data. they want to see whether higher interest rates are affecting the dollar and trade, how it's

affecting mortgage rates in the markets. and ultimately, how it's infecting inflation. we won't have a good sense of that, i think, for a couple of months time, which is fine with the committee. i do think there are in any rush to get the next one off. david: i wonder if you think we will learn anything tomorrow about how the fed plans on tricking the balance sheet? think not. i think in the initial stages they want to keep attention -- ond just on the past the path for short-term. the decision on the balance sheets are months if not quarters away. david: you may ask you about today's inflation numbers. is that something that the fed cares about? cpi and describe credence?? michael: it's interesting that now,pi is actually a 2%

even though the core pc is that 1.3%. ,he fed has been taking note whether it's the core cpi, they are selling a more reassuring message about where inflation is right now. david: michael, thank you. that's the chief u.s. economist at j.p. morgan. bloomberg begins special fed coverage at 1:00 p.m. eastern on bloomberg tv and radio, including janet yellen's news conference about follow. on the next 20 minutes of the "bloomberg markets," trading revenue fell 36% in the third quarter as fixed income sank. why that could be a bad sign for the rest of the banking industry. the cuhear from investors bancorp about what a rate hike could mean for the retail lending operations. and falling oil prices are a windfall for walmart. ♪

david: welcome back. it's time for the bloomberg business flash. halliburton's takeover bid for baker hughes is facing yet another hurdle. antitrust officials revealed

they may delay a decision until next year. that's according to a person finale with the situation. has raisednd brazil concerns about how the merger of the number two and number three will servicing companies can change the competitive landscape. sentiment gauge's fell for the second month in a row, having a 10 year high in october. they're concerned about the rising cost of labor and loss. now he and pharmaceutical has a new distribution deal with walgreens, to help lower the prices of branded restriction based products by 10%. the deal also covers over-the-counter products made by value pharmaceuticals, international. the 20 year deal takes effect early next year. you can always get more business news at bloomberg.com. ramy inocencio as a check on companies moving this afternoon and pouring over reports. ramy: the first and i talk about is disney.

that "star wars," came out less night in los angeles, and shares have been gaining. right now they are gaining more than 3%, up by 3.3% here since the movie premiered yesterday. goldman sachs analysts regular estimates for the new star wars films to nearly $2 billion. that's up by one third from the last estimate of $1.5 billion. another company to talk about his coach. shares arising for a second aro. today up without by 4.2%. this is after getting a second analyst recommendation in two days. hope shares will outperform the market perform with a $38 price target. that's one day after raising the call on the retailer trade they are convinced that coach can deliver better sales this quarter on a wider range of gift products. talking about gift products, visa is holding on to opening gains we saw this morning. right now is training near

--sion highs, up about two two and two thirds percent right now. goldman cites market share gains in the u.s., as well as long-term growth potential over in china by the end of 2016. finally, one more stock to look at -- lumbar liquidators. it's having its best day since 2007. look at this. it looks like it's at session highs as well. 37.6% higher today, after whitney tilson says he has covered his short position in the stock. on the flipside, ryan nagel warns the company is not out of the woods yet great and still faces resistance over its former use of china. david: that's ramy inocencio, the market desk. income, sharesd

railing the most in almost 40 years today after the company vowed to reverse declines in its bond trading business. particular,ng in 16 we expect a return to normal profitability. joining us is catch up or the con scheme katia porzecanski, to talk about that. in the last quarter, they lost $80 million. david: liza's this bank in particular having so much trouble? katia: they really specialize in niche things, like distress trading, energy trading, they do leveraged loans and leverage lending. particularareas in

that are affected by anticipation of the fed hike, and also energy prices down about 55% in the last quarter, with a fiscal quarter that ended in november. david: any sign that things were going wrong? banking was upnt quite a bit, that helps them overall have gains for their whole business. but even within investment banking, their debt underwriting was down 50%. they took on a lot of leveraged loans, and we saw they were part of this consortium of banks that are now stuck with this debt that they landed to carlisle to buy out symantec. they can't get that off their books. if they get that off their books, they could sell them at a loss. even that, we still to see how that turns out. there also able to cut costs a lot. let's talk about the promise of return to profitability. how they are going to turn things around. katia: they are taking steps to

assuage investors. they were hiding from investors for a few years, ever since they were bought and basically taken private. when they came out, they had an investor day and told everyone we're going to be reducing risk and volatility. now they are putting their money where their mouth is. in this release today, they said they are going to be cutting their leverage, they already cut it to below 9%, which is a seven-year low. they reduce their balance sheet by $6 billion from last year, which is really good in terms of keeping a risk on their balance sheet or taking it off. ,hey are also reduced in energy and distressed energy. they reduce their exposure there to 39 million dollars from $70 million in the last quarter. they are really trying to fix the areas they give them a lot of problems. david: thank you. that is katia porzecanski, with bloomberg news. we look at how financial services are bracing for the shift. my conversation with the bank

ceo, coming up next. ♪

david: welcome back to "bloomberg markets." it's looking like a lily federal reserve will nudge interest rates higher tomorrow. -- is looking likely the federal reserve will raise rates tomorrow. i think lost in all of this is the consumer, wondering what this is going to mean for him taking out a mortgage. what is the effect going to be? on rates, is not going to be that significant. mortgage rates are tied in to the 10 year treasury, it's not going to move much after this rate hike tomorrow. and the significance of it isn't that great. for a home equity line, it's insignificant. david: how is the landscape changed for you as the bank? in the past, there was a greater need, it's not the case as much

anymore. --in: the cost of can tries franchise is key. anyone can give the money out. bring that money and seek and it's you can fund the growth is really challenging. david: i wonder when we look at how is thateness, played out as you see it for consumers over the last few years? i wonder about the psychology of the banking industry? kevin: it's allow the consumer to do leverage. in 2008, whole aspect of the economy were overleveraged. it's also a large population of the segment -- a large cingulate -- a large segment of the population to seniors. we may have stated the party too long. david: how vocal have regional banks been about the need to raise rates, or the economic situation generally? tied into the

economy. it's not just about rates, it's about what goes on in washington. reform, arporate tax more proactive business environment to help businesses, especially small businesses grow and start, and hopefully improve the economy with more jobs. david: are you satisfied you are being heard out? banks,that regional smaller banks were saying they didn't have a seat at the table, they were being heard. is that beginning to change? results, idodd-frank think it's becoming more working relationship. it is getting better. we crossed over $10 billion write a long time that came into focus. our relationship with the regulars is very good. david: at jpmorgan, we were talking about the pace at which these rates i go up here it must do you concern yourself with that? there is a newness to the situation, having rates low for so long, wondering what's going

to happen and how that's going to play out. a lot of uncertainty, it seems like. that's why tarp take some of that uncertainty out. curve is notyield good for banks. at the short end if he goes up quickly, and the long end, the tenure in five-year don't move very well, that will her regional banks. -- thewhen you look at psychology. when you talk to people who come to your banks, do they have this figured out? it such an abstract sense, such a macro level. what people told you about how it's affected them? kevin: it's about the confidence of the consumer. howworker and the economy, comfortable does he feel with job security, raises, things like that. i think the impact of inflation. right now, the dollar is surging. imports are cheaper. if we were in a normal rate environment, we wouldn't be raising rates. cummings, ceo of

investors bancorp, the biggest regional bank headquartered in new jersey. stay with bloomberg tomorrow for complete coverage of the fed decision. live coverage of 1:00 eastern on bloomberg television and radio. still ahead, on "bloomberg wal-mart stands to benefit from cheap fuel. more on that after the break. ♪ . . the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you.

we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. david: from bloomberg headquarters in new york, this is bloomberg markets. let's get to the headlines -- rendon greeley has more from the

news desk. thatan: new york city says they and cities around the country received the same threat that los angeles received but quickly concluded it was a hoax. the mayor says he is convinced there is no danger to his cool children. l.a.am bratton says overreacted by closing the nations largest school system. the e-mail was believed to have come from an ip address in frankfurt, germany. congress and the white house are closing in on a deal over budget and taxes. house speaker paul ryan plans to release details on the agreement. both contain victories

for republicans and democrats. isretary of state john kerry in moscow trying to resolve differences with moscow over syria and ukraine. he's meeting with president vladimir putin later. russia says the airstrikes are aimed at islamic state. defense secretary ash carter is in turkey looking for new ways the us-led coalition can strengthen its fight against islamic state militants. he wants turkey to better control its border with syria and block the fighters of the terror group. in baltimore, a judge has denied in the for a mistrial

officer of the men charged in the death with freddie debt -- freddie gray. it's the second day in the trial of officer william porter. city officials are concerned that if the officer is acquitted, riots could break out. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. david: commodities markets are closing in new york. let's look at today's biggest movers starting with gold. the precious metal gaining as the dollar weakened before tomorrow's fed decision. natural gas futures extended losses to the lowest levels in 2001. oil advanced after slumping to its lowest level since february 2009. that's the longest run of losses more than he -- more than a year. the slump is causing plenty of pain for oil producers. the cheap oil means more money in the pockets of american consumers. the adage thath gas is cheap. there's more money in my pocket, so i'm going to spend it. guest: it seemed like consumers were using it to pay down debt or more immediate things like a car repair. but now it has been about a year were gas prices have been kind of low, so we see consumer

spending more of that money. jpmorgan did an interesting 50lysis where they looked at million credit and debit card purchases and found consumers were spending about 80% of the gas savings, so they are spending it. so the question is where? retailers are saying consumers are not spending it because they are trying to mask problems they are having the big question is where they going to spend it? david: you have written about walmart -- what is it about walmart customers that are benefiting? 's customersmart tend to be around the lower end. for those lower income customers, feel makes of a bigger percentage of their income. so they are spending more on fuel, so they feel it when it goes down. incomen found when lower customers found gas savings, their spending power went up by about 1.5%.

like three times as much spending power the low income customer gets. they have an extra $20, so they are going to buy staples, things like meat or dairy or use it on back to school shopping. go back willingness to to walmart time and time again? shannon: it's hard to believe but one of the big things is when gas prices were high during a recession, customers were not going to walmart because it was too far to drive. walmart says the majority of americans live within five miles of customers, they are out of the way. consumers might have been more the storeo drive to at three dollars and $.50 a gallon. david: you have this gargantuan retailer -- it has to play out in this as well. shannon: that's another reason

analysts are saying walmart could be a big winner here. they have their own private fleet of trucks. is in ahat they ship walmart truck with a walmart employee driver. that will help them feel the effects of lower gas directly, whereas of your outsourcing to a trucking firm, they are going to give up some of that profit. some good news here for a walmart -- how has the company been doing? shannon: this would be a little bit of good news for them. it hasn't been pretty. they've lost about one third of their value over the past year. but on the oil side, they have seen traffic go up in stores. issues andther traffic is not going up as fast as analysts would like, but after a few years of declines, we have seen traffic go in that

positive direction again. the company has high labor costs and amazon is coming after them. they have a lot of problems but i guess oil might not be one. sam walsh gave an exclusive interview to bloomberg. my london-based colleague asked if iron ore producers were in a race to the bottom to maintain market share. guest: as the lowest cost producer in the world, we are in a privileged position. if you look at supply and demand economics, the high cost producers would come off and over the last five years, we have seen 400 million tons of capacity, on. that falls and the high cost category. people hanging on

by their fingernails, sooner or later, the adjustment will take place. it's not natural, not normal for hostages to say how can we withhold supply. muche price is going much lower. you called $30 fantasy land back in february. we are knocking on the door of fantasyland right now. >> we are still looking at fantasyland because the sustainable price of $30 just will not physically work. take fiveyou need to dollars for shipping from australia, $15 for shipping from brazil. so that means you are talking about a price of 25 from australia or 15 from brazil. there are a lot of high cost producers that are not going to pass muster at that sort of

price range. it is not sustainable. it is fantasyland at that level. happenhat what needs to -- that prices need to go lower? grexit is what happens in every cycle. that thereight now are people suffering pretty loudly. be a lonelyit would place if we got anywhere near 30. it is still looking pretty crowded in many ways. it is crowded and there are a lot of producers hanging on by their fingernails. up the cashning reserves of their shareholders. that's a decision for them, not for me. that was sam walsh. before we go to break, u.s. natural gas sold at its lowest level since 1999 and you can thank el niño for that and the

warmer than expected winter we have had. 20ing up in the next minutes, the republican presidential hopefuls are gathering in las vegas. their fifth debate is tonight. a lot has changed in the country and the world since they met last month. apple is said to have opened a secret production facility in taiwan. what the tech giant is working on big don't want anyone to know about. and a look at tomorrow's fed decision. ♪

david: welcome back to bloomberg markets. in just a few hours, it is fight night in vegas with the republican presidential candidates going head to head in their last debate of the year. national security and terrorism are expected to dominate the discussion. to not allows plan muslims into the country does not seem to have heard him. joining me from they guesses john heilemann. when these guys get into the wolves den for the debate, maybe not all eyes, but all -- a lot of eyes are on ted cruz and donald trump. how do you expect that to pan out? expect all eyes to be on

those guys. the gold standard poll in iowa, you have crews well ahead in iowa at the moment, which puts some pressure on donald trump. trump does not like to see anyone the ahead of him in any circumstance at his usual -- he will usually attack. wayeems to be feeling his toward this. last night at his event, he was very restrained and did not go after crews. that raises the question of what's going to happen on the stage and if he does go after him, how ted cruz will respond. fear is that he's worried about alienated some of the supporters who might like cruise -- might like ted cruz? john: it's not so much that. it's more of a question of how he would go after crews. what he has been a genius at so far is finding the soft spot in the people who have challenged

him, whether it has been ben carson or jeb bush. 's is not clear what ted cruz soft spot is without seeming to be attacking the conservative movement. trumpnot so much about supporters. rush limbaugh went after trump for the first time, and i think trump is trying to figure out what the most effective way to take on a cruise would be and what is the way to do it so that he can maintain his standing with the big voices on the right who have been supportive so far in the conservative media act go chamber. donald trump made his proposal about stopping muslim integrate -- muslim immigration into the u.s., this will be the first time we will hear from them all on the same stage. how do you expect him to tackle that issue? john: i think that's a bigger bantion than just the

proposal. it's hard to believe given how frequent these debates seem, it is the case that both paris and san bernardino both took place after the last republican debate. the entire world has changed politically speaking since the last time these republicans were together on stage. national security and immigration is much more intense than it has been, so i think we will hear more talk about all of those issues. because trump's positions are the most incendiary, there will be a big focus on that. all of these candidates have criticized him on this proposal. they have not done it to his face. but now that it seems like his position as popular, how many of them will be as strong in this moment as they were in the immediate wake of those

proposals when we did not so -- when we did not know about how they would be received? david: for the candidates who are not polling as well and need to make a splash tonight, does all of this give them an opportunity to do this and who stands the best chance of getting noticed and exploiting this debate to his or her own gain? : you could say this about any past republican debate, that these guys who have been down in the low single digits, that these are opportunities. carly fiorina, you may remember, had a big moment but that did not accrue to her benefit in any kind of lasting way. the candidates who are all jostling right now for the crown of establishment favorite, john kasich, chris christie, marco rubio, jeb bush, none of them have emerged as an establishment they've read. none of them have consolidated

that fragment. for all of them, the pressure itchets up day by day and think you will see all of those guys try to stake out some ground and say i am the guy who can beat donald trump. ,'m the one you should turn to which the establishment feels is vital for their long-term fortunes. david: that is john heilemann joining us from las vegas. be sure to catch "with all due respect" tonight from las vegas. time now for a look at the biggest business stories right now. factory activity shrank in new york. it improved but stayed in negative territory. any figure below zero indicates contraction. 3m is lowering its full-year slowngs forecast, citing growth in the economy. it anticipates earnings of about

seven dollars and $.55 per share. guidance was for earnings in the range of $7.65 a share. have suffered a loss in seattle. they have allowed drivers to form a union. you can get more business news at bloomberg.com. stocks in a rally mode with energy leading the way. how about some of the individual movers? we have more on today's spider sector report. energy is powering higher j. exxon shares up by 4.5%. this is the highest since the start of the month and happening as the price of oil rises today and after house democrats say they are open to lifting the oil export ban.

chevron is the second against gainer. what's look at those shares, up a little more than 4%. still negative for the year. a third oft about its value since the start of 2015. 2%,iburton is up by about despite the department of justice not being satisfied with the company's plan to buy baker hughes. says itice department may delay decision until 2016 hasbaker huge's -- acre use recovered from a brief halt in trade. this was delayed the cousin of the delay in the merger and today, we are seeing the first gain in four days. you very much. coming up, apple opens a secret production lab in taiwan. we will tell you what they are

working on, next. ♪

to bloomberge back markets. according to people's layer with the matter, apple has opened a production facility in northern taiwan where engineers are developing new display technologies. this comes after apple got hit with a trifecta of cuts, projecting apple sales will drop for the first time ever. let's start with what we know about this factory in taiwan and what goes on there. great goop from our reporter in taiwan that apple has opened a secret lab to work on display screen technology. we believe there are 50

engineers inside working on brand-new displays. the goal is thinner come a lighter, more energy efficient. ledt now, apple uses displays. into't want to get too far the weeds, but it is more battery efficient in the picture quality is better. tim went to this building which is tucked away about an hour outside of taipei. he did did to the front door and saw the apple logo over the front desk. they did not want to talk about it but apple has always kept most of its r&d and house at outsourced the processing. apple moving toward is potentially doing some of the processing themselves. theirould decrease reliance on some of the other companies and focus on smaller manufacturers. in those the stock

smaller manufacturers rising today and larger manufacturers taking a hit. myid: i just looked at iphone and on the back of it, it says designed in california. even the manufacturing has moved overseas, a lot of the design happens here. ?ow significant is this emily: i think it is significant that they are thinking of making some of these components themselves. if they can make the parts themselves, they can have more control and potentially cut down on costs. you mentioned the three analyst reports all taking a swipe at apple. morgan stanley saying iphone sales are going to drop for the first time in 2016 and shipments will fall the cheer. cutting a price target

and jpmorgan saying they see weakness in the supply change. we had some conversations about this on "bloomberg west" yesterday. iphone sales are gangbusters but while the smartphone of market is saturated in some places, it is still growing. take a listen to this analyst. think there's any gloom and doom in the market that will see more smartphone owners that today. emily: he's saying we could add 5 million more smartphones next year and apple's second only to samsung globally. huge potential for apple. we're trying to follow up on the reports that apple is scheduling an event in march and may be unveiling a smaller screen iphone? iphone is six. we will be able to confirm those

until we get closer to the time it is interesting to see apple potentially catering it to an audience that wants something different. david: thank you very much. make sure you tune in tonight for a talk about solar stocks. that is 6:00 eastern right here on bloomberg television. some breaking news here -- microchip is the undisclosed bidder for at hill. coming up, a discussion on the weeks big the decision. that's coming up next on bloomberg markets on bloomberg television.

>> welcome to bloomberg markets.

from bloomberg world headquarters in new york, i'm ready lose. here's what we are watching at this hour -- a market rally underway. reboundingsurging, a crude oil as junk bonds help to ease investor fears ahead of the fed decision tomorrow. just 23 hours away now from the fed's potentially historic decision. what going to be the impact on investors? and the state of u.s. residential vacancies to explosive growth in cities like atlanta and denver, he would -- we will hear from to real estate titans. we are about one hour away from the close of trade. i want to head to the markets desk for the latest on the markets.