-- and 4:00 a.m. in hong kong. welcome to bloomberg markets. good afternoon, i'm betty liu. 2016. week to start the markets are taking a small breather today. they are still declining, though not as much after all the turmoil sparked by china. all on pacedaq, s&p to finish the week 5% lower which banks the question, are short-sellers having a banner 2016 so far? bearish bets against the s&p are hitting four-year highs as volatility remains a name of the game. and could yahoo! soon be on the blocks? the company could be backing off of its spinoff plans and looking for an outright sale of this web businesses. pressure growing from activist investor star board. we are one hour away from the close of trade. .ulie hyman has the latest

for the last hour, it's been critical, we have seen an acceleration of the selling. has not been a direction decided. maybe we will see acceleration of the selling. if it did, it would cement the decisiveness of the day in what has been a very indecisive day. redre more deeply in the right now and at the moment the worst start to the year since 2008. if it gets worse, it could be the worst start ever for the s&p 500 at least. all three major averages are down. look at the three-date intraday move. look at all of the choppiness we have seen in today's session. around midmorning there was a run and going negative and then stocks went positive. since then, we have been vacillating between negative and positive. investors have a job report better than estimated, but they are still looking back at the

chinese volatility we saw, looking at the oil market. take a look at what is currently the landscape of winners and losers. top spotre taking the over financials and energy. telecom is one of the more defensive stocks on the rise. every moment that you look at this, you get a different snapshot. is there any more direction in mostly not.s julie: we have seen similar volatility in other markets. let's look at oil. oil has remained lower throughout the day but it was higher after the jobs report and had some volatility as well, down another half a percent at the moment. take a look at the 10-year note. one would think that we would see selling of the 10-year and the yield moving up in the wake of the jobs report but that's not the case, now lower, 2.1%. the euro, take a look. there has been a little bit of

volatility, but it's remains negative throughout the day, now down .75%. rounding it out with gold. there has been some volatility but it has remained negative coming off of a strong run in which investors were looking for what they perceived as safety. it looks like some investors are finding that less necessary with the jobs report. julie, thank you. let's get a check on the headlines with ramy inocencio. first we had to belgium. prosecutors say investigators have searched an apartment in brussels that may have served as a bomb factory for the paris attacks. they believe the residence was used as a hideout for salah abdeslam, who is wanted in connection with the november attacks that killed 130. south korea mark north korea's fourth nuclear test with its own blast of propaganda. speakers along the border began

blaring anti-north korean messages and also a fair amount of korean pop using. meanwhile, north korea celebrated the blast with a fireworks display and dancing. it was also the birthday of leader kim jong-un. two people with ties to the islamic state have been arrested in texas and california. one of the suspects was a refugee from syria, accused of lying about his travels there. no indication about whether they had planned any attacks in the u.s. who says it never rains in southern california? el niño brought record amounts of rain to southern cal up on you but not enough to bust the drought. san diego got as much in monday as it normally does for the month of january. still the state is listed as abnormally dry or still in some form of drought. nasa still wants to get to mars and is willing to ride share to get the job done. the european space agency picked up the cost to build a service

module that will provide propulsion, air, and water for astronauts on the planned or ryan spacecraft. betty: after the massive selloff, in chinese stocks, they got some reprieve overnight, but the volatility is fueling even more concerns over china's ability to manage an economic slowdown. joining us now is an investment with over $26 billion in management. volatility, while it has been stomach churning and frightening to see over the last aek, does not signal to you crash, recession in china. >> that's right, we have to keep in mind the shanghai market has

always been ridiculously volatile. there have been 30 bear markets over the last 20 years. correlate witht anything happening in the real economy and that's true again today. betty: i can understand on the one hand you write retail investors in china may be treating it like a casino and taking it seriously, but then why are we taking the drop so seriously? >> that's a great question, we should not be. chinese people don't take it seriously. only about 4% of the population invest in the market, and we don't invest in the market. foreign ownership of the ayrshire's market is less than 2%. it is not really having a big impact on us other than in our heads. it's also important to note the real economy still looks quite healthy. it will grow more slowly on a your two-year basis, but we knew that. the economy has been decelerating. parts of the economy are quite weak. manufacturing and construction.

services and consumption, which is now the biggest part of the economy, is actually growing really well. betty: is it the biggest part of the economy because we have made it so? >> yes, is going through the transition or restructuring that everyone has been waiting for, a havef what thepermabears been waiting for. this year will probably be the fourth consecutive year in which the services and consumption part is bigger than the manufacturing part. in the first three quarters of last year, consumption contributed 60% of their gdp growth. betty: we talked about china with mohamed el-erian this morning. he, like you, does not believe there is a coming recession in there ist he believes another reason why investors are so nervous. listen to what he said. >> what is really a concern for investors around the world is the currency.

not china has been doing is only weakening its daily fix, but losing control of the offshore market. that is significant. yes, there has been on characteristic missteps. china hasews is that the resources and the policy flexibility to get back on track. what did you make of what mohammed said, which is, we may not be overreacting to what seems to be some troubling concerns with the chinese currency? >> paying attention to the currency is important. it is important to note the chinese government made some big mistakes in managing the currency dating back to august. i think the mistake is not execution. what they are doing is proper and appropriate. it's communication. they have done a terrible job telling us what they are trying to accomplish. i think what they're doing is quite sensible. we are going to devalue the renminbi against the dollar if

there is a strong dollar again this year. at the same time, they are telling us they are determined to keep the chinese currency basically stable against a much bigger basket of currencies, and they have done that. as of yesterday, the renminbi was up slightly against the basket. i don't think this is a competitive valuation, nothing to do with boosting exports, but simply relieving pressure from the strong dollar. probably not against the rest of the major currencies in the world. betty: the chinese can say that, however, there are very few people who believe that. they think there is a competitive devaluation going on, they have seen the last few moves at fixing the exchange rate. what does china due to reassure the rest of the world that they are not trying to export their way out? >> i think they need to do a better job of communicating, but

we also have to pay attention to the information. we know last year china's exports, while they were week, were much stronger than global exports. what this says to me is the problem in chinese exports is not competitiveness but globally weak demand. there is nothing you can do about that. you cannot devalue your way out of that. if you look at u.s. imports of chinese goods, the share has been rising every year consistently, including last year. i don't think this is about exports. the other thing important to note, exports are a small part of the chinese economy. in recent years, the value of exports minus imports have contribute nothing to chinese gdp growth. i estimate only 10% of the value of stuff that rolls out of chinese factories is exported. the important story for china and us as investors, is the chinese consumer story, which is strong. betty: andy rothman, we

appreciate you joining us. much more ahead. the betting on a slide. short interest in the s&p has soared in the last six months. are the bears boys to reap billions? and one stock holding up well is netflix. the media darling has gone global, now in almost every country in the world, but is there any trouble in all of that growth? as we had two great, here is some perspective from michael holland. >> you buy something today, you could, but the sentiment is amount we have not updated it, but the sentiment is lousy. china today, if i were starting a hedge fund, i would go directly there and find the best quality companies because they are selling at five or six times earnings. they are so depressed because of the sentiment. they may go lower. ♪

betty: welcome back to "bloomberg markets." i'm betty liu. some of the look at biggest stories in the news right now. steve: will once again be able to manage client money, but not until 2018 as part of a settlement with u.s. regulators who it accused him of failing to supervise a former trader at sac capital. his family office but also be subject to routine examinations by the sec. he neither admitted nor denied allegations he failed to supervise the traitor. the world's largest oil producer says he is considering an ipo. saudi aramco confirmed what the kingdoms took the crown prince told the economist. the company is controlled by the saudi government. it's innerworkings are a mystery. from oneworth anywhere

trillion dollars to 10 chilean dollars. candles will become the first major company to disclose the presence of gevo ingredients in their products. in june so, the company risk losing customers. the labeling changes excited to take up to a year and a half to implement. that is your bloomberg business flash update. even when stocks were rallying, bearish traders refuse to reduce their short sales. now that stubbornness appears to be paying off. so far this year, u.s. stocks --e never looked worse really talking about this week. a handful of investors could be poised to reap very big gains. joining us now is oliver renick. i know you have been on this story all day. essentially from last august, why didn't anyone take their shorts down?

oliver: it depends on what you're looking at. you can think of shorts in a few ways. one of the big questions is our people shorting particular companies based on the fundamentals and making a call that a certain security will go down, are they doing it as part of a hedge for the other side of a long trade? right now, it seems like people are making bets on individual companies, which is not a good thing if you are thinking about earnings or the story for u.s. stocks overall. betty: or the economy. oliver: you saw what happened in august and september. people were pretty long. when the markets sold off, they cover their shorts on spy futures. long and short contracts are both down now, which indicates people are taking a step off of the table. they are not long but not reducing their shorts either. at is thee looking average short interest of companies in the s&p 500.

part of the reason that people have not covered it yet is, if you look at what is coming up next -- we have the chinese growth concerns. we have a row in commodities. then you look at what is coming and the pastors are not that grain. earnings, pointing to fed. we don't know how many times that that will go. if they go to many, people may think they are going to fast. earnings is not the land of milk and honey. there are a lot of cracks. companies are not looking so great right now. oliver, is this necessarily bearish for the entire stock market, what kind of signal does this suggest? oliver: if you are a contrarian and you want to be on the opposite that, it is a good opportunity to be long. the shorts get really high at the bottom of a sellout, so it is shocking that people do not time it right. usually what happens is the

shorts come off, and that has not happened. whether it is bearish or bullish for the market, it's hard to say. what it means is, if the company fundamentals get better, assuming we have earnings beats, you see some of the headwinds from the last couple of quarters ease, then perhaps there will be buying power behind it. whether it is the same amount that jpmorgan said in august -- right now they are looking at hedge is getting pretty low on etf's. quite -- not quite as much buying power. betty: so we cannot read too much into what it signals. give us a context of how many short bets are there right now. oliver: right now, the averages above 3%. in august, it jumped 50% to about 3%. when you look at overall, it is not a terribly high number. this is across s&p 500

companies. if you look at all reported exchanges, short interest as a , itentage of free flow shows you beyond the s&p, what is reported on u.s. exchanges, it shows something similar, which is it got really high in august, it has come down a little bit but is still elevated above six-year historical standards. if you go back further, we are still pretty low in shorts appeared to what was happening in 2008. betty: that was a different story. thank you, oliver renick. still ahead, we look at the options trade as stocks remain rather flat. here is the dow, down a little bit right now, off 62 points, after dropping 900 points the first four trading days of 2016. ♪

betty: welcome back to "bloomberg markets." i'm betty liu. oil prices are down again today remitting a lowest level since 2004. news that saudi arabia is considering taking part of its state owned oil giant to the public. el-erian joined me to discuss this move and the potential impact on oil. >> this notion somehow that the saudi's were not be able to navigate these low oil prices -- remember what the saudi's are trying to do. they are saying we are going to be the country that market output, loses share, and never regained it. we are going to let other people also play the game of having to adjust to lower oil prices. at the end of the day, given their reserves and the low cost of production, they come out winners. betty: that was mohamed el-erian. stocks are heading down near their session lows, selling not

as bad as we have seen all week long. for our options inside, let's bring in julie hyman. joining me today in dan deming, managing director at kk and defending champ -- kkm financial. you sent me some commas earlier this morning and you said the worst rally off of a substantial down move is a fade. in other words, upward movement but now it is losing some steam. what do you think is going on today? : basically, that is an old adage from the trading floor. move,a substantial down you are afraid of the first rally because the probability is it will test the lows. that is what is taking place today. the markets are having a difficult time maintaining any sort of escape velocity, and that is all of the things of the markets are having to contend with moving into earnings

season. it's interesting when we saw the market up after the announcement of the unappointed report, it started to follow oil. one oil started to come off, that is when the european markets closed on their lows, and that is what drag the market lower as well. the market is taking their clues from oil right now in terms of direction. in terms of the options market, we have not seen much movement in the vix. what do you take away from that? right now, options players are saying that they are fairly priced given the current volatility. thatyou look at a 25 vix, generally implies a 1.5% move on any given day over the next 30 days. we saw an outlier yesterday, but by and large, these moves are like the thousand-point moves we had in august. market participants and options players are comfortable pricing

in a 25 vix. julie: eric balchunas, who covers etf's for us wrote an interesting piece in the where he said 70% of the volume in the options market is on etf's, a lot of it on the spy. you have another trade on the xlp, consumer staples. you are thinking defensive, what is going on? dan: right now we are seeing a pretty good wash out in the market. going to the 1880, testing the lows from last year. you have another three and a half percent. xlp has been an outperform her. outperformed the s&p, and i will continue to be the case into 2016. basically, i want to get paid to rent the stock as i wait for a better entry point lower. if it spikes higher in the market reverses, i want to be

able to participate on the upside, so i'm looking at a risk reversal on the xlp. julie: so how does it work? ,an: selling the march 48 put buying the 38 call. cant trades below 48, you get long. if it goes above 51, you get to participate on the upside. it buys you sometime as the market figures out where it is headed. i don't mind picking this up at 3.5% discount. dan deming, thank you, have a fantastic weekend. staples,bout consumer defensive in the market. ♪

betty: from bloomberg world headquarters in midtown manhattan you are watching bloomberg markets. let's get a check on your first word news. ramy: good afternoon.

first we had to mexico and the president there says that fugitive drug lord el chapo guzman has been recaptured. offered a $5rnment million reward for information leading to the recapture of guzmán. he escaped from one of mexico's secure prisons back in july. police officer who was ambushed overnight is expected to survive. he was shot 13 times at close range while sitting in a marked patrol car. the suspect is now in custody. thesuspect said he did in name of islam. the officer is in stable condition. in washington, president obama legislationto veto

designed to curtail his own bill. the koreastoday in show the difference between the countries. 100,000 people danced in the north korean capital celebrating bomb test. is condemning the blast, by blasting loud propaganda across the border. the broadcast includes criticism of the northern economy, human rights abuses, and south korean pop music. which some people do like. back to you. betty: you like it? ramy: i do. betty: i knew it. [laughter] have less than 30 minutes until the close of trade for the week. -bigail is life the new -

live at the nasdaq with more great apple is one of the big stocks we are watching today. >> it has been interesting start to the year, that he. are tack and biotech. before we trade to apple, biotech. market closed down more than 20% from its summer peak. ,e reached out to an analyst who said that the fundamentals remain positive, and that the problems that plagued the last year are not in play. high fliers, the big internet companies, three of these names in olivet, amazon, and facebook are among the top point drags this year. amazon alone is down about 10%. investors are reevaluating that team.

biggest pointhe draghi, down about 7% year to date. several analysts have cut iphone estimates for 2016. and we return to the nasdaq, as we close down today, it will be the seventh straight down close in a row for the longest losing streak since 2011. betty: thank you. let's talk about another tech company. shares of you who are rallying today. in a mostly downmarket, yahoo! may be having a change of heart -- sellings ma its main web businesses. in alex sherman who covers tech, and media for us. is this because of star board? >> i do not think it is because

the starboard, but in large part it is because yahoo! is realizing that if it is not starboard, it is going to be somebody else. they feel like, we may not have time. his starboard is going to rattle the cage, if we do not think of a we have a real shot at losing control. yahoo! probably is thinking, we could just keep going on the course we sat, and by ourselves some time, or maybe we can be a little more proactive and say we will run a profit, which we have not seen them done. .ut my source but my sources say they are warming to the idea of selling this thing. and that would push back the proxy contest. that is what they want. they are looking for some

solution, and that is a solution. betty: what is the big difference here? what's the difference between a spinoff and a sale? >> what it will get is they will put a needle in the coffin in the sense of what they are going to do with the business. they are giving up, but they are not giving up if they spin off. they are buying time. but if they sell, what marissa mayer is saying i have done what i can with this company, it is time for somebody else to give it a chance. you have to remember that marissa mayer will get paid fairly well if she did this. there is a multimillion dollar severance package, a golden parachute, not uncommon for ceos. that is lingering in her mind. she probably does not want to sell, but if it comes to that, there are worse outcomes. betty: and there are potential buyers, like verizon. said publicly they

would buy this. they bought and well, this is not surprising. yahoo! merged at one point, and they can do it again under the umbrella of verizon. betty: thank you. netflix ceo reed hastings made a big flash. >> why we have been here on stage, we switched netflix on in azerbaijan, in vietnam, in india, in nigeria, in poland, in russia, and saudi arabia, in singapore, in south korea, in turkey, and indeed it easier in -- and 30 new countries indonesia, and 130 new countries. in each country, viewers

everywhere are going to have the same television shows and movies that they can access on netflix. it is a bold move, but is it going to be successful? our tech writer is here with me now. ed hastings was saying this is the first in a global television network. know what? see if there to people and 130 different countries are willing to subscribe to netflix. and now we will need. - see. been operating in about 60 countries, so this is not like the first foray outside the united states. but when you do this, and go to every country with the notable exception of china, you cannot any tailoring.

you just have to do it come and see what happens. betty: they did something a little bit different as they got close to the launch, right? >> in earlier international expansion they made a big deal of going into each market, analyzing demand, making about content lineup and things like that. now they are just saying we're going to turn it on, we're going to treat everyone the same, and we are going to see what happens. marketot need to do the research if we are just going to turn it on everywhere. the big challenge for them here media licensing has never been sold in this way, generally. betty: how has it been sold before? >> country by country. network, it operates in one country, and media rights would dole out the rights in different countries with different fields. netflix has run into trouble .ith this for the past they do not even have house of

cards with some of their markets. they want to strike global market deals with all content at this point. betty: does this mean they have to go back to their other content collaborators and renegotiate terms? or have they already.net? -- fdone that? >> this is not something that has been done, and it will not be done by the end of this year. deal, other global companies will not want to give netflix global rights. the one way it is dealing with this is by making his own shows. it can give itself global rights to think that if it thinks about that in advance. they are openly saying that that is a bigger part of their strategy now, to have more originals and complete control. betty: does this change the cost on content? if any company is holding back international right, and those deals with cost more, presumably. peter: thank you. great to see you.

we are heading to the close of trade in this first week of the year. we look at the s&p, flirting with its worst start to a year on record. ♪

betty: good afternoon, welcome back to bloomberg markets. any moment now, mexico's president will address the country to announce the capture of the world's most wanted drug trafficker known as el chapo guzman. he escapes from one of mexico's most secure prisons in july using a sophisticated mile-long tunnel that opened up in his cell shower. for more want to go to mexico

city where our reporter joins us now. tell us the details of his capture. there are not that many details yes. we are just learning about it as we speak. his pressent has conference that is about to start. what we do know is that there was a deadly standoff early friday between gunmen and naval officers from mexico. that led to the capture, according to the official statements from the government. there was a report of armed gunmen in a property, and that led the officers to go to the property, and they were met by a firefight. chapoed to the arrest of as well as the deaths of several gunmen, and the injury of one official. betty: it sounds very dramatic. where is el chapo now? >> he is flying in route to

mexico city. mexicocaught in northern , and he is on his way now to mexico city. betty: what about the issue of extradition? around,be, this time extradited to the u.s. to face charges? >> a lot of analysts hope that would be the case. has already escaped from two of mexico's most secure prisons. where else to put him at this point. that is a big question. it remains to be seen. what we are seeing is that the attorney general has been open very recently to extradition. was a big announcement, just a couple months ago, were 13 traffickers were sent to the u.s. in an efficient process. process.ition

this seems to be a new page for mexico on the extradition front, to a faster extradition process for el chapo. know on the twitter feed of the drug enforcement agency they tweeted out a short tweet saying they were very pleased that the mexican government captured el chapo. that brings up the point, what kind of effect is this going to on the wrong drugs, not just in mexico, but in the united states? drugs, not just in mexico, but in the united states? >> he was providing heroin to shoo cities like chicago. there was a lot of violence in his supply in areas across the united dates. clear, and it's never really is what happened after

the capture of a major kingpin. whether this leads to more fragmentation, which could increase violence or whether we can finally take down the major threat, and the violence can subside. i think we have to wait and see. betty: thank you so much. speaking with our reporter ahead thehe press conference on details of the capture of el chapo guzman. exceeding job growth 292,000. basically, we have been bouncing along, trying to make these gains. joe weisenthal with more. what do you read in today's market reaction? joe: but there is a lot of negativity in the market. i'm hesitant to draw a line to anything we saw on the job

market and anything happening today. it was a very solid number in terms of job creation. but on the other side we did not get wage growth. that is a goldilocks number. the economy is shrugging along, no pressure on the fed to accelerate their pace than what people are thinking. we saw two-year yields jump up, and then of course, the selloff. week, we have seen a lot of volatility, and a lot of anxiety. clearly gravity has been the dominant force on the market this week. who know what today is going to have to do with what we say. betty: nobody wants to celebrating these numbers too much by buying stocks. they are still worried about what is going on with china. and what more rate rising due to this economy. joe: it is pretty clear whatever is going on in china, whether it is justified or not is having a

direct effect on u.s. markets. where the futures trade, and last night at 8:20 p.m. when the chinese government set the latest currency effects, and it did not weaken anymore, the s&p futures immediately jumped. then things got more volatile and fell apart a little bit. but the point is there is clearly people pay attention to that number in a way they had not in the past. it is the source of a lot of anxiety, whether it is justified or not. betty: thank you. up in the next hour, the chief economist at morgan stanley discussing the jobs and much more. much more ahead on bloomberg markets r. here is how rough it has been for certain sectors this week, as we had to break -- head to

break. ♪

betty: welcome back to bloomberg markets. markets are ending this wild week in just about 10 minutes time. bull's opinion, it could not and any sooner. all three major averages taking into down. what this means is that if you look in the s&p 500 for this first week of the year for 2016, we are now down nearly 6%. 5.92%. look at this painful week if you are long on this market. the otherk at some of worst starts to years that we have had. 2016, we're down even more than that. it looks like it is going to be

the worst start to write your ever. -- start to a here ever. ever. what has brought us here? you are looking at commodity related movers. williams companies, freeport copper and goals, all of these, including freeport extending last year's decline. calendar flipse over does not mean that anything has necessarily changed fundamentally. in terms of the groups that of done the worst this week, -- thishave done the worst week, we have financial and technology. is rolling over here because we had seen some large-cap tech outperformance in 2015. that has started to change in the early days this year.

there is one notable group that is not on this list, and that is energy stocks. that is surprising as we have seen the huge aloft in oil and energy has been week it has just weak, it has not been the weakest. johnbetty: what a wild week. is lisadiscuss this abramowicz, and peter, coming to us with some charts. tell the story through charts. peter levy start with you. so much of this was about china. it was the yen against currency. peter: china is not looking at yuan pair, they

are looking at the basket. this is the basket they are paying attention to, and what it shows is that it is not that different. it is falling into the dollar, and against the basket. fairly sharply. betty: a very dramatic way, that is why stomachs were turning on this. how does this affect government? theires this affect sovereign debt market, how does this affect their bond market? >> my head hurts trying to understand all the different push and pull that is going on in the market right now because while you should have a slight flight to safety, and a sense of treasuries strengthening and

others strengthening, there was a cap in response. a lot of people are pointing to the fact that china is selling their $3 trillion of currency reserves at the fastest rate on record. really charge, was showing the massive plunge. you are seeing flat performance in u.s. treasuries, which is more muted than people had expected. wantst shows, and i do not to be alarmist, the treasury yields will spike up and china will liquidate all of its holdings, but it is another thing to consider. the flight to safety is not just an obvious flight to safety anymore. charge, the rise in construction versus manufacturing. peter: yes. this is consistent with the

pattern of weakening foreign relatively strong u.s. growth. manufacturing is very sensitive to week for growth. betty: over the last five years. >> yes. on thection, depending domestic economy, is doing better. betty: that is good news for us here in the u.s.. i like to end on an optimistic note. it has been a tough week. thank you. that does it for bloomberg markets. what'd you miss? is next. are in the optimism, we for the worst yearly start on record for the s&p. ♪

scarlet: we are moments away from the closing bell. joe: i am joe weisenthal. alix: and i'm alix steel. ♪

scarlet: u.s. stocks closing lower this friday after a very volatile week. the question is, what did you miss? to 2016.a shaky start why you need to pay attention. we hear from wall street's biggest players. report exceeds estimates, but why this continues to be an area of disappointment. alix: how long will this volatility last? we will speak to a former advisor for the inside scoop. thelet: we begin with markets. china was at the root of it all week long. gains in china did not have a