market selling off big time. it's a critical time for the markets. good afternoon from new york. i'm betty liu. let's head to the markets desk where we have the latest on where we are in trading right now. we are off. not by much. >> we are trading a little bit higher. markets are pushing higher in the past 15-20 minutes or so. take a look at the numbers. they had been lower by about 3% or so. the s&p 500 of the nasdaq are still down. with the s&p, we still are below the psychological 1900 mark. 95% of all stocks are down. we are just up above the 16,000 .ark on the dow all dow 30 stocks are still down on the order of about 1%. date, it's not confined

to just today. we are only two weeks into 2016. s&p 500 rushing down nearly 8%. the buddha correction territory down by 10% there. a hop into my bloomberg terminal. bys is all about volume sector as of today. we can take a look what is happening with the most traded sectors. 90% of volume against a 20 day moving average. financials are also up by 83% against that 20 -- 20 day consumer discretionary. this has to do with what is happening with crude. a crude is down by 5% off of its , which we hit about

an hour or two ago. >> we are moving to the safe havens. >> it is definitely a risk off and safe on. let's take a look at treasuries. is a.s. 10 year treasury favorite where investors go into for some safety. we are seeing they yields down by six basis points as investors push into treasuries. the yield is 2.3%. we saw this fall earlier between -- below the-- but 2% mark. let's see how gold is performing. gold is up by 1.5% here. this is breaking a two day fault. best game in a month. >> thank you so much. thes get a check of headlines on bloomberg first word to news.

mark crumpton has more from our news desk. >> lindsey graham bowed out of the presidential race and has thrown his support to florida governor jeb bush. his endorsement is a coup for bush since senator graham holds major clout in his home state of south carolina. bush was initially considered a heavy presidential contender. a a debris field has been spotted where two marine corps helicopters collided last night near hawaii. 12 crew officials say members were aboard the aircraft when they went down about two miles from the north shore of the law who. there were no civilians on board either helicopter. boarded aauts spacewalk -- after water leaks --o one of the men's help men's helmets. it was a scary repeat of a near

drowning 2.5 years ago. the european union still hasn't come up with more than $3 billion in aid it promised to turkey november. governments are ticked talking about more. almost $2 million -- global news 24 hours per day. back over to you. stocks, here'ss. today's trade on the s&p, making that big push. try to make that push higher in the last 20 minutes or so. we are back in the lows we saw back in august. how does the u.s. economic picture look? how does it play into all this? perspectivethis and

-- putting this into perspective is our chief economist and bloomberg market executive editor. let's talk about the economy, people try to figure this out. a stock markets look bad. is the economy this battle. the consumer still keeping its purse strings a very tight, even in the key holiday spending state. now the consumer still outstanding. but we are talking about a 2% down from double did a -- from double that. a clear loss on the consumer sector. >> this stalling is just recent. this was supposed to provide a boost. but with a key income growth, consumers are going to remain on the sideline. setting still a positive pace but still lower than expected levels.

>> what are people telling you about today's trade? >> i think the data is really important. u.s. data and u.s. consumer was supposed to be the thing that lifted the entire global economy this year. that is not panning out so far. global growth slowing down and data from this morning. markets really took flight at that idea. we have oilis prices that haven't been able to find a floor. it has always been about the shale boom. people are starting to recalibrate towards a more demand story. what if global demand is actually slowing? is it? >> i think it is. we do see significant slowdown in china. that is going to continue to put downward pressure on prices. even if the u.s. consumer importationd, that

of further deflation is going to make it even more difficult for the u.s. economy to remain on track and even further difficult to remain on track with expectations for inflation. saw,er data point we producer prices down a negative territory, moving further and further away from that longer 2% objective. >> it is a great point. at the market is forcing the fed's hand here? >> i'm not sure it is happening this time. we see the markets transition from a place where they always expected the central banks to come in and support them, to a potentially scarier place where -- where even if the central banks kim and they might not necessarily have the firepower to boost stocks and global economies. the one good thing i would say about the selloff, there is a silver lining. it hasn't been august 24.

hugeven't sparked a upsurge in volatility. that is a good thing. up having aould end much slower grind toward a worse place as people recalibrate their expectations. >> that is a bit of a silver in aligning -- silver lining. that maybe this is a correction we need in the markets then? isthat is what i -- that something i hate worse than even firepower. i never understood that. we could say there was a shakeout that was needed. >> we have seen people ratchet down earnings and expectations.

by some accounting tricks, things like that. finally reflecting the fact that fundamentals in the u.s. economy are not as strong as many have suggested going into that december meeting for the fed. the fed has says the economy is modest. >> this amazes me because the in raised interest rates december and it was so smooth and everyone felt confident and we had all of the analysts come out with their outlooks for the year. fast-forward to 2016, this should be a time when people are deploying money and buying stuff. --rybody is handing back everyone is pulling back and saying wait a minute, things aren't panning out the way we expected. >> going into that december meeting, consumption was declining. raised too late. people kept criticizing them for that. >> i would argue they raised to soon. the 2016 cap and we

argued the fed should have waited for more tangible for the -- tangible proof that the u.s. was on good footing. it is consistently wrong. they have consistently inflation for years, yet inflation has continued to decline. that very disconcerting monetary policies being based in consistently and inaccurate. >> we were talking about this earlier, are we slipping into a recession? >> i think we are slipping into much more modest growth. zero interest rates we are patting ourselves on the back for eking out the minimum we should see. we continue to lose momentum for

here. they are arguably splitting hairs whether they are in recession or nonexistent growth. >> they can be one of the same thing. we have seen the equity markets correlate so closely with the oil markets. when does that break? >> whenever oil finds bottom. is interestingat to watch is equities following the credit markets beat if you ,ook at the derivatives index the price of ensuring high-yield debt, you can see that is weaning equities down. there is a theory in the market that people are selling equities because they are finding it difficult to sell high-yield bonds. this is the liquidity crisis. baby liquidity ends up managing stock and debt. much.nk you so bloomberg's tracy alloway.

we will speak tomorrow with chief economic advisor and bloomberg columnist mohamed el-erian. he speaks about -- about market volatility and how asp presents could prove to be longer-lasting. we will take a look at the market selloff. a bit, buting back still down. almost now about 400 points.

betty: let's check in where the markets are trading. first a look at the s&p. as you can see it is just coming low, excuseigh --

me come of the session. reminding people about that really nasty correction we saw last year. remember at one point it was down over 500 points and we are thel now trading below at 16,000 level, a psychologically important level. the nasdaq, which has been consistently the worst performer of the three major indexes, it rally baked yesterday. know it has been the financial, the attack, any energy stocks leading the indexes lower. biggest business stories in the news right now, chipotle is taking itself off the menu next month to hold a big food safety meeting. the chain will discuss changes to food safety. employees at 1900 locations are expected to attend.

sales and shares have been battered in's and e. coli outbreak. the world's largest retailer is scaling back. 200 69 of itslose almost 12,000 stores. the company wants to focus on its e-commerce site. another 60 our money moving stores in brazil. isn'tazil president ruling out a bailout for the state oiled to state owned oil company. -- for the state owned oil company. sell on deals to of a corruption scandal. earlier this week they cut spending plans. continuing our coverage of this wild thing in the markets, s&p and dow plummeting to their

lowest level since that route last august. what can we attribute to this tumble? alls bring in bloomberg's of our redneck, who has been watching these crazy moves had beenas if we crazier. >> we are finding our footing here. >> it is unclear where the floors going to be for that footing. over the past week there has been a pretty noticeable change in people's attitudes towards traders. people that were normally bullish and say we were -- we are going to have 5%, retaining those outlooks for the year overall, but now they are starting to say, sure this may be could: let lower -- could go a bit lower. we are seeing where that dip is throughout the bull market, it is a little harder to justify. >> is everybody waiting for oil

to stabilize to buy the debt? >> oil obviously does have an impact on stocks. you would be surprised if you look at the day-to-day correlations. it doesn't offer the greatest insight to oils impact on the market. the two are divergent from one another. >> not completely. demo when oil is down 6.5%, what happens is -- >> when oil is down 6.5%, what happens is it weighs on the market. there has sort of been a more fundamental concern. you see companies with leveraged balance sheet's selling off the most. if you look at the s&p, those with the least debt, they outperform by almost a percentage point. that is one example. there is the fundamental issue of if earnings are going to come in weaker, these companies are going to selloff a lot harder.

we have been looking at that in the past six months. really the second quarter of last year, companies are getting hurt really bad. this goes beyond the oil specific story. anybody paying attention to data right now? >> we are paying attention to data. to cover the losses. it obviously is going to be important. thisyou get to the meat of , 7%.are predicting 6.5 fundamentale picture gets on economy, the question is not when our stocks going to bounce back. i think people are current -- i think people are comfortable that. the is going to be one of

corrections of the bear market. a lot of people believe the economy is strong enough. as we get further clues on what is happening on the ground level , that is really what is going to determine how far we go. >> thank you. our bloomberg stocks reporter, the cp stays. taking allmarket this selling today? we have the options inside for you.

>> this is a bloomberg news special report. will the fed turn more cautious about future rate hikes? the guggenheim partners cio bloomberg on that. >> i don't expect this to slow down. i think it will be hard for the fed to consider raising rates if we are facing this sort of environment. i think the probability of a

rate hike, first off there is no chance of a rate hike. in probability of 25% or less. i don't see a rate hike until somewhere late into the second quarter. >> we are 23.9%. they don't move in march, what kind of a signal does that send to the markets and the consumer? what this say about the global economy? global economy is contracting. if you remember the global economy's gdp in dollar terms, the global economy is in a recession, which is people say that is a product of dollar strengths. --also a crumbling nation also a combination of week growth. in the face of deflationary pressures, there is no reason to have to consider raising rates. we are running the risk in the long run to create asset bubbles

or create other problems. to consider the possibility of seeing the u.s. fall back into recession. i don't think they are going to do anything to jeopardize the expansion. betty: bloomberg news ramy to -- isn -- bloomberg's here to talk about the selloff. theere joining me is financial manager of kk financial. it hasn't really been a great day, let alone a great year, volatility up about 20%. -- do younk the for think the last few weeks are precedent for the year? , i wouldn't say for the rest of the year, but certainly for the short-term it is for -- it is a precedent. it is a confluence of events that is filling up, this anxiety resid war.

key levels when you look at the s&p. that is why we are seeing this volatility. i expected to continue police the next month or so. >> so much of the volatility deals on oil, hinges on oil. a lot of people are saying $20 oil. are people saying that is a possibility? enoughve been here long to know that everything is in play to some degree. given the fact we are seeing so many people flip that channel, when youhat coin over, see activity in some of the big oil integrators, where it is 2.521, that tells me we are getting closer to a bottom, given the fact you are seeing

everybody repositioned for a worse case event. to me it feels like capitulation here. >> let's get to your trade. you're looking at chevron. >> i am. given the fact we are seeing chevron well off the lows last august, holding up pretty well on its low, that tells me there is some inherent strength. by -- at a buy a on chevron and selling an auction. -- selling an option. >> more next, stay tuned. we live in a pick and choose world.

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into the red. here we are half an hour away from the close of trade. of our low ofoff the session. we are struggling here. a lot of concerns about global growth and oil prices. bloombergstraight to news. obama administration is -- about 40% of the coal produced in the united states comes from federal lands. michigan governor rick snyder wants an emergency declaration in the town where the water was poisoned. a flint water was contaminated i lead when it used a nearby river to save money last fall. down -- looking to crack down on extreme us is

losing patience with the european union. the french finance ministry is saying the eu is dragging its feet and cutting off -- striking it feet and cutting off financing to terrorists. feet in cutting off financing to terrorists. north korea has an offer for the united states. pyongyang will stop nuclear testing if washington suspends joint military drills with south korea. the u.s. and japan are ratcheting up diplomatic -- ratcheting up diplomatic efforts to punish the regime for nuclear tests. in jakarta today, a display of grief and of defiance. vigil at the side of yesterday's attack, shooting explosions killed two people in a busy shopping area.

toy will not given extremists. one suspect was killed and two were arrested in raids across indonesia today. global news 24 hours per day powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton, back to betty liu at today's market selloff. is plunging,sdaq along with all the other averages, at one point dropping the most since 2011. fit nasdaq has paired those losses as well. been a subject of hannity selling today. let's get to abigail doolittle -- of heavy selling today. -- getet to add the the to abigail doolittle. abigail: now the nasdaq is down 2.9%. it is leading the charge lower equity major us

averages. this is on it's exposure to biotech. x is down datan percent in 2016 relative to the dow and s&p, down 8%. the nasdaq biotech technology indexes down. now takingarket is biotech's down 30% from the record peak last july. currently the nbi is holding its bear market below. you have to wonder in this sort of wild environment, how long will that last? on a year to date aces, the biggest point drag is big tech, apple, microsoft and out for that -- and alphabet. the company cut its first quarter poor that its first-quarter forecast. cut first-quarter

forecast. this is the big tech company to first report the season. it is weighing certainly on apple. the stock is down today. recovered a bit, but perhaps in sympathy with that news at of intel and news that the company would have to pay $8 billion on back taxes on a european probe after paying an italian -- an italian tax bill last month. the timing could not be worse, worse, considering the stock is down on concerns around the iphone. >> adding so much more instability on apple. thank you. abigail doolittle live at the nasdaq. let's stay on the markets. china, oil, so much to discuss. let's bring in mohamed el-erian, the chief economist at advisor from pimco joining us from irvine, california.

you wrote a piece this morning, we were quoting it as well where longer thehe volatility rasps the likelier it is to be accompanied by a durable the klein in markets overall." -- durable decline in markets overall." if you look at the volatility index, we are not anywhere near our august selloff. what kind of volatility are you talking about? : we are in a regime of higher volatility with components we have called , think of ittility as squared. that will cause leveraging in the system, and in the context of limited liquidity. morepeople expect is volatility, more ups and downs we have seen this week with a downside until you can i don't i knew buyers.

>> we were talking with our stocks reporter. they were saying by on the dip. do we have to wait until oil prices stabilize until we see this as i buying opportunity? mohammed: i think both of them are responding to a much bigger figure. they are responding to economic growth. second they are responding to the valuations that have been tumbled -- have been coupled with fundamentals. responding very specific things, which in the case of oil is the loss of this producer in opec. rather than say it is oil and energy -- it is oil pushing energy and energy push oil, i think they are responding to something much bigger. ishink the equity market

more rational creative the most rational has been the fixed income market, which has been concernedfor a while, about low growth. you have certain components, u.n. that have been talking about it for weeks and months. elements of emerging markets, elements of high-yield debt. are technically dominated rather than fundamentally dominated. up withre about to come a book that focuses on central-bank policy, you have to imagine central bankers around the world are carefully watching day by day what is happening. i want you to listen to what he said about the rate pass in volatility. , as were not that good were reminded earlier, at forecasting. what happens is the economy

doesn't always play the way we expected. be agiley is going to the data dependent. betty: you your that word, data dependent. the fact of the matter is the fed has been repeatedly almost too optimistic. there forecast has been off by being too bullish about the cost -- about the economy. are they looking at the right data and should they be on a rate hike path? mohammed: if you look at only the economic data, then they should be on the path for further hikes. i think they will do two this year. the economy has not been contaminated by what is happening in the financial sector. the question becomes should they respond to the financial sector? that is what is really hard. they respond to financial volatility, it has made the underlying situation worse.

i think this time around they are going to be focused much more on the economy, yet they are data dependent. --y are did the dependent they are data dependent on the economy. betty: should they be more sensitive now? mohammed: i don't think we had a choice. we transition from a very artificial regime of suppressed volatility to one of more normal volatility. that transition will never be painless. it will be incredibly him be. that doesn't mean you stay in artificial mode, which is causing damage as well as benefit. embarked on qe2, he said it was about, "benefits, costs and risks." longer you stay in this -- the longer you stay in this experimental regime the higher thene

benefits. betty: are we heading into a recession though? mohammed: you asked me that a few months ago. i said the probability was 20% -- was 30%. i still think it is 30%. i do not think it is the baseline. in 2017. the question is do we get the recession in 2017. i haven't changed on that. betty: why not? mohammed: because i think people underestimate the resiliency of this economy. first we have become an employment machine. we have created 6 million jobs in the last two years. there is a ton of cash on the sideline.

is exciting stuff on the technology side. i don't think we should give up on the economy, but what we should do is financial lies the markets which have successfully decoupled fundamentals. betty: we will be back with you in just a few minutes. mohamed el-erian, our bloomberg columnist. let's take a look at the selloff stocks, paring their losses but they are still down quite significantly. so far for this year, it has been an extremely rough start. we have lost 1400 points on the dow. the nasdaq is halfway toward the bear market. down 10% so far this year.

ready bank markets are reeling as oil prices plunged to the 12 year low, below $30 -- below that $30 level. ihs vice-chairman. >> it is striking. we are back in an oil price range. we are getting close to it, which is before the great to 2003.we back >> with us is mohamed el-erian, the chief bloomberg economic advisor. if i read into what you are saying, oil prices are packed down to these levels. may be they are indicating is that we are eating up this growth in china.

if you look at demand and supply. it does justify oil below 30. have an effective swing producer. reducingnger have opec output when prices go down. it is going to take time. .es he is right you can explain it for now in terms of the swing producer issue. the swingyou take producer issue out, where do you think oil crisis should be? mohammed: higher than this. incrementaleen

massive supply destruction. that is still ahead of us. have been able to deal with that cash burn, they have cut the investment program. the prices are so loan that you can't even sustain your cash burn. we are also going to see some pickup in demand. all of which is going to lead to higher prices over time. this is not an instantaneous thing. this is going to take a number of years. betty: it sounds so scary. a lot of that is going to happen here in the united states in reversing the shale boom. a lot of these produces in especially if they are reliant on energy, devastated and what is happening in norway and their currency.

that is going to have some big economic impact, no? mohammed: you ask the question what is the weight of the producer? in the old days it was easy. now we are producers and consumers. some people are hit hard. some people in a fit. some countries are dominated by production, you mentioned norway. others are dominated by just -- are dominated by consumption. betty: how deflationary do you think oil prices will be around the world? mohammed: i think they will be deflationary when you look at the price component for not gdp. don't underestimate the extent on which input prices are coming down. it takes time for an impact to have production. that is going to be reflation .everses the price component

draghi hasnow mario been trying to reflate the euro zone economy. how do you think he's going to react to this in the last few days? ecb in fact increase their stimulus even more? mohammed: i think that is more than a 50% probability right now. i think the ecb has already increased it in the last few weeks. as we look forward they are going to ask the question as to whether we should do more. you are going to see divergence in central bank policies get even longer. are going to see volatility among the big ones. we are going to see

renewed volatility. going to bet is not very successful in promoting economic growth. >> thank you so much for joining the other important day. advisor.nomic i know you are joining me here about your to talk new book, which comes out later this month. thank you so much. mohamed el-erian. do a quick check on how the markets are trading right now, 10 minutes away from the closing l. we are now down about 2%, but coming off -- slightly well above the lows of the session. anddow is still below 16000 the nasdaq, remember the law --

remember a lot of the selling has been happening in momentum shares. the stocks taking a hit like apple, their indexes looking to close down about 3%. much more ahead on bloomberg markets. more of our special report is next.

betty: as you can see we are just minutes away from the close on this really turbulent session. we seem to be stuck at this level. remember the dow has been off by as much as over 500 points. today the lowest levels we have seen since august. i want to bring in my colleagues and take you through the close on this day. scarlet: nobody must belong on a

three-day weekend. just like this european policy risk a couple of years ago, who knew what the european elites would come what -- what come up with over the weekend, now it is china policy risk. have policy crisis, important to the central bank of china, and production and retail sales and fourth-quarter gdp out of china. with greece, policy risk, now it is china. : i find it remarkable going into this year it was such a consensus to belong on financials and technology. feet ofy loves those sectors and not only is the market way down, but the key to sectors getting absolutely creamed. financials, big banks down. earnings might helping at all. 70's getting smashed after that intel report yesterday. a really painful start to the and a painful date what a

lot of people were piling up into. betty: it is astounding that group mentality. how is another example of - joining us is lisa abramowicz at mike regan. give me your take. joe made a great point about intel. it is not corporate newsmaking the market business today, but this report was very scared about the demand in china. it just reinforces all the macro concerns have been. lisa: i was looking at the u.s. five-year contracts. gauge of this is a longer-term inflation expectations. sinceell near the lowest

2009. people are ratcheting back their to the lowest level in more than six years. inflation andbout increasing concern about disinflation and deflation over the longer term. >> our main concern was there was going to be upside on ablation risk, and a lot of them have same reasoning. headline inflation was going to pick up. oil has not stabilized at all. all these people continue to debt continue to push back their expectations. >> in 2011 we had some -- but the second leg of this old

market has been consistent. it has paid off. >> 1867 level, that is the lowest we said in august. it clearly became a support level then. the problem is you don't know until after the fact if it is the permanent supporters and temporary support. we blew right past it, 10 points below it. at least for today and in many are term it is a good sign. is a lot oft, there questions about whether it works anymore. all the notions we had, especially because the bull market is getting older. there is a discrimination. they are nfl quarterbacks, they don't last forever. people don't expect it to go on forever.

>> within the credit markets there is a technical reason why nobody is buying the. i was looking at some data that shows that $15 billion have exited high-yield mutual funds since november. that equals 5% of assets under management and data compiled by wells fargo. that is amazing, and how much is going to follow that. theyyou see hedge funds, are seeing the same pace. this is what happens when everybody's pushed into the same trade because of central-bank stimulus. >> you also have sovereign wealth funds unable to put their money to work because oil decline has hurt them as well. >> you hear a lot of people lisang about this is what alluded to right there, the fact that there are all these charts. the s&p versus the fed balance sheet.

then the balance sheet leveled off, the s&p leveled off. is that the simple explanation? >> i don't think you can point to one individual thing. it is all tangentially related to the fed. looking back to lisa's area of expertise. looking at the credit default , credit default swaps are a story again. there a fence? all of us have this in the back of our mind what happened with the crisis. with the carnage we saw in the markets, does anybody think the market -- anybody think the carnage is going to be that widespread? wayhe banking sector is in healthier shape than back then. bear market in 2008.

there is nervousness that another one of those is around the corner. that is necessarily cause a recession and that sort of thing. people still have those two nasty periods in time -- in mind. see managers using proxy to protect credit? >> there has been a lot of crossover types of trade to avoid credit, in order to sell this stuff. there is a question of how much is what is going on in markets is technical anderson by computers and how much is by actual traders. within credit you are seeing people starting to sell and people -- the to sell it things are starting to it down.

are approaching the close, 15 seconds to go, there is the closing bell. 2.7 -- of 2.5%. the s&p 500 music -- s&p 500 moving 43 points. the dow had flung 512 point throughout the day. at its low it had declined how many? >> over 500 point. >> >> those two groups have declined. >> it is not a relief. >> the utilities index was the best performing group in the s&p 500, but it was down 9/10 of 1%. in terms of what happened, this is a three-month low. no, eight-month lows. joe: the s&p 500 falls to its lowest level since