and i'm alix steel. you're looking at a rapid deterioration of stocks, ending down about 215 points. 1%, the nasdaq also the story, off by more than 2%. ist of this story right now about apple. apple is a drag on the dow by about -- let's take a look here -- bringing up my terminal -- by about 45 points. of course, a huge weight on the nasdaq as well. the other part of the story is boeing, taking out about 78 points from the dow. they issued a disappointing forecast for this year, they will be selling fewer jets, hitting their lowest level since 2001 with another weaker global demand proxy. most of them, apple, echoing a similar sentiment. scarlet: yet the backdrop is the federal reserve's decision. it was a press conference and

there was generally no real big surprises there. perhaps investors were looking for something more dovish and that might explain some of the risk off. exactly, at one point we had erased the worries and most indexes were in the green but in the end it all fell apart, as you saw. --x: the fed leaves its bit benchmark interest rate unchanged. the chief market strategist there is joining us to talk about the markets. david: the fed did not offer much for the markets, not offering that much of an of economicnt volatility concerns. is the fed going to have to capitulate even more towards the market at its march meeting? david: the fed did give you two looks at the idea that global issues, global financial issues and global sort of financial stability issues more generally

are going to play a role in their decision and in particular how they impact the models of the fed for the labor market and their inflation forecast. but i suspect that the market is still in one of those very precarious places where smaller theseare going to drive short-term trades. we are still bouncing around with oil, still bouncing around with china. the fed is in the loop and i think that people were hoping for a little bit more. i don't know that they could have given you a much more dovish statement, given the off cycle meeting. i read that as reasonably comforting that if things were to deteriorate, they were going to sit on the sidelines and to anythingactive that sort of gets in the way of their view that inflation is heading back towards 2% and at the labor market is continuing to heal from the crisis. scarlet: the fomc did not have

numbers on hand but departments are looking for the number two miss thehe number two fed forecast some 2% on the year-over-year basis. that's a great point. david, what the recent market selloff to? oil? china? quiddityowth? globally tightening? i literally hear a different answer every day. the jury is out. my personal view and the view that we put forward to our clients earlier this year is really one that's focused much more on the energy trade and there is a lot of flow coming from distressed players in the energy market. in particular, those who have built up large nest eggs of sovereign wealth and who are meeting to tap some of that with agn wealth because 75% downdraft in the revenue-generating machine,

their energy asset, they need to come up with some additional revenues and figure out how to rebalance unbroken balance sheet. we think that there is a big flow going on there that's very difficult to measure. no one really tells you what they are doing in that space. but we think that that is a real flow that is holding back on the market and that really there is not a main street story. financial market/wall street story and we will find over the course of 2016 the data coming ok, probably even a little better than ok and the consumer, which has the lot, healing quite substantially from 2008. this is really more of a financial crisis than any sort of looming recession like crisis. so, it would be very unlikely for the fed to restart qe but you have these sovereign wealth funds having what they are calling a review's qe effect

-- reverse qe effect, when does the market turnaround? david: great question, which i knew the answer. joe: well, what causes it to turn around? fundamentals. the fundamental that the u.s. economy is not heading into a recession anytime soon and we are looking at a market that is trying to price in the significant odds of a recessionary outcome and as the data comes in somewhat more robustly than what the market is thatasting, i think that is where the rubber will meet the road between wall street and main street. the shorts are really pressing it here. they had a great start to the year. you have a lot of momentum traders going with this trend. so, there is going to be a lot of flow into a relatively illiquid market. we have all talked about liquidity on your show for a long time. i think you can attribute it to that, but we are really sticking to this view that this is not a main street/recession story and

if anything, if it develops in a negative way it's going to be much more like one of those selloffs that we had in the late 1990's, where the u.s. economy is doing quite well but wall street goes through these periodic bouts of stress-related to emerging markets, energy, and long-term capital. scarlet: i've got to jump in here, we've got some earnings coming out. ebay, then facebook. first-quarter revenue is going to miss analysts estimates. for justwere looking under $9 billion. in addition the first quarter adjusted earnings per share coming in shy of estimates. earnings-per-share matching the consensus estimate with revenue pretty much in line and ebay shares tumbling by more than 10%. let's move over to facebook now. their fourth quarter adjusted earnings per share, $.79, topping the consensus, higher than the most wish estimate, which is $.75. certainly that's

a market increase from last year at this time. in terms of revenue, $5.84 billion, much better than analysts were looking for. they were anticipating $5.37 billion. in the third quarter by contrast, revenue was $4.5 billion. when it comes to monthly active users, 1.4 4 billion is the number that people are looking at. that is shy of the consensus. analysts were looking for 1.5 8 billion for the monthly active users. in terms of earnings-per-share revenue, it was a beat and stocks are rising by almost 5%. advertising for mobile revenue, 80%. johnson joined us. now, what number really stands out to you? johnson: as we look at this

business, it's an and profitable business growing at a fantastic rate. this is a year-over-year revenue increase of 52% on a very big business. this business is just growing at a fantastic race and you can see that in these numbers. i will continue to dig through these and look at the average revenue per user and i will have those numbers for you shortly but generally speaking i think you need to step back from wall street expectations and look at the growth aspects of the business that are growing quite fast. scarlet: facebook's monthly 14%, 1.4ers increasing 4 billion as of december 31. what's interesting, talking about the year-over-year jump in revenue, is facebook a seasonal business? i'm not sure that it is. it's not like apple, where people have to buy the products around the holiday season. this really is an advertising driven business. any business with some kind of maturity that derives revenue

from advertising is going to be absolutely dependent on their fourth quarter and as it matures more and more, you will see more of that. flow in theash fourth quarter, $2.14 billion. free cash flow, over $2 billion. cory: in 13 weeks. alix: that's a lot of money that facebook made. scarlet: just a correction, monthly active users 1.5 9 billion, mobile is 1.4 billion. alix: you are mentioning something? cory: those numbers are fantastic. one of the numbers that's important is research and development. that's been the biggest things when it -- that's been the biggest thing when it comes to operating earnings. they've spent an incredible amount of money on redevelopment. including stock compensation spent on.3 billion free cash flow -- sorry, r&d. spending $100 million every week on research and development,

which is an incredible thing. that is 22.5% of sales. as much as one third of revenues on r&d, 22.5%. that's a decrease, but nowhere near the lower levels we saw when you're ago. they were spending 10% of sales and now they are spending 23% on sales on r&d, which they of course have been able to turn into business and create fantastic revenues and free cash flow. so, investing big-time at facebook. so much, coryu johnson. much more to come on facebook. joe: back your with david. david, every time we get one of these big selloffs or people start to talk about recessions, the memories of 2008 come back help us drawnnot parallels. what do you say to people who immediately start thinking that

this is a downturn and a huge crisis again? i think it's just so different from 2008. you had 70% homeownership rates in 2008 and the housing asset was the main asset that everyone had on the balance sheet. it was a huge hit to the average and the driver of gdp in the u.s. economy. ofay i would say that 90% folks out there that spend every day are affectively short the asset that's flowing up, which is energy. the more energy goes down, the more they benefit. it's just a completely different story line. yes, there's a lot of sovereign wealth funds and guys in texas and oklahoma who are in pain and probably some of the workers at work for them are in pain, but i presume they are all finding something new, maybe driving and uber in miami instead of digging a hole in north dakota. probably enjoying themselves more this month than in january.

i don't think that there's any real parallel for the u.s. economy. that said, if you want to look at the russian economy or the economy of a middle eastern country, a large oil state or even a norwegian economy that is in much better state, yes, there are some parallels. they really have an asset that dominates their consumption and gdp going down like our housing asset did. joe: facebook shares -- alix: facebook shares rallying. we will be back with more analysis on facebook results. ♪

alix: let's get right to mark crumpton.

mark: environmental and civil rights groups filed a lawsuit today, asking a federal judge to order the replacement of all lead pipes in the flint water system. ins the latest lawsuit filed the michigan city water crisis. governor rick snyder joined local officials in a press conference today. >> the short-term issue is about recoating the pipe. that will be based on expert saying that the water is safe. the goal is to get the water coming out of the tap safe as soon as possible. mark: a committee has been appointed to help the residents exposed to lead. a danish tourist has been infected by the zynga virus. virus. the mosquito carrying the virus is not found in the country, so there is little risk of spreading. there have been unconfirmed germany and portugal. president obama will ask

congress for $12 billion over a decade to help feed school children of low income families during the summer. the request will reportedly be in the 2017 budget proposal. nearly 22 million low income kids receive free and reduced price meals during the school year. just a fraction of them receive meals when school is out. that he willsays skip thursday's debate in iowa. he says that he's been treated unfairly by fox news, who is holding the debate, and their anchor, megyn kelly. heathens -- says that instead he a fundraiser for veterans. "with all due respect" is live in des moines, iowa, all week. beginning at 5 p.m. noontime here on bloomberg television. global news 24 hours per day, i'm mark crumpton. back to you. for more on facebook

earnings, we want to bring in "the kirk actor, author of facebook effect," the inside story of the company connecting the world." with us with david is cory johnson, our west coast editor at large. we are looking at over $2 billion in free cash flow for david: zuckerberg says that the business is thriving at the top of the statement. that's an understatement. if you look at 80% of the revenue that they have from a year ago, that's amazing. 1.4 4 billion in monthly active users are mobile. that's almost all. if the total is 1.59, that's impressive, but the mobile group grew 21 percent in users globally. this is a company that when it went public, people said -- they don't get modal -- they don't get mobile. they have taken shares in u.s.

oval advertising away from groups steadily ended just an astonishing mobile story. do you see a ceiling for them? or do they have a long way to go? you heard me, i'm not up -- i'm not optimistic about their possibilities long-term globally. is inere real opportunity the developing world, which is why the free basic thing is so important to them. frankly, there's a lot of controversy around that but they will continue with growing globally for long time to come. alix: i should point out that facebook said that video and instagram were making strong currents in the fourth quarter but they did not break out revenue from instagram, if they did that how would it be? scarlet: it's in the curious -- it's curious. going through tech company earnings, apple mentioned china a couple of times in its earnings report area we out the

common from the cfo that there was and softness in china and hong kong. facebook has no exposure to i guessoes it? cory: they don't have that is a weak point to work -- worry about. the mobile thing is such a big deal, david is right. looking at mobile revenues year-over-year, it's up 82% year-over-year. not only is it a growing business, if you just think about its a separate business, which of course is not really but i'm sure they look at it that way, and 82% rise on a $2.5 billion business year-over-year is a fantastic thing and it shows you how they have sort of been able to capture the tailwind of the move to mobile with successful mobile apps. let's that forget, instagram and facebook mensa jerk. they are not necessarily contributing in a direct way to revenues, though they do keep people in the facebook universe.

facebook, if you will. the numbers that we see from these guys are very impressive, not just from a revenue standpoint -- right? actually from a free cash flow standpoint. flow inon in free cash the last 12 months, really fantastic numbers. the headline here is that they are still in an experimentation year for apps.ing this is the platform that is the network for much of the world. how them orton visit for facebook to crack that? david: they essentially own that business in every sector except china. they are the dominant colossus. revenue has not been an effort of theirs until now. i think that for them at something like -- you can look at it a little bit like a trojan horse, where they can get into the mindset of the user that way and slowly wean them towards facebook, which they haven't actually tried to do but if you look at the things like uber,

they are trying to turn those things into more full-service apps that do more than simple communicating. what is its biggest risk? david: there are two risks. china is one of them. they have to get into china. zuckerberg absolutely believes that. most important competitor that they face globally. they have an advantage as they extend globally, which i think they will do. in the developed countries we are already talking about it a at all,s not an issue indonesia, south africa, companies were say -- facebook is so huge, but this is a real potential weak point for them over time with some very long-term risks on a financial basis. you know, they've got to do something to reassure their users about how they treat their personal data. it's really concerning more and

more people, especially as you have seen in europe. david kirkpatrick, thank you so much. cory johnson, bloomberg editor at large. alix: much more coming up on "what'd you miss?" to has the fed contributed this trend? ♪

the usc negative rates? the markets pricing and a 10% change that interest rates will sink below zero next year.

explain. is here to there are a couple of metrics you can look at for this. one, the option on eurodollar futures. can you take us through that? >> we have a great function on a terminal for interest rate probability. you can go on that function and take a look at this. what it's showing is that there is this whole probability distribution implied by options on eurodollar features. starting toside is get better, so investors are assigning it a greater probability that interest rates go negative by the end of next year. the chart that we just showed was the explosion in open option contracts betting on that. protecting against that prospect. has it been done before, to go negative? what are the risks involved? matthew: it has not been done before, but we have seen it in europe. one of the things that fed

officials have an saying in recent weeks and months is that they thought about that before but they did not want to do it because they were afraid of what it would do to the money market, but now we have seen the risks are not as bad as we expected, so now maybe that's an option next time. that is certainly playing into little bit,gy of causing things to not look like totally worthless. joe: there you have the chart based on the 2017 eurodollar futures, showing us the odds of interest rates over 10%. matt: this was high in october but it has surged back up. or six weeks since the first rate hike, how successful have those reverse repos that they have been relying on -- how are they doing? matt: it's really interesting,

they have been doing well and they haven't had to do reverse repos like they thought they would have to. what is interesting is that they are doing more of them with central banks and foreign banks, the yellow line in the chart. especially in the last three months of 2016. what that means is basically foreign central banks, we hear all about them selling u.s. treasury's to intervene in foreign exchange markets and whatnot, but really what they are doing is partly out of treasuries in universities those because they are in overnight glyphosate , so they are much easier to liquidate for a is intervening in the market to profit off. this is a notice, where you don't get the full picture if you don't look at the daily overnight. scarlet: that's -- alix: fascinating. you would never think of that is where you would find the fed working. italian bankshares

declining after giving up games. why have they gone lower and why is there into off of cap cap on the? -- bad debt on the group? ♪

scarlet: i'm scarlet fu. "what'd you miss?" let's get the mark crumpton with the first word. mark: thank you. president obama welcomed bernie sanders to the white house today. afterwards, the senator told reporters he and the president had a positive and constructive meeting. he also discussed speculation that the president was playing favorites with his former secretary of state, hillary clinton. >> the discussion the other day about tipping the scale for secretary clinton, i don't believe that at all. he and the vice president have tried to be fair and evenhanded in the process, and i expect they will continue. mark: senator sanders also discussed his chances next week's iowa caucuses, saying if

there is a large voter turnout, he will win. a programming minor -- "with all due respect" is live from iowa all this week ahead of the caucuses. coverage here at 5:00 p.m. new york time. hillary clinton says she is open to appointing president obama the supreme court. the democratic front runner knows that there may be a few obstacles, first and foremost whether the president would want the job after eight years in the white house. senior republican lawmakers say american tax dollars should not subsidize the purchase of russian rocket engines. senator john mccain and house majority leader kevin mccarthy introduced legislation today to end such purchases. they say the sales enrich the friends of the russian president. dozens of holocaust survivors gather today at auschwitz, marking the 71st anniversary of the day soviet forces liberated them from the nazi death camp in

poland. global news 24 hours a day, powered by 2400 journalists and more than 950 news bureaus around the world. i'm mark crumpton. scarlet: thank you. let's get a quick recap on how u.s. markets closed. stocksght line down for after the fomc 2:00 p.m. policy statement . the s&p lost more than 1%. even as there is no clear shift in the stands. perhaps this will reflect investor expectations. if yould also mention, consider where the s&p 500 has gone today, if you go inside the bloomberg terminal, it has been up and down, but we are pretty much right back to where we were about four days ago. as dramatic as the declines look today, we have gone kind of nowhere over the past four days. alix: and we have earnings out that are really moving. first, you have to talk about facebook. it was truly a killer quarter on

the top and bottom line. $.79 per share, $6 billion in revenue. the two key numbers here -- 80% of their ad revenue from mobile. usersthaon of its tha -- 1.4 billion of its users that logon every day logon via mobile. a huge move for this company, growing its user base. scarlet: and it's rewarding in shares, as well. paypal gaining 5.5% after they beat analyst estimates. in addition, paypal is announcing a $2 billion buyback, of its former parent ebay is reporting a first-quarter forecast missing consensus estimate, marketplace showing no growth, down by 8.5%. alix: something you might have missed today is the deal between the european commission and

italy. the two parties agreed to help the country's bank offload bad debt. bankshares reversed early gains on concerns that the plan might not be enough. mark chandler is the current head of global strategy, and he recently wrote about the banks. what's the main problem right now for italian banks, and what is this agreement between the european commission and italy trying to solve? >> italy's problem is that the banks have a lot of bad loans, something on the magnitude of 200 billion euros, put it close to 220 billion u.s. dollars. what they want to do is set up a bad bank. another bad bank. this will warehouse the bad debts. the eu has agreed that they can sell the bad loans to other people who might want to buy them, invest in class. in addition, they will get a guarantee -- they will end up

buying the guarantee them the bank, and this helps them avoid but the eu had to worry about the past two years, unfair state intervention. alix: why did it take so long? other areas of europe wound up getting their housing orders years ago and got, quite frankly, a lot more help from the european commission then italy. why did it take italy so long? >> good question. the problem is that italy is now having its third unproductive trimester. they have not had an elected government for several years. that has stalled it. and the reason this is so difficult now is that starting january 1, the directive basically talked about how you can liquidate the banks. it's basically trying to replace taxpayer dollars with other people being bailed in. on what terms can you give state money. the banks have to take an 8% loss at current liability.

parts, butving because italy waited so long, it's a problem. i think compromise, they diluted whaaly first opposed, which used a larger role for the state. i suspect they diluted this program so it's not going to be as effective as it might have been, which is why i think the bank stocks took a hit even after the eu approves the bad bank situation. scarlet: so this underwhelming itponse from the eu -- does say there is no risk of contagion? >> i think what europe wants to do is make a president. they have a new directive in place, they can't let the first country looking for a solution to violate the rules. the prime minister of italy shed back, but there has been a bit of a tug-of-war. this year especially, europe is under a lot of pressure, because the fiscal agreement has been

diluted because france said the security pact outweighs the stability pact. that gives them some fiscal latitude, and they want to make sure they don't have a backdoor to expanding monetary policy. joe: how much does the prevalence of these weekak bankss impacts -- weak impact their role in helping the economy grow? a good point because italy has been a de facto recession. creditfourth quarter, conditions and italy eased the most in europe and lending increased, but still from a very low base, which means that these bad loans are still hanging over and restricting new investment. joe: let's switch to the domestic news. the fed. what stood out in the fomc announcement? nothing. [laughter] despite the volatility of the market, a lot of stocks below

20% from their peaks, global stocks been tumultuous, the fed didn't say a single word about that. they didn't say anything about later this week, the q4 gdp. it looks like the consensus is less tn 1% annualized pace. when you un-annualized it you are looking at a slump ish economy. theyed has not yet -- don't meet again until march -- that they have not backed away from the prospect of four rate hikes this year. alix: so it is still on the table. >> i think the fed kept the door open. they haven't convinced the market that is the case, and fed funds rallied afterhey met. those interest rates fell. so my sense is that the federal

reserve is the market less dovish than they expected. alix: we've been curious over the last few days -- we have seen a rise in long-term expectations, which is counterintuitive because oil has fallen off a cliff. you come inside the bloomberg terminal and i have charted 30 year break evens. a rally. yeah, they are still down, but low.he what do you think the fed is anticipating on oil? >> it's important, what has happened this year. the cpi number last week. what happened last year was that despite the strength of the dollar in the drop in oil prices, core cpi trended higher all last year. alix: thank you, ntals. >> those are the two key things driving up core inflation. shelter, rentals, and rental

costs. those will continue to push core inflation higher even though oil prices -- everyone thinks it has stabilized. joe: the fed said in a statement today that the labor market continues to improve. you mentioned core inflation is holding up. is the fed right not to be babying the market, to not waiver from the past? -- not waver from the past? >> we are talking about people setting monetary policy for the country, and i don't think we want them to be responding to short-term volatility. today's meeting was never thought to be a large meeting. if the fed says we will raise rates gradually, i know it doesn't mean back-to-back rate hikes. the real beating is in march and i don't think we want the fed to make any decision based on the first two weeks of the year. i think the fed's right to look past it, and in some ways the anticipation of further rate

hikes may be one of the things ending this big bull market. i'm not sure we need a new fundamental reason to sell stocks. value investment -- there's less value than there was six years ago. scarlet: fairpoint. you. so great to have you.ank alix: coming up is, the broad-based come -- coming up, is the broad-based commodity route finally rolling over? ♪

scarlet: i'm scarlet fu. "what'd you miss?" it's time for the bloomberg business flash. another quarter of record revenue for facebook as the social media company keeps selling ad through videos, mobile devices, and instagram. fourth-quarter sales increased to $5.8 billion, beating

estimates. growth was fueled by more people joining the network, with 1.6 billion users logged on every month. of ebay are falling in after-hours trading after they projected earnings that may miss analysts estimate. their growth is stalled, revealing shoppers went elsewhere during the holiday season, and online spending reached new heights. their fourth-quarter sales remain unchanged. forecastinglcomm is sales that this analyst estimates, indicating that the smart phone market is weighing on orders. first-quarter profit fell to $1.5 billion from almost $2 billion a year ago. that is the bloomberg business flash. three important things happened today that you may have missed, and i am keeping my eye on financials. we know the fed liftoff began on december 16, and the era of

zero interest rate policy ended. but if you look at the financials, some of the worst performers -- here's where you can see it. this is december 16, the last fed meeting. since then, it has been down for this ratio, the financials relative to the s&p 500. when the line goes down, it indicates they underperformed relative to the s&p 500. once the rate hike did come, it was coupled with a broad-based selloff, plus a lot of concerns about economic growth. joe: it's funny that we had so many people talk about how the banks will like higher rates. people fought all stocks would like higher rates. it's interesting to see these popular ideals. scarlet: financials were the most favored group among managers, according to global tax data. alix: interesting. that makes sense. you don't deliver there for you switch it out. wasaw that bank of america buying financials.

scarlet: after they had been bombed out. alix: exactly. joe: i want to dive into the terminal to talk about an interesting phenomenon. apple won't be the largest company in the world for a short period. is apple'ste line market cap and the other is google. $518 billion, google is $486.9 billion. over the years there were some pretty huge gaps between these two. but it seems like any day now, they could switch. that would certainly generate a lot of headlines. scarlet: google is a hardware company but -- joe: exactly. they said they would like to push him more credit, but for now google is on the way up. scarlet: and they need a hard sell for that. they were really pushing that services narrative. they were: and

pointing out that one billion installed base, saying that we can generate a lot of additional revenue from the space. scarlet: people on twitter kept pointing to that and saying why are they so fixated. joe: that's why. scarlet: i'm obsessed with trying to find out when commodity supplies rollover. china zinc imports might help us tell the story. this white line you are looking at is china refined zinc imports. youorange line is when import the raw material and make it yourself. as you can see, china imported much more ore than they did refined product, the right around december, that trend might be turning. you'll have to import refined copper if you can't get the actual supply. if they're importing less raw material, that may be a sign that supply is getting tighter

on the market. it's the most favored metal this year, so this is definitely a cool metric to watch. joe: so far, how is a zinc doing? alix: zinc is shutting in some protection but we are not in a deficit yet -- some production, but we are not in a deficit yet. this could start to be a sign. scarlet: no one is calling it doctor zinc or anything, right? alix: not quite. we have gotten earnings from apple and facebook, and tomorrow we get microsoft and amazon. we will look into their profitability. ♪

scarlet: i'm scarlet fu. "what'd you miss?" david einhorn has turned

bullish, according to a recent copy of his presentation. he's shorting shares of amazon. let's see what the numbers say about amazon. there are three keys to driving the prospects. first is their prime service. they won't say how many people pay the fee, but data this week from consumer intelligence partners shows that crime in the u.s. is now 54 million strong. that leads us to the second narrative, the film and. they have steadily increased their share of the commerce market of third-party se llers. fee to amazon for handling the storage and shipping. the third part of the story is the cloud. amazon built out its business at a time when the public cloud market is making 31% annually. the overall market will be worth about $25 billion i-20 18, when

you combine server and storage. amazon has seen a huge payoff for the cloud, which is a higher-margin business. revenue from their web services now totals more than $2 billion. prime the film and by amazon and cloud are all boosting their profitability. growth margin, as you can see, has grown steadily over the last two years. we get a closer look at their finances tomorrow when the company reports earnings after the close of u.s. trade. alix: thanks. joining us now from san francisco to discuss amazon is tur senior analyst, tha provides research covering more than 130 industries and 1200 companies globally. what's going to be the key metric that you will be looking at when it comes amazon tomorrow? >> it's all going to be about profit growth. the things you mentioned, prime, linkedthose are together, and they impact the

the core retail business. it's algoing to be profit growth, this engine of prime driving fpa, fpa driving prime. it should still be working. the last couple of years we have seen amazon focus mostly on sales for investing a lot of infrastructure, and now we are using that infrastructure to service mom and pop shops or other retail networks and getting them on this program. joe: there's been a lot of talk about how now amazon is finally, after all these years of investment, about to turn on the earnings side of the business and have all this cash wash over them. is that what jeff bezos wants to do? is there a risk that investors may be disappointed that he wants to take all this cash and invest crazily in something brand-new? >> i think it's important to

understand how they are doing it. now they are forming this three-step formula that you guys mentioned earlier. it's helping them from a profitable standpoint. all the free shipping that happens with prime customers, it will reduce the expenses as they pay for the fees to use the service. what wilyou will see happening is more and more third-party sellers on amazon, and of course prime customers spend a lot more than nonprime. it's all about the scale of the model that will define profitability. scarlet: now that amazon is consistently profitable, if you look at earnings on a gap basis, it has had three straight quarters throughout five of profit. does that mean investors will be more tolerant of an increase in spending by the company overall

as they try to look at other parts of their operation? >> yeah, i mean they will hopefully look for more insight, because the addressable market is still large. just storage and hardware alone is like $24 billion by 2020 versus what they have right now. the actual time could be even higher they said how many connected devices go online. that increases the need for this backing data center support. that would be looked at closely. ofx: you were just on part our team giving analysis of facebook's earnings and terminal customers can find that now. what is the biggest question that came out of this awesome order for facebook? >> so what this is telling you is instagram video and the core newsfeed business, the strength is continuing, and it will give the behemoths that they can

monetize -- maybe in 2017. that's the runway they need. engagement numbers are strong, daily active users are growing. all fundamental metrics are pointing to continue to growth, and facebook is dominating. alix: thank you so much. scarlet: coming up, what you need to know to gear up for tomorrow's trading day. ♪

scarlet: do not miss this. caterpillar earnings out before the bell. how much will they guide down their 2016 revenue estimates? that will be key for the market. scarlet: and forecasts for the global economy as well.

microsoft reports earnings after the closing we will cover that. joe: and don't miss this tomorrow -- we answer the question on every investors let's. is the u.s. economy recession bouncing?

mark: i'm mark halperin. john: and i'm john heilemann. and with all due respect to all the other candidates here in iowa, today, yet again, it is all about the donald. happy donald trump did what day, sports fans. iowa caucus mission control, the downtown des moines marriott. the world is still in a frothy lather after donald trump's announcement yesterday that he does