♪ u.s. stocks advancing, and oil climbs for the fourth day. joe: what did you miss. u.s. equities suffering the worst rout since august. is more market turmoil to count? shockse bank of japan investors, adopting a negative interest rate strategy. but willing t it work? alix: how much oil wealth is in the market, and where is it flowing? we look at the major market impact. we begin of course with the markets. we finished the end of the month the opposite of how we started. now we are closing at session weeks ofunding out two gains. every industry group is at least up 9/10 of 1%.

positive week. this is even as economic data was fairly mixed. p was kind of middling. consumer confidence was weaker. nothing to get super excited about. joe: this was an absolutely huge day. the dow ending up 380. melt kind of a day. really starting with the shocking news last night about the bank of japan going to negative rates. expecting more easing from the fed, but the other central banks are delivering that people are getting excited. exactly the opposite of what we have felt this week, or most of the year. a lot of panic buying out there today. stocks: more than 13 rose for every one that is down. that is the broadest advance since our leftover. alix: some of the momentum names had a very difficult week,

amazon, microsoft, netflix, they spoke. -- facebook. painted a picture of how hard it is to be a traitor right now. netflix, earnings not great faitt. amazon,e a long on amazon disappoints. traders cannot get ahead of this, that has been adding to the volatility in the market . joe: you see a real differentiation between the. m. acronym based investing really not the best idea. alix: and you can see what these stocks have done in this past weekend the volatility we have seen. deepet: i want to see the dive into the bloomberg terminal. the negative impact is fairly limited because japanese stocks

jumped, plunged, and then climbed again as investors tried to make sense of what was going on. all industry groups rose except for the one on the bottom. it was the topics bank index. will see is that right there at the bottom, that group fell 2%. if you look at it on an intraday , this is the intraday performance of japanese banks. this is right when that doj investment came out -- announcement came out. japanese banks as a whole has been struggling to make lending andy, after we demand falling prices. then after interest in margins are among the lowest in the world after sweden and denmark. they could fall as much as six basis points, taking 45 interest point off.

they are pretty much trading at their lowest in about 15 months. into thent to go bloomberg terminal and talk about the impact of that surprised bank of japan decision and see i what it did to the government bond markets. the white flag down at the bottom is the japanese 10 year yield. he will see a sharp leg lower with that orange rectangle. the 10 year yield in japan is now we yielding 0.1%. i want to blow this out really big, because this is going back to the late 80's. yieldsy government bond everywhere has plunged, but japan is famous for having so much government debt. it is called the window maker trade because people have lost so much money. anyone betting against the japanese government, last night really got the system surprise move. alix: i was taking a look at the

s&p and the rally we saw this week. take a look at by bloomberg terminal. i have charted three rallies across the last year and a half. the rally we saw is what it used to be. saw on thery low we 20th we have only rallied by about 2%. from the slowest recovery any bottom held after a huge plunged in the past seven years . rallyors got used to this and the by the debt mentality. we did not see that huge of a spike. it shows a change in sentiment in the market. to: it will be interesting see is the strategy continues or we go back to sell the rally. alix: can see all of the start and more on twitter. scarlet: a pretty rough start to 2016. in stocks, that is where we are going to start.

benchmarks actually closing out their worst month since august. the s&p 500 was for its worst month's 2009. with the rebound of the last seat of weeks have helped and we're looking at the second worst month in the last three and a half years. you're looking at the worst january 2008. every single industry group fell in europe during this time. treasury's because there is standing by of u.s. government bonds. see the yield come way down. the 10 year yield, believe it or not, started at about 2.27%, not ending at 1.92%. if you look at the yield, it go straight down. much more sensitive to that policy. let's move over to oil. med to have found a

we arery floor and nowhere near that out because we have this sharp recovery. branch has made its way back to about $34 after starting the month at $37. gold is a winner for the month, after 1.46%. fact thee refugee in past year. only five months of gains over the past year. that is an incredible move there for gold. today toning us discuss the month that was and the current earnings season is dan suzuki, the senior equity strategy at merrill lynch. thank you for joining us. look at the dow up nearly 400 points. his january the distant memory and we go back to a calm stock market? >> it depends. the year is some support here.

is that sentiment is increasingly to the site of panic. but the missing ingredient as growth. there is no signs of growth right now. that we have not had a couple of good data points over the last few days. we had improvement. we have the chicago pmi and the milwaukee data out today pointing to improving growth. you should see the ice and come through, and these may be have been the floor of the market. alix: if you look at field earnings and you look at the , and you notice it is at its highest level since 2009, that growth is just not there. >> that is absolutely right.

there has been an increase in the bottom line. there is a lot that affecting the top line, the effect of commodities. that is showing up in those numbers. again, it comes down to growth. you can only cut so much for scarlet. what do you find, and how is it different from the last couple of cycle? >> it is early in the earnings season. so far,t we have seen and it's been very needed results on the downside. just this week we have seen more of the reaction on the downside. until this week we saw very little to french weather -- --ferent gene that has been in our lexicon lately is the idea of a profit recession.

profits could rollover without the economy rolling over . some say this fx energy story and not that bad. is this really an energy story? >> i think it is largely an energy story. you look at the energy the prophets have been down 70% over the last couple of quarters. now you are positive sales growth and positive earnings growth rate you're definitely .eeing we're looking at the 4400 gdp we've got today, global gdp does not look very good. my hope is that we get to the first quarter and the second quarter you're going to see growth pick up. positive.to get very has been some chatter that the recent selloff we've seen really has to do with global markets readjusting their

expectations. maybe we are in a permanently lower growth environment. do you think that is part of the macro story that is correct in readjusting? that we should selloff more because of that? >> i think it is where your view is. we are pricing in a global recession. -- of it is factoring in what is collapsing here. that is understanding what look at the pace of the different growth indicators. int of it is factoring potential growth. we are taking a lower growth trajectory into account. but the violent reaction have seen is also starting to price in the global glut. scarlet: we have a chart that shows the russell 2000 relative to the s&p 500.

it is a ratio. when the line is going down, you're looking at small caps on for performing -- underperforming. forced to because the smaller companies on them and are liquidating. do you agree? i think there is a lot of different dynamics going on when it comes to this. printable, they tend to be more credit sensitive. they do not have as strong of a balance sheet so there has been a huge focus of credit risk in the stock market. the is definitely part of it. title issuers that have been underperforming in the markets. that is going to continue for a while. there's a premium being put on our. if you do not have trading liquidity, i think the markets is going to punish us for it.

we are just in the early stages of what can be a long cycle for the all caps. a load people don't alize it is not just a bear market for small caps. they have underperformed by almost 30% by 2011 has been a relative bear market and an absolute bear market. alix: thank you. good to see you. scarlet: speaking of credit. the credit is seen as a recession alarm bell. we will speak with the high-yield credit shooting -- trader at goldman sachs. ♪ [laughter]

alix: is get right to first were

news. mark: president obama says to ensurere to do equal pay for women. mr. obama marks the seventh anniversary of the signing of the lilly ledbetter fair pay act. he announced he is expanding a data collection system ways to ferreting out get around equal pay laws. dzhokhar tsarnaev's file an appeal. the cities lose more than

$250 million each month. russia suspended all flights to egypt after that incident back in october. the national football league said the number of reported rose 15% last year. they released the figures today. there were 182 concussions reported during the regular season games in 2015. that reversed a recent downward trend. they are working on better detecting methods and reporting, but stress more research is needed. alix: thank you. this week the former head of u.s. high-yield credit training at goldman sachs sounded off on the junk-bond trading. he wrote the majority of the new money can be classified as renters not owners. class they are unfamiliar

with the risk, and only familiar with the recent history of strong returns. he is worried about investors that got into the high yield space and are not bearish enough to get out when they need to. have him joining us now from cincinnati. joe: tell us about the rude awakening that they are in for. i think bottom line is that we are at the dawn of a really painful deleveraging cycle. access to capital, especially for these capital structures which are fully leveraged is just the beginning. there is going to be a lot of pain for anyone with physicality to them. alix: you have to look at the debt, finally getting downgraded to junk bonds. that debt has fallen and fallen

and been downgraded to nowhere in sight. how many more of these downgrades are we going to see? how fast will they come? >> freeport is the ultimate poster child of the cutely high-heeled boom -- qe high-yield boom. as a mining company they are incredibly levered through commodity prices. bought aify they deepwater drilling company, which is incredibly leveraged ohio of prices ri. in hindsight, that is somewhat ludicrous. but that is what the market encouraged in the market funded them with 4% debt. as forward three or four years command have to pay the paper. oil has dropped about 80%. freeporte a

stakeholder, with the debt trading at about $.41 on the dollar, this is an 18% yield. the debt is now the equity, and a war iny is which there is no equity value to the company except for the hope that the company survives and copper goes completely higher along with foil. i think a lot of the freeport stakeholders who own the equity do not view themselves as a war of holder. quickly --ry historically, low rates have encouraged firms to lever up very quickly. they are being rewarded for taking on more leveraged -. >> exactly. we take a look back to 1980. over the course of the past 35 years we have seen a correlation with the market punishing firms as they lever up, with strong

balance sheets stocks dramatically outperforming week balance sheet stocks. this has held all the way through 2011. that trend completely reversed. years, youst four the market aided by activist and returns of a really rewarding increasing desperate whether it is that funded m&a, w.a.r. vivax. the market has rewarded himself and his positive feedback loop has been absolutely violent. over the past four years you had week balance sheet stock outperform strong balance sheet stock 50%. retreat over the past quarter, but our view is that you are not going to retrace a four-year divergence in three or four months. it is the early innings of this trend. scarlet: thank you for joining us today.

coming up, how are consumers faring as businesses turn more risk adverse? ♪

alix: coming up on monday, a conversation with stanley fischer from the council on foreign relations. tom keene will sit down with mr. fisher to discuss the economy, the fed, and monetary policy. we are looking at three most important things that you may have missed today. when we talk about the gdp report, it was kind of mixed. but there was some good news on consumers. bloomberge the

terminal, you can see the annual pce on a year-over-year basis . our recession special yesterday, what can you help was one critical reason why the u.s. may not be turning into a negative growth. the consumer is confident, they have a job, and they are spending. and not offense any manufacturing recession we may or may not say. and may o to dive into the bloomberg roll cake and talk about another decent sign for the economy. i'm looking at chicago's pmi midwestern manufacturing indicator. this is a very bouncy number.

this month, surging back up to 55.6. you can see that this number bounces around a lot. you do not want to over read too much. but the good news is this is what you would not expect to see if we were collapsing into a recession, a solid bounds like this. not the type of thing you would expect to see if the wheels were really falling off. maybe there are some signs of life here. least there are pockets that do not let the economy is a collapsing. alix: i'm looking at oil, and it is a very intense month. was in anow the oil bear and a bull market in the past four weeks. % slide, with iran coming online more than we

thought. then we have an old oversold bounce at the end of the day. we have the conversation that perhaps russia and opec will meet and coordinate a cut in production. even though that is complete nonsense. --rlet: ok came out and said opec came out and said that was not going to happen. he is the energy guy in russia, if you does not say is, it is not going to happen. you can wish all you want great but that greeted all the volatility in the oil market. a parent market in the oil market in four weeks? joe: recesses everywhere have absolutely searched -- risk assets everywhere have absolutely searched appeaurged. scarlet: coming up, bank of japan's decision to introduce negative interest rates may have an impact on currencies. what you need to know.

♪

♪ let's get to mark crumpton with first word news. >> law enforcement officials say one of the fugitives that escaped from the orange county jail has been captured. two other men are still at large. residents are urged to remain on the lookout for a white van they may be using. meantime, a woman who sought -- taught english to the inmates has been booked as an accessory. she gave them maps of the complex. and health officials trying to determine how the brazil on the backs could be affected by the spread of the zika virus. more than half a million people

from around the world are expected to attend the summer games. the world health organization is holding an emergency meeting on monday about the epidemic. the virus has been found in at least 24 countries. the obama administration confirming that hillary clinton's home server contains a closely guarded material, including those with the highest level of classification. they are releasing 1000 pages of e-mails that she had as secretary of state. officials also confirming that seven e-mails are being withheld in full, containing top-secret material. the state department did not describe the substance of the e-mails or say if hillary clinton sent any herself. president obama is set to go back where it all began. the washington post reports next month the president will visit

springfield, illinois to mark the anniversary of the launch of his historic campaign. he will deliver an address to the state legislature. day.l news, 24 hours a back to you. scarlet: thank you. a quick recap on how markets closed on friday. you can see a rally into the end of the month and the end of the week with the dow industrials gaining almost 400 points. we ended the month the opposite way we started. every industry group climbing. earnings, we are starting to see some companies that are getting rewarded. , but it hase ones been fairly inconsistent. joe: it has been said in these are some of the most extraordinary moves this week

that a selloffs with amazon today. and the next ordinary rally with facebook or the big picture, this is quite an end. alix: we dive a little deeper into amazon. it fell the lowest this month. this is sense 2008. the stock is getting completely destroyed, falling two weeks in a row. we will put this in perspective of how important it is for the overall psychology of the market. scarlet: what did he miss? the bank of japan surprising markets. discuss, isow to bob. he is a global strategist who says there is weakness throughout the country. what i find negative regime, this is complicated. this is a three-tier system and it only applies to new reserves that the banks of deposit at the

central bank, so is this similar to what has been done in the past? >> it is less than what the ecb did in the past. this is a bit of shakespeare, signifying really nothing. this is on new deposits that the bank puts at the bank, so this is only on marginal deposits. this is more symbolic than anything else and it had an impact on markets in japan, particularly j jp markets. this is probably where they wanted to do with those markets. joe: when i saw the news, there was a lot of eye rolling, this will really work, they have a reputation for throwing seemingly and that now working. you do not think this will have an effect? >> this is not really meaningful in the sense of the economy. they have a history of underwhelming.

it is a 5-4 vote, so it was barely passed. it is on new deposits, not existing deposits. it is more symbolic than anything else and maybe some reaction is the expectation that by taking this action, they will maybe put action on the parts of other banks to follow. the: that is a great point yen is against the u.n. so this has more pressure in china? >> keep it in perspective. the yen was down today. -- 100 20'sne 20's that it was 125 last spring. soa gets it back into the 125 -- so it gets it back into the 125 range that japan is more comfortable with. is theand below, that

risk around the world and that is what they are concerned about. they are pretty comfortable with 120-125 and i do not think that will do much for competitiveness or force anything out of china. ,oe: if you look at u.s. prices the years afterwards, they are trying to figure out how they will stimulate the economy. negative rates were talked about theoretically, but never seem to like it was a practical idea. people were worried about ramifications. and now we have seen the ecb did negative rates, is this something that seems like it may be part of the common central bank arsenal in the future? we have broken the tab do of it -- taboo of it, it does not break everything so maybe they will try it. >> i do not think so. we have a different financial system in the u.s. than japan or

europe. so much of the u.s. financial system is individual aggregation of assets. that is a big part of the funding process in the market and if you go to zero or negative rates, basically making it difficult to continue to maintain money market funds, then the funding of the corporate sector through certificates of deposit really drives up -- dries up. we have a different financial system and it makes it difficult to make it function properly with negative rates. in japan, there is a bank oriented financial system, so they can handle these things. it is a difficult process in the u.s. scarlet: the market is not think it is totally bananas, because we are looking at the probability of negative rates and the probability now is over 10%, so there are some in the

industry trying to prepare for the eventuality of that. scarlet: and the fed recently spoke about this. a representative said he thinks they should consider it if the situation arises, what might that situation be? >> something worse than something in 2008. scarlet: they could lower rates so much more. >> yeah, but i think most oflysis to tie in the amount security purchases taking place and it's infected -- infected impact, so in monetary conditions, the fed had gotten interest rates to a minus two, they were very low. at that is different from actually having a negative print on rate. i think that the financial structure is somewhat more difficult to do that in the u.s.

than in other economies, that there are a lot of other things they can do before they go to negative rates. alix: the irony is that the bank of japan, they want people to stop saving and to start spending. yow do you do that when the come out and did negative rates? agingten, it is an population in japan. it is an older population than here. and i think as a member of the 60 plus set, that is demographic rather than fundamental. and there is not much they can do about it. here is an older population in japan. we had household spending data out of japan today and it was in 2015, down over 3% in 2014, so declining household

expenditures. people are not spending. they are older and they do not have interest income that they have to live off of, so this is counterproductive for an aging society. joe: let's talk about the eurozone where we also see negative rates. do you think that the ecb can use monetary policy to boost the economy, unlike japan where does not sound like they will do it? >> what it comes down to is the mechisms for transmitting monetary policy. i think that during the crisis by the fed of easing and the mechanisms through market stability, and a weaker currency, right? manufacturing renaissance, a very weak dollar. they served the economy well.

the biggest mechanism for monetary policy in the eurozone will be a weaker euro. it has been driving growth. that plus lower energy prices. if you look at the eurozone economy, it is driven by the consumer. it is largely japan by lower drivenprices -- largely by lower energy prices. so again, the question is, how does monetary policy impact the economy and that is the transmission mechanism and in europe it has been a weaker currency and that is the case in japan, also. e: bob my thank you. scarlet: thank you so much. we love ball. where didoming up, all the oil money go? we will find out. ♪

♪ scarlet: it is time for the bloomberg business flash, a look at business stories in the news. s&p 500 is downgrading a credit rating, the agency says they will split into two different units and the s&p 500 will monitor the companies. it could prompt a further cut. jetliner cameew out today. it has more than 3000 orders are to more than 50 customers of the 737 were on hand. this is a reference to the seattle suburb where they have made it the planes since the 1950's. and more bad news for the sports industry, the new york times says that the company handling

processing is getting out of the business. they are suspending all payment transactions in the u.s. and its territories next month. that is your bloomberg business flash. alix: over the past two years, oil prices have skyrocketed and oil companies have made money. this is compared to the amount of money they were making and all of this money led to a large amount of cash in the system. but now that oil prices are falling, the cash could be drained through the system and it could come to tightening. joining us as ryan to talk about it. it is really hard to find out where this money goes. you make all this money, where do you put it when you invest? >> as far as we know, they have invested in treasuries i'm a but it could be anything --

treasuries, but it could be anything. on purpose, they do not let anybody know. alix: we saw a huge explosion in funds, a lot of state owned companies and that goes back to the states. $7 trillion, best guess where it is invested? >> i would say the majority is in treasuries. but if you buy up a lot of inasuries, it does not stay the treasury market. it will spill over into other markets. the idea that something is moving credit, not the economy, you cannot see what is. so we go looking some miles. alix: you compared the potential of these petrodollars -- they are kind of the same size, do they have the same effect in the world? >> that is the theory right now. of $2g to a magnitude

trillion-four children dollars -- $4 trillion. in the market, there has not been something to replace it. too much supply of assets and is not enough demand, prices go down. alix: what is the probability that the volatility we have had in the last few weeks was a result of these funds drying down assets to pay for something. >> it is high. our thought was, for everything else coming up to replace it, people can save money. he can have less assets in the market. we have that now. but we are looking at a couple of years worth of money coming in to make this happen. i do not think it will end any time soon. alix: this is a world international reserve asset. you can see, 2009 we were rolling over a little bit. can you contrast this with 2009? >> there was a financial crisis

in 2009 to go with it. this seems more like a permanent shift and it has to do with emerging markets, countries rather, and doing things to alter their currency and support themselves. if that does not change, i do not see why we would expect less volatility in the market. alix: for years, we could be priceg at slower asset depreciation, adjusting to oil prices that are stagnant. >> that is right. we do not really know exactly how long it will last, but it will be with us, and has been for 18 months already. alix: very depressing, but thank you. thank you for helping us understand. it was a pleasure to have you.

ryan preclaw. scarlet: coming up, looking at data that could appoint to a slowdown. and on monday, a conversation with stanley fischer from the council of foreign relations. discuss the federal reserve, monetary policy and all of the above. that will be on monday. ♪

♪ scarlet: is the u.s. recession bound? we dug into it yesterday. this is what we had to say. >> i am not saying we will never have a recession or cannot, i am saying that current data does not support the recession.

there is a lot of data points we normally look at that do not support this. as a result, any piece of information has a narrative. scarlet: we got more data today that suggest the economy is cooling down. joe: how are you? matt, you are looking this morning i gdp data, kind of old and we have fresh data on the consumer, what did you see that stood out? >> what is happening with the consumer is front and a center. we talked with rob kaplan today and his answer on the likelihood of a recession was, it is all about the consumer. that is why i do not think it will happen. there will be things in the survey right now, to developments we are watching. one, how they impact of the financial and -- financial volatility is impacting consumers and wage growth trends

and how they affect consumer confidence. what you can see in the chart is the stock market volatility is taking a toll. probability that a consumer will see higher stock prices is the lower -- lowest it has been in two years. that is concerning, because we talk about consumer spending some of those are things that supported. support it. you have the stock market access with your balance sheet. the wage growth, again we saw in the survey today that the probability of higher income a year from now perceived by consumers is now back under 50%. so consumers now see it less likely than not, that they will get higher income a year from now. joe: also, this morning we got .mployment cost index

alas, people were excited because that number was taking off and then it flatlined. >> exactly. growth indicators are bubbling up. median hourly earnings are looking good, but the take away from the surveys is that so far consumers do not believe it, yet. they do not believe we have wage increases that could lead to more confident. alix: and many believe they do not -- or they will not have a job. >> we ask, what do you think about unemployment a year from now and this tends to lead the unemployment rate. we are starting to see this uptick in concerns on unemployment. it is not too concerning, but is showing that some of the forecasts for the unemployment rate, consumers are not buying

that it will plummet. joe: why are the numbers not deteriorating? there are a lot out there. >> the michigan survey is not bad. it has stagnated for the last couple of months. it is consistent with some of the charts. but there are other questions asked of consumers that can kind of in place the headline -- inflate the headline number. what do you think about business trends and that sort of thing. what we want to focus on his way to growth and the stock market, so that is why those are important to watch. scarlet: how quickly did a turnaround? alix: all of a sudden we rally and expectations change or will it take longer to shake out? >> expectations can change quickly. this is not super concerning, but is something to watch. if we get a rebound in the stock

market, we probably will not see a big impact from this. wage growth is a much longer and persistent story that would be good. scarlet: if it changed. thank you so much, matt. yesterday we asked on twitter, do you think the u.s. is heading for a recession? the result, 42% say yes. 57% say no. this has been sustained throughout the vote. alix: there were over 500,000 votes in a 24-hour. you can watch more on bloomberg.com. ♪

♪ scarlet: don't miss this.

, -- monday morning joe: and manufacturing data out

>> with all due respect, iowa caucus-goers, put away your phones and pay attention and experience the caucuses, for god's sake. ♪ mark: -- john: we are at mission control at the marriott, roughly 72 beforeefore islands -- those in iowa kickoff the elections. they will