a balance between sounding confident and acknowledging risk from around the world. and the new normal for technology. investors now say earnings do matter. we will hear from goldman sach'' chief operating officer, gary cohn. stephanie: welcome to "bloomberg ," here at bloomberg world headquarters in new york city. i am stephanie ruhle. david: the market is down, up, we don't know where it is. stephanie: we will bring inexpert and try to break it down. david: who better than to have john mack with us? they will help us sort this out, i hope. stephanie: we have to cover the

economy with janet yellen about to testify. we have to get our head around what matters to her most. clearly she hurries -- clearly she cares about data. the question is, is a data around the world as we look at china, japan, brazil, or is it the economy improving slowly? we have breaking news right now. matt: first i want to give you news on time warner's dividend. if you are a shareholder, you will be happy about the fact that time warner is raising its dividend. well, you might be happy. $.40 -- to $.40, a quarter per share. you are getting a next her nickel and a quarter per share. as far as earnings are concerned, we have eps from $1.06 fromops, at time warner. we had total revenue at $7.08

billion. i will look and see if those are comparable, but the dividend increase and the $5 billion share buyback program are things that can move the stock. i want to talk with vonnie quinn from first word news. vonnie: voters in new hampshire sent a message to establishment candidates for both parties. a billionaire and a democratic socialist won the nation's first presidential primary. john kasich was a surprise second with 16%. in a victory speech, donald trump sounded a familiar theme. donald trump: we are going to make america great again, but the old-fashioned way. we are going to eat china -- to mexico, alljapan, of these countries that are taking so much of our money away from us, on a daily basis. it is not going to happen anymore. vonnie: bernie sanders beat hillary clinton by 21%.

the race was called almost as soon as the polls closed. bernie sanders: together we have sent a message that will echo from wall street to washington, from maine to california. vonnie: up next, caucuses in south carolina and the primary. the4 decision will stop thes clean power plant -- epa is said to have overstepped its authority. nato made a ploy thousands of troops to defend against russian incursions in the baltics and eastern and southern europe. defense ministers will discuss the situation today in brussels. any deployment would include large numbers of u.s., british, and german troops. global news 25 hours a day, at

150 news bureaus around the world. i am vonnie quinn. matt: i will start in the u.s. with futures. we see gains across the board. as david mentioned, we have been down this morning. we are back up right now. s&p futures are at 1%. nasdaq futures gained the most. the nasdaq is really what i want to hone in on and focus on here this morning. it is almost at a bear market from its high. we are down more than 18% since july 20, tech stocks, big tech stocks falling in value. if you look at the volatility spreads, there is a great function of the bloomberg gv. you can see the volatility of -- volatilitysus versus the volatility on the s&p. you can see on the bottom of the chart that we are almost up to a high level, almost to the highest level we have seen since the june 20 hi on the nasdaq. i also want to look at japan

because it is a huge story, was a huge story overnight yesterday and tonight. nikkei. the 5.5% on the tonight, 2.3%, although it had down -- although it had been down 4%. the board there so i can look at the yen. the strongest art to a month we have -- the strongest start to a month we have seen, ¥115 is all you can buy for your dollar. that is not what the bank of japan wants. that is not why they are spending so much money. the japanese 10-year has a positive yield. it had been negative yesterday. it is back. they are spending a lot of money and not getting a lot of traction. stephanie: what does the market want to get japan out of this? >> i think what the market wants from the boj is aggressive

action. the boj has put rates in negative territory. they are likely to do more going forward in terms of asset purchases. the real question is, is it enough? is it enough to pull inflation up to its target at the time. david: the stock market is suggesting they do not believe it is enough to bring it up. >> certainly there are a lot of things happening on the stock market. the globalseeing is fear, the fear of what might happen in china, what might happen to the global economy, oil producers, european financial institutions -- all of that is weighing on markets globally. a chartwant to show you i have that shows the yen at its since 2014, since november of 2014. here is the bank of japan, where the bank of japan has surprised with a negative rate move announcement.

look to the european stocks. take a look at the european majors. you can see a rebound here. here the stoxx 600 up 2.3%. the cac and the dax up. deutsche bank obviously, there is talk -- it has been said that it will buy back some of its more senior debt. deutsche bank shares up are up -- which bank shares are up almost 14%. i want to show you one more function in the bloomberg. allows you to get a look at stock. you can see the equities. obviously there has been a rough time of it, and you can see from these charts it is coming back a little bit. stocks quick look at health. david: you have run a couple of

big banks, john, particularly during a difficult time. if you are running a deutsche bank right now, the overall market turmoil as well as specific issues with the banks, what do you do? john: you have to communicate with investors in the marketplace, number one. number two, i think people overreact. the bank's name is deutsche bank. it is the german bank. politically, they will stand up if they need a safety net, and give it to them. at the end of the day, all you can do is came indicate. i think they -- i think they're equivalent of what we have with the fed -- i think that they're equivalent of what we have with the fed is the german bank. you off guard, flipped or quick, and it scares people. i heard yesterday the lowering ofof

interest rates, it is absurd. the government will not let that happen. stephanie: if you are spending money that you were not planning to spend at a time you need to focus on growth, do you ask regulators to ban shortselling? when panic is happening it is not helping your company, and it is a fundamentally good company. john: it depends. during the crisis back in 2008, there was a lot of pressure on balance itself. what people did not understand, and i am not sure about the german market, but people forget the power of credit derivatives and the pressure it can put on stocks. so the combination of shorting and putting on a trade against it puts it on steroids. do i think they should and shortselling? should go outthey and ban shortselling? i do not.

what has to happen, the central bank needs to make a statement, the ceo needs to communicate, and i am confident everything will be fine. stephanie: but is the use of credit derivatives -- they are simply destructive for those who are investors, who are basically short time hedge fund investors. traders, really. john: you have to ask the market. that is the game you play. david: we have a central bank statement coming out today from janet yellen. i wonder, as i look at this, you about the futures of interest rates, and the market is saying there are no rate rises coming this year. say tould janet yellen make it any better? can she only make it worse? steve: she can use some york fedce -- as new

president dudley said last week, if market conditions like this were to prevail in march, the said may choose not to raise rates then. the fed is paying attention. they will not make the situation worse by raising rates in very volatile markets. at the same time, she cannot say rate hikes are off the table. she is not ready to do that by any sense. the labor market keeps tightening, she will have to hike inhy the fed december did not work. she will have to play both sides. matt: you can see the market does not even think there is 33% chance there will be a rate hike at all any time this year or into next year. obviously the chances of a march rate hike has fallen -- have fallen. every other surprise index has come in down. only the labor market is positive.

not spokenshe has yet, and the picture in december is not the same as today. >> i do not think it is an issue of rates. i think as a general fear of markets, not just pure interest rates -- if you look at europe, you have no growth. if you look at geopolitical risk, what could happen? you look at the u.s., where there has been growth, not as much as we would like to see, but there is fear. the fear is geopolitical. lower oilhought prices are a big positive, and i still believe that. i think low interest rates are still a big positive. market?driving this what is going on in the middle east, china, and north korea puts a rocket up into space. global economies are suffering with the exception of the u.s., which is doing pretty well. i think it is just fear. stephanie: is there a catalyst you could point to that you think could help us get out of this slowdown?

without regulatory or fiscal policy changes, banks are not lending with confidence. ceo's do not know what is in store. john: i think banks are lending. i do not see that as an issue. there is the monday -- there is the money out there for lending. let's get the presidential election behind us and get some clear direction. i think the fed clearly wants to raise rates, but not in this environment. number three, we have to figure out a way to calm the global world. it is a mess. on here have miliband later, and he will talk about what is going on around the world with refugees, with trends, the pressure being put on europe by the immigrants coming in. and then you have russia now helping syria, and all sorts of things going on. if you are an investor, why would you be conservative right now? catalyst: is there a that you think could stop the global slowdown?

there are some candidates out there bank. it is hard to know which one of them come first. there is some bottoming in the oil market, that will help them feel comforted. the continued decline raises fears among oil producers. people are worried about those countries. the same thing that could happen is some sort of chinese policy stimulus. they are really the only ones with a lot of great cuts that can be done. europe and japan can cut rates a little bit further and do some more qe, but i think china would be the one to really aggressively put in stimulus if it is going to happen. david: thank you so much, dean maki. john is going to be staying with us for the rest of the hour. we will have full coverage of janet yellen's testimony before congress at 10:00 a.m. eastern time. more on the european banks. we spoke with the ceo of italy's second-largest bank. that is coming up next on "bloomberg ."

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of disney areares falling premarket. the world's largest entertainment company posted record earnings in the fiscal fourth quarter, still there are flagging -- there are slacking profits with espn. last year's luxury car sales leader, bmw, fell to third place last month. mercedes posted a 20% increase. audi finished in second place. and burberry is suing jcpenney.

the british luxury goods maker says the american retailer illegally sold a coat and a jacket that featured replicas of burberry's famous plaid pattern. jcpenney is not commenting. going tow we are global go. every day we will bring you stories from around the world. today we had to london with francine lacqua. european banks are in focus. you just spoke to the ceo of the second-largest bank. what did he say about current market volatility echo francine: i had an exclusive conversation with him, and it is the second-largest bank. it is the biggest company in italy. i was trying to get out of him how he saw the turmoil, whether he was worried about the turmoil. he said clearly that the market reactions were blown out of proportion. >> the market is absolutely crazy. definition, noer

correlation with the fundamentals. the markets are irrational. think in the end, in some weeks they will come back to the fundamentals. bigcine: this is a pretty european ceo, and he says there is a disconnect. he says if you look at the real economy in europe, we are still growing, and the negative headlines that feed each other lead to the market fallout. stephanie: i have to ask you about the market disconnect. as an economist, you look at fundamentals. but at a time we are seeing panic around the world, how do you pair the two and manage the disconnect? dean: first of all, you have to do the fundamentals justify -- you have to look at, do the fundamentals justify what is out there by gekko in most cases,

no. the economy is glowing -- the economy is growing slowly, but it is growing. to the market fluctuations get so intense that it starts to affect growth itself? that is what we are likely to hear from chair yellen, that the fed will back off if markets are getting out of hand. they are worried about this kind of feedback loop, and that is something to be concerned about. david: john, it strikes me that there are fluctuations in the markets, but there are differences between companies and how they are positioned. italian banks, the rate of nonperforming loans is greater than the rest of europe. so you have to get your own house in order, too. quicklyd a fast and as as they can, they will try to do that. but the volatility is difficult. we need to have some calming factor. if we get some reasonable growth, i think the fed will take action over time. but they want to see a chick up in confidence -- a tick up and

confidence, and right now people are lacking confidence and becoming risk of versus in some cases. in some cases. when you look at these blue-chip companies who are paying 6%idends in the 4.5% to range, i think that is a great opportunity. but if you are nervous and scared, which i think many people are, you hold cash. stephanie: google does not go on sale that often. john mack, stay with us. dean maki, thank you for joining us. when we come back, somebody else's weighing it. goldman sachs' gary cohn, giving us his thoughts on volatility and technology, weighing in on uber and a potential ipo. ♪

stephanie: welcome back. emily chang sat down with gary

cohn at the bank's tech conference in san francisco yesterday. she asked him if we are seeing a revaluation in tech. in some cases we are seeing a revaluation, but in some cases the market is clearly taking a pause and trying to understand the long-term viability and a long-term wealth creation vehicle for shareholders. emily: you guys are investors in uber. out, said thated be publicly traded now. what do you think? gary: everyone is entitled to their opinion. maybe five or 10 years ago they would have been public, and they are not. has access to

capital. they were able to raise at an ever higher multiple. emily: an unprecedented multiple. gary: they do have cash flow. they have earnings power. they are doing the things i was talking about other companies doing. they are investing a lot of their u.s. earnings in their u.s. cash flow in building up the international business. their u.s. builders -- their u.s. business is proving to be very positive and accretive to shareholders. investorat about liquidity, though? gary: as long as the company is growing, it pesters -- investors are creating value. where investors will be concerned when there are down rounds. then they will be concerned about liquidity. doing a flat round, a down round, having to provide more security or more preference for

the new investors, that is when you will hear about, you know what, i am an investor managing other people's capital. i need liquidity at some point. david: john mack, you are involved in tech investing. what do you think about this question of getting out? stephanie: for investors to get out. john: they can get out. a number of people, whether it is uber or whatever it may be, if they want liquidity, they can sell their stock. it is not the best execution, but when you went into it, you knew what you are buying. i think gary is correct on this. stephanie: we have to take a break. we will be back with more. john mack. ♪ we live in a pick and choose world.

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here is vonnie quinn. vonnie: john kasich gave himself some breathing room. that is what came out of new hampshire at the primary. bernie sanders beat hillary clinton by 21 points and called on supporters to help out. us raisenders: help the funds we need. whether it is 10 bucks, 20 bucks come or 50 bucks, help us raise the money we need to take the fight to nevada, south carolina, and the states on super tuesday. republicanmp won the race, as expected. he is setting his sights on the next battleground. donald trump: thank you, new hampshire. thank you. we are going now to south carolina. we are going to win in south carolina. i love you all. thank you very much. vonnie: republicans vote in south carolina on february 20. democrats on february 27.

according to a south korean news andrew c, -- and the u.s. and russia are stalled syriave peace talks. they broke down last week as syria's military made major gains against rebel forces. secretary of state john kerry and his russian counterpart will try to get the talks going at an. they will meet with other foreign ministers tomorrow in germany. global news 24 hours a day, inered by 2400 journalists 50 news bureaus around the world, i am vonnie quinn. here is solar city. let's look at some stocks first. solar city down almost 30% after showing it had fewer deliveries than the street was looking for. a big loss for the stock. a big loss for billionaire islam must it we will talk about that later. disney down because of -- a big

loss for billionaire elon musk. we will talk about that later. disney beat revenue overall from "star wars." my -- and akamai has businesso securities and media business, and the market likes that. 1% on s&p futures, dow futures gained thefutures most, although they have lost the most since the high. european stocks are gaining today, pretty much across the board. but the brightest slice on the high is financials. if you dig into that, real estate, deutsche bank's 14% gain is a huge part of that, and urge a bank got some steam behind it today after -- and deutsche bank got some steam behind it today

after saying it may buy back some of its debt. stephanie: it may, and the market seems to like that. tom keene is not here just to look good. it is time for the "morning must-read." joining us is david miliband, the president and ceo of the international rescue committee. david, welcome. tom keene, you are always working, been on the air for the last three hours. what are you reading yeah cap tom: we are looking at deutsche bank. bring it up right away. this is a short must-read. unknownsnknown stash much associated -- the big unknowns -- john mack, do not fall off your chair. tom: like john mack taking over deutsche bank.

you and i have seen this train wreck before. we have seen this theater. it is one part international finance confidence, trust, liquidity. it is one part because plan, and it is one part the overarching macroeconomics that deutsche bank has to do with. which is the most important for john cryan to do with right now? are clearly scared about the banking system. they do not see much growth in europe. all of these banks in europe have been overly aggressive in the past, so he needs to dial that back and talk about what they are doing, buying in bonds which makes a lot of sense at that price. he needs to commit decay that is what he is doing. tom: that he needs to communicate. that is what he is doing. tom: might i suggest the james gorman and john cryan have a cup of coffee? to call him about

that. stephanie: they are spending money that they had not planned on potentially in a buyback situation. let's go back to fundamentals. deutsche bank has cut jobs, cut bonuses. they do not have a real growth strategy right now. if you are in that position, how will you make money? where are you going to grow? john: i think it is an overreaction. it is deutsche bank, a bank of germany. this is a long-term game. we are reacting to traders and who can take advantage of volatility. the real question is, on a long ish, does deutsche bank -- deutsche bank a bank that will fix their problems, figure out a way to get confidence back into their shares? i believe, yes. question, is the real why are we allowing -- do we need regulatory changes so that we will not be controlled by

short-term traders that are controlling the narrative? john: that is a great question. i had a great conversation with gene ludwig, and he believes that some point in the near future that is what is going to happen. that the huge players in the marketplace are creating so much volatility, should there be some kind of gating issue or control on what they can do and when they can do it? you would hate to see that, but with derivatives and what we talked about earlier in the day, i would not be surprised if the new administration, the regulators in washington, we look at something like that. regulators canet come swinging at every angle. tom: i totally disagree with the idea that the markets have a behavioral construct. all they are doing is pricing their expectations of the risks involved, and the arch question, not front and center, is there a

liquidity risk within european banking, because they had not adult -- they have not addressed the adult questions of recapitalization? stephanie: you can trade and -- tom: there is a believe out there that markets are exploiting the risk measurement and uncertainty. there is no textbook that says that happens. they are just pricing in the future risk. mack,isk do you see, john if europe continues to delay and delay? the british at least had the courage to restructure rbs, lloyds, and the rest of it. where is the courage to restructure? john: sometimes courage is only obtained when you think you are going off the cliff and you have to stand up. when you see the volatility going off with deutsche bank shares, and some of the other companies in switzerland with what they have been through, i think people do have backbone. is a bigger question.

the consensus model is all about the long-term, and the question mark has always been, does it have the fleet miss of foot to respond to the short-term. their income problems in european banking that you guys know more about than i do. the bandwidth to do with the euro crisis, to do with the russians and the ukraine crisis, and now to deal with the refugee crisis, the bandwidth among european leaders -- that is a wider question for germany. tom: do you perceive institution a -- hey had david: they have a political leader in mrs. merkel, has shown the ability, sometimes slowly, in the greek crisis, sometimes ahead of the game in the refugee crisis, to take old measures. takeas the virtue of -- to

bold measures. she has the virtue of being elected. people talk about the thatbility of germany -- mistakes some of the institutional strength. stephanie: does she have the power to make a difference? david: she does, yeah. she does not have all the calls she ise parliament -- holding on to voters. she have strains within her own coalition, but reports of her demise are much exaggerated. true, john, the perceived wisdom that the u.s. did this better, that we recapitalized our banks earlier? stephanie: we do everything better. david: not always. is that fair? john: the short answer is yes. all the banks were forced to raise capital, and we did. we cut positions and created liquidity. that was under the direction of

the fed. it was hard medicine to swallow, but it was the right thing to do. i do not see that yet in germany or in europe. i said the swiss -- and this when i was at credit suisse, and clearly they did not like me. ubs -- ubs and credit suisse at one point had the best global brand in the world. the investment banks they required -- the investment banks -- thequired and built investment banks, play around with boj -- and started to speculate plan a big encino, and the banks did not do that -- a big casino, and the banks did not do that. tom: as people go in a conference room, and i know you have never done this and we need to be number two in six months or everybody is out of a job -- that is a lot of the revenue

motivation you see in major banking. what needs to be the new tack of a deutsche bank, that took out alex brown a few years ago, have a fragile u.s. platform -- what is your business plan for john cryan to get rationality into being germany's bank? stephanie: especially now that they hire a bunch of people for being big guarantees. john: they have to get back to basics. they have got to get back to basics. as the bankon historically has been unflappable. now they have gotten away from what they are doing. they have had turnover in leadership over the last five or six years, more than one time. that also applies to the swiss banks. tom: would you support the use of cash? they have a lot of cash. to take down high quality bond paper?

most of the world is saying that is a desperate act. john: i think it is a smart act. you know what is going on within your bank. if these bonds are traded at stress levels, why would you not take them back out? stephanie: why weren't they doing it before the world was beating them down? david: david, we have had you on before to talk about the refugee crisis. yours, arelike critically bringing a to those who need it most, but who is giving money to the ngo's in an intelligent way? who is best to do that? in shocked us about what the most effective way -- there are people out there bank -- there are people out there who want to write a big check. of this comes from your ability to have a clear set and a real sense

that the work you are doing needs a hard hat. if you look at the charity world, there is a lot of talk about efficiency. we say $.93 of every dollar goes to programs. what we need in the ngo world, we are serious about outcomes. we can tell you where we help them. we can take you to the programs. the big test in a world where 60 million people are displaced by conflict -- one in every 120 people on the planet is displaced by conflict -- who will make a sustainable difference? stephanie: given that it is not just charity, how impactful your work is as it relates to the refugee crisis -- when your phone rings, are you hearing from people in the market investors who are so concerned about global risk? crisisthe global refugee something they are concerned about? david: they are much more concern than six months ago. six months ago the syrian crisis

was a syrian problem and maybe a jordanian and lebanese want. it is now a big european problem. secondly, their employees are saying to the bosses, what are you doing about this? what is our company doing to respond to this. we want to live up to the values we proclaim as a company. people bringing us up and saying our employers want to be part of this at how can we be a serious partner of yours? stephanie: isn't it also understanding europe, europe as a place to invest? this is more than just an issue that -- this is a massive problem. david: i have lived in new york for two years running this agl -- this ngo. africa is a big story. side of the story is, africa is rising. big stories of success, but big problems.

if you do not address the problems -- what we are saying to people, with heart and with head, you should trying -- you should be trying to work with organizations like ours. it is very gratifying when john mack comes out to jordan to see our work, with the ngo's really be effective? will they be efficient? will they be using local people in an intelligent way? him, heestimony from can testify to us running a good shop. john: one of the things our family decided, we were thinking about we could help three or four families. we invent -- we met david and he invited us to go to jordan. it blew me away how irc takes peopleey to help these in jordan. i have always been a little

suspicious of ngo's. but when i went there bank and saw the way they -- but when i went there and saw the way they help these refugees, my wife and i decided -- during hurricane sandy, my wife and i decided we would help the ngo. take 10%.id we for what? they have administrative costs. $.93 on the dollar, they put to work. i was impressed with what is going on. keene, i know you have to go back to "surveillance," but we will see you tomorrow. we will be right back with "bloomberg ." ♪

matt: welcome back.

i am here in the hpe green room. stick with us. we are going to talk about market volatility, european banks, u.s. tech stocks. covering all of it here on "bloomberg ." ♪ new hampshire has spoken. decisive wins on both sides of the aisle. bernie sanders beating hillary clinton by a whopping 18 points, and trump topping second-place john kasich by double digits as well. zach mitre is with us today, and megan murphy is live from new hampshire. big victories last night from outsiders. megan: huge victories. bernie's win over hillary clinton was only second to jfk. that tells you a lot. both of them were game changers

for the race. there will be a long grueling fight for her. trump has really emerged as a front runner, and republicans need to start treating him like he is. i want to zach mitre, bring you in here. i did not know who bernie .anders was who is going to be backing him at a time like this? zach: millions and millions of americans sending in $27 checks. that is the kind of support he is getting in the money race. he is beating hillary clinton. in january he raised more money than hillary. last night he had a one minute fundraiser during his speech, and it crashed website the democrats used to process donations. stephanie: that is different than thinking about a cocked koch brothers check.

david: you have trump on the top and you have all these mainstream guys. where are they? what does this mean for them? a clear winner has not really emerged yet. so you still have john kasich, bush, and rubio in the hunt. kristie says he is going back to new jersey and think about it. so his support and his donors may be up for grabs. but the establishment has not rallied around a single candidate they can take on trump. stephanie: how much does it hurt them moving forward with so much money sitting on the sidelines? many wall street bankers -- many wall street backers got behind jeb bush months ago. greati have a lot of respect for jeb bush, and we serve on the bloomberg foundation. but he has been slow out of the

box. i also think the candidates have never come up against someone like donald trump. with his years of practice on "the apprentice." it shows the frustration with the american people. david: i know you have been supporting hillary clinton, but is there a candidate you think is a wall street candidate that wall street can get behind? john: like the name of your show, the bloomberg show? good point.hat is a john: i think it is so piecemeal that it will be hard to do. we need to get some of these candidates that drop out of the race. we need to get down on the republican side, maybe cointreau or five candidates. stephanie: could wall street really dismiss the election of bernie sanders?

you have to think the president is influential when it comes to who a treasury secretary would be, and that matters. cannott does, and i dismiss it, but i still think it is early. stephanie: megan murphy, thank you for joining us from new hampshire. we will be back with more you are watching "bloomberg ." ♪

david: you are watching "bloomberg ." back with us is john mack. a final thought for us, john? john: the markets are extremely volatile, but i believe you do fundamental work, are companies out there bank that you want to own. companies between a 4.5% and 6% dividend, they will have volatility, but long-term, if you take your time and do your research, there are companies you should be buying now.

we all are used to the volatility. we do not like it. we are used to it. so i think you need to have a long-term approach, find the companies that fundamentals are really good, pay a dividend, and have growth on the horizon. stephanie: fundamentals really good. that is duke university. do you have advice for the basketball team? out of the 25 -- out of the top 25? john mack, morgan stanley former chairman and ceo eric coming up, glenn hubbard, dean of columbia graduate school. stay with us. ♪ .

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i've never felt so alive. make your business phone mobile with voice mobility. comcast business. built for business. financial markets are poised to bounce back from yesterday selloff. janet yellen on capitol hill, the fed jet make event about the next rate hike in testimony today. a look at her remarks in 30 minutes.

disney investors ignore the star wars earnings, selling for fears core colors might hurt pockets at espn. ♪ david: welcome to "bloomberg ." i am david westin. stephanie: i am stephanie ruhle. a look ahead to janet yellen and to help us break it down is dean of the columbia graduate school of business, glenn hubbard and a bloomberg economics editor, michael mckee. a lot to cover but first the news. vonnie: on to south carolina and nevada, the next ops for the presidential candidates after new hampshire sent a message to the establishment, to outsiders

-- two outsiders when. in. donald trump win and john kasich was in second place. p: we will make america great again by beating china and japan and mexico in trade. we are going to be all of these countries. -- beat all of these countries that are taking so much of our money. on a daily basis. it will not happen anymore. beate: bernie sanders hillary clinton by 21%, the race was called almost as soon as the polls closed. senator sanders: we have sent a message that will not go from wall street -- echo from wall street. innie: republicans will vote south carolina next. the nevada caucuses are the 20th

and 23rd of the senate expected to vote against sanctions against north korea after net -- life begins nuclear test. it would target their ability to get money for weapons. -- theyeme court decided to stop the clean power plants until the final months of the obama presidency. utilities, coal miners come and two dozen states said epa overstepped its authority's. now to matt miller on the markets. matt: u.s. futures, up across the board and climbing into the morning with s&p futures adding 21 points and the dow jones adding 147 and nasdaq futures putting up the biggest gains, one and two thirds percent. in asia, the nikkei fell, not as much, only down 2.3%. the 10 year posting a yield.

upative yesterday, but back into positive territory for the yield. people selling out of bonds a little bit. in europe, gains across the board, the strongest in germany, the dax up 2.5%. this is a story of the banks. after reports that deutsche bank may buy back some of its debt. a surge in those shares in germany, up 13% in frankfurt, credit suisse and ubs up as well. european banks are doing well. that is holding up the market. , is anie: if you are long positive to see european banks improve but the question is what is going on there fundamentally and if we are seeing a move because investors feel confident or a move because investors are simply short-term trading, that

is a risk to the markets. fundamentally, remember what the banks need to do, serving as utilities and lending and when you look at market speculators, not just a disconnect, a problem. matt: you had to get long last night, if you got longest year you are still down 30%, 40%. let's take a look at oil. so key to the market. crude bouncing up a little bit but still at 28 -- $20.59 a barrel. the iea sang oversupplied will get worse than previously anticipated. -- it has brought oil down yesterday. you see selling in gold. a little bit of risk today with the dollar down a little bit. i want to show you the ages function. .- hs function this goes back to years, a correlation of oil to the s&p

index rolling 120 day correlation. we have not had a correlation this type cents -- tight since 2013, 2012. a volatile week for global equities, the losses continued. a bigger look into what happened in the region. more from hong kong. >> trading was limited in asia as china, taiwan, and korea remain close for the lunar new year. major markets that trade sell a downward pressure, australia injured a bear market with the 200 falling 1.2% to its lowest level since july 2013. concerns over the global economy hit japanese stocks which saw the worst two-day slump since the huge earthquake in 2011. the nikkei fell to pointer percent to the lowest level since october of 2014.

you will hear that stat a lot, the midday and the topics having the yesterday drop since november of 2014. a huge impact globally. stephanie: china is not even open this week. matt: japan will be closed tonight. do not stay up looking for it. david: we are joined by glenn hubbard and mike mckee. there are a lot the markets are afraid of. sort through the noise, what concerns you? glenn: the original concerns were about china and oil but those were not news. the problems had been there last year. we are pivoting to concerns larger, u.s. growth, what will it be? and the financial conditions of european banks to the extent they will be tarred growth in europe. -- regard europe growth. --e: you have to ask whether

european two-year swap rates and you do not see a whole lot of movement suggesting deutsche bank is a little bit of a one-off with investor concerns. ,here is still credit available financial conditions in the united states had been tightening and that was brought up by a number of fed officials in the last couple of weeks but that has flattened out. maybe we are getting past some of the volatility and that will give the that a chance to catch its breath. stephanie: it does not seem there is one clear disaster that is hurting u.s. markets but overall threats across the board . what is the biggest threat to the u.s. ? glenn: uncertainty over the growth rate itself. the economy is positioned to grow in the 2% range over the next year or so. i do not think the fed will pause too long. we will not see action now or in march, but i do not think the fed core belief are being shaken. david: kenny markets become a

self-fulfilling prophecy and drive us into a recession? glenn: through destroying wealth, that can happen. the volatility is a surprise because nothing we are looking at is news. stephanie: that's why more and more investors are sitting in cash because of the uncertainty. what catalyst could we see that will turn investors to the right or left? we are at a junction where we could go massively bullish or bearish. glenn: better policy, it will not happen. the thing that could lift expectations of business people is better fiscal policy. i do not anticipated before the american elections. >> maybe we get good economic data and that turns people's minds but do you believe the larry summers secular stagnation that this is as good as we will be able to do and we should get used to that? do noti do not come i

seek reasons for a permanent decline in productivity growth and a lot we could do to improve . these are policy issues and if we do not change policy, secular stagnation may be correct but why would we not change? david: it is not growing the way it was and we cannot figure out why. glenn: what issue is measurement, we are not sure how it is growing, we measured the goods producing sector well and the service producing sector, otherf the economy, the issue is we have policies holding productivity back like tax policies. the way we tax businesses and regulatory policy, uncertainty over the entire policy environment, all of this is a tax on productivity. david: you describe it as the existential threat to america but it seems to be getting worth -- worse. glenn: a politically campaigns are talking about threats from without, the threat to the country is from within, from a

political system not keeping up with economic reality. stephanie: from a political perspective as we look at these campaigns, why do we remain anticorporate america and big business. if wesinesses, incentivize them, they create jobs and manufacture, that will drive the economy forward. candidateshave some talking like that, the front-runners in both parties appear to be demagogues but that does not mean all the candidates are and eventually the american people will center on this message because they have to. stephanie: have you told jeb bush to say this? >> he said he wants 4% growth a year, but what are jeb bush's specific policies he's advocating? glenn: he has a complete bigomic plan centering on areas, tax policy, making short week get a business taxation right, trade policy, making sure we have smart, fair, and free-trade. education and skills training,

reform of entitlement programs, regulatory conference of regulatory reform, a root and branch for economic growth. stephanie: michael mckee, you study economics, if this is part of his platform, many people say they have not heard his story, do you know this? michael: i do because i have studied it, the problem is presidents propose and congress disposes and i am curious as to what evidence you have that there is willingness on capitol hill to do anything along those lines? you cannot adjust the tax don't let alone raise or lower taxes. glenn: -- we have a democratic -- president and republican congress, a republican president and congress could accomplish everything i outlined. at the moment, we have gridlock. all the policies are stuck in the wrong place. if we do not do something, the defaults are anti-growth. david: four years, it has been said that wall street prepares

gridlock goes nothing untoward happens glenn:. nothing -- will not fix entitlements or strengthen the nation or invest in research or reform the taxes. that does not sound good. stephanie: when i wake up i feel unlucky, when i sit at a table with all of you i feel very lucky that all these gentlemen are staying with us. what a morning we are having, taking a look at one of david's favorite restaurant, red lobster says sales spiked 33% year over your on sunday, thanks to a lyric in beyoncé's track mentioning the seafood chain, red lobster was so excited they biscuitscheddar bay has a nice ring to it. the brand was mentioned 42,000 times on twitter in a single hour and traded for the first time in history. did peyton manning did paid by

budweiser, red lobster did not have to pay for 30 seconds. >> red lobster is what came to mind when i saw the halftime show. back,nie: when we come somebody else we do not watch dance but watch beat and listen to her words, janet yellen testifying on the hill this morning. ♪

vonnie: welcome back to "bloomberg ." deutsche bank may counter the selloff by buying back some of its own bonds, according to a promotion familiar -- person from a year, there was a concerned they would struggle to make payments on its riskiest debt. the bank may decide a buyback would be unattractive as shares are up the most in almost seven years. , it hasf the times

joined other oil and gas who has cut dividends and flashing payouts 81%, that will save the covenant $450 million per year. burberry telling jcpenney to not mess with their plans, they say the american retailer illegally took off on that their plaid pattern. stephanie: we will get a closer look of what janet yellen will say in front of congress as she gears up to testify before the house financial services committee. what can she do? >> she will clarify the fed position. the news in the labor market validates the strategy the fed has been on, there has been downward surprises elsewhere in the economy and i expect her to talk about that but no big changes. she will be sending the message that i am on it. david: the hippocratic

testimony, first, do no harm. she has to walk a tight rope between saying the economy is in better shape than you think without raising alarm on wall street that they will raise interest rates and she does not want to talk down the economy and reinforce the negative opinions. >> if it is possible to do no we will not have interest rates and she has to preserve her options, i soon as she says we may raise interest rates come up with that be taken amiss? >> i think marcus -- markets understand that's one that and 25 basis point move in any funds rate are not holding back business investment. >> does she have weapons in her arsenal to help us? effect anddoes, the resort to larger quantitative easing programs and the fed could contemplate negative interest rates. those will not be that effective

. the biggest weapon is fiscal policy. stephanie: ray galeano of bridgewater shared what he thinks she could do. >> the federal reserve can be effective in monetary policy. if they are a little bit late and then they tighten monetary policy, that is not a problem but they are not as effective in easing monetary policy, the pushing on the string like in the 1935 time is a real issue. what they have to do is wait for the whites of the eyes of inflation. alone, a: he is not bloomberg question, the likelihood you think of negative interest rates as a policy tool by the fed. do you think it is being analyzed? >> the fed is always analyzing its option but it is not likely for the u.s. and i share his view that i do not think monetary policy is the answer if we get into trouble. the better answer is fiscal

policy. chair yellen and her colleagues are nimble and the college -- congress is less so. >> if she brings up that congress needs more to do but we heard stanley fischer and bill dudley suggest that they may want to let the economy run a little bit hot, do what he is talking about, be a little bit more slow to react to possible inflationary pressures so they get some momentum in inflation going forward. they are listening. negativeright about interest rates, problems with that, we have money markets the rest of the world does not happen they would be devastated by this and the fed knows that. that is why they are concerned about whether they would do that. matt: you mentioned the economy doing better than you think. it does not look like it if you check out the bloomberg ecsu function, this takes it a host of indexes from unemployment rates to total vehicle sales to

empire manufacturing to retail then gages the surprise, whether it was better than expected or worse than expected. look,ter what time you the last three months, the last year, the last two years, the only place we have exceeded expectations, not to say it has not been good but exceeded expectations, is the labor market. everywhere else has been a disappointment and this leads me to question whether janet yellen and this that are focused -- too focused on the labor market and not looking at everything else? it seems like they only want to react to the labor market and possibly stock market. >> i think the fed looks at a lot of things but the labor market is at the top of the list for the fed and the national bureau of economic research when it looks at calling recessions, the labor market is the focus because in moves more slowly. i expect chair yellen to focus a lot on the labor market in her comments today.

ofthe labor market is one their two mandates, they are required by law to focus on the labor market and they see it and they have told us it has -- it is the best indicator of the health of the economy because if people have jobs and are making more money, they will spend it. stephanie: mohamed el-erian says we are facing a perfect storm. >> the first part of the perfect storm is concern about global fundamentals, corporate earnings. is concernelement about effectiveness of central-bank policy, people no longer believe that central banks can repress financial volatility. the third element is the lack of patient capital, they needed to step in. bring these together and you get volatility and volatility with a clear downside to risk assets. >> i disagree. >> i agree that we are facing the characteristic but they were

here months ago, nothing is new. what is new is a regulatory environment that is baked in volatility by removing market makers. i think people are focusing on the fact that public policy is either relatively ineffective, some monetary policy, or relatively unlikely, which is better fiscal policy. stephanie: what is new is that the market is panicking, so what is her job, the economy or the market? saying theyts are do not necessarily trust the central banks to come to the rescue. the central banks are saying we do not want to come to your rescue, we want to step out of this. the market has the dual message of we need you to we do not believe you. that is a tough position for her to be in. atwhen we come back, a look you are reading -- what you are reading today. ♪

david: welcome back. it is time to take a look at the top training stories. deutsche bank payments hinge on its pure accounting metrics, they will have government backing it meeting and john mack said that and new hampshire is a triumph for donald trump. mike mckee, we have time for one. michael: wall street is fixated on negative interest rates and the folks at j.p. morgan have done a study on how load negative interest rates could go . there are problems with negative rates but one of the biggest is that it is just cheaper to hold cash rather than pay the bank, they can build big malts but risk -- they looked at this and did a tiered system

where only part of your deposit that the central bank are subject to negative rates you could cut them significantly, 4.5 -- negative five -- -4.5%. >> that is what japan did. michael: they could go as low as -- stephanie: we do not have any more time. >> possible but not what the economy needs, the economy needs to chill expectations and that comes from fiscal policy only. stephanie: glenn have heard, will be a business school dean and michael mckee, i could figuratively live with them. will janet yellen talk about market volatility today? ♪

♪ stephanie: welcome back, you are watching "bloomberg ." boiling gesturing as is paul to dissect janet yellen's testimony the markets,t

futures are up, disney's numbers were great but the market had a mixed picture. the market is feeling concern about cord cutting, espn losing viewers. "frozen" is going to broadway. brendan greeley is here and we have to talk about janet yellen and what we are expecting today. gradual,shia saying gradual -- she is saying gradual, gradual. i putted on the risk excess meant in january, -- risk assessment. she went into great detail on what she sees on the downside, uncertainty about the value of the renminbi. and is doing it to country what he could do to exports and financial conditions in the u.s. she goes to the positive side, lower prices of oil may spur demand. not a lot of risk detail downward, a lot upward.

she sees slack in the labor market which is looking at the involuntarily underemployed. when she gets to the other half of her mandate, inflation expectations are important, now we are hearing it from her. looking at market based inflation which is much lower than they are modeling. she says it has to do with liquidity. she goes torket but survey-based inflation and says those are much lower than they have been in the past. on balance, she says inflation expectations have not lost their record at she is looking at it, the assessment has not changed, the detail is a lot greater. she looks at december and is feeling regret about december. she gets defensive. she says we have to put a rate hike in our pocket when we can, either gradual now or much more precipitous later on. she gets to growth, the question we are wondering, can financial

could -- have financial conditions affect growth? higher borrowing costs, i high price of the dollar. she says wage growth, looking back at the market, should support that with one caveat, the specific language, final domestic demand, she is looking at demand here without export, even that is suffering. changed,y, nothing has no change in march. implicitly, a lot of concern in her testimony on the downside. outd: every detail you put was on the dovish side, not want to the hawkish side. brendan: that is true and the path is determined, you could look at world interest rate predictors, a 0% chance in

march, if she does nothing, if she says it on glide, that continues. if it is dovish, that is no change and i do not think there is a predicted change in january of twice 17. dovish means nothing. stephanie: i am looking at the bigs index, up for the fourth straight day. even if it is not her job to respond to the market, the market is saying we are scared. paula: the market is saying we do not believe janet yellen and that is a problem. she is trying to tell the bears to not be so bearish and saying to look at the same data as you are and we are interpreting it differently. that is a problem, when everyone is looking at the same data and seeing different things. her job today is to explain what she is seen in this data and why she thinks they are still on this gradual path to more rate increases. now, the market is saying that they do not see more than one

rate increase in 2016 if that. david: what does -- paula: the plots are going to be adjusted. stanley fischer gave a hint of that in his speech. they are based on what the data is and that is changing. they do not know if the market volatility can affect what the fed does, even though the fed's job is not to respond to the markets, sometimes companies pull in their horns and consumers pull in their points in response to the market and become self-fulfilling. she will say that the oil prices are transitory, but the oil prices are causing a lot of changes in the market outlook and that will affect that. stephanie: four david mentions everyone is focused on that, is america?

does the real economy care about this because it is only 25 basis points? brendan: it is about wage growth and labor slack and she was explicit that has gotten better. to the points -- to their points, she says this is for the late language but important, she says rate hikes are not on a predetermined path. that means, even what we said in december, for rate hikes over the year, we are not committed we are lookingid at this and we will not dissuade you for market expectations but do not see any more hikes through december. david: this is a written testimony and now we get the question and answer in front of the house which is often more interesting. what will you look for and if you got to ask questions, what would you ask? brendan: just how significant thethat she sees transmission from uncertainty in

the chinese economy to uncertain in the u.s. economy? theave been talking about dynamic where uncertainty in china leads to lower commodity prices and uncertainty in other emerging markets. the u.s. has been relatively safe. she see any path if that continues toward decreased demand in the u.s. we are seeing a drop in next board but will they go farther. you will hear a lot from congress, importantly for our viewers, is exquisite conversation about auditing the fed and fed behavior. tend to bemonies less than economics and financial and more about the politics of the fed. stephanie: what would you ask her? as i look at corporate earnings, down almost 6% during the year, it is corporate america that increases wages and creates jobs, not a good picture. paula: that is a bad sign for her. i would ask her if she made a mistake in december. they are going through that all over again. she will not say they made a mistake and she say that we are

talking about gradual, but i audit thepoint about fed and the politics of the fed is important because they dovetail with what i am saying, the reason there is such a push to audit the fed and the reason people want to take power away from the fed is that the fed is a cocoon, trying to be more transparent but not communicating enough about what it is seen any data and why it is acting the way it is. the response to that should be she should do this more than twice a year, she should do it four times a year and do monastery -- monetary policy four times a year and three congressional staff more, more back and forth and then the markets could get in -- on the same page. stephanie: the more data the more confusion. twice a year does she come out and say this is how we're looking at the data and this is what the financial stability risks are.

and has an opportunity for congress to go back and forth with her. we need more of that and i think congress needs to do its job and not do so much grandstanding, have more follow-up to their questions and be more sophisticated. the only way that can happen is if the fed helps the congressional staff, along with them and understand what is happening in the world. stephanie: do you agree, the more she communicates the more she loses flexibility? brendan: i do not think that is necessarily is true, she is learning to communicate more. history tolong congress auditing the fed and us getting more information out of the fed. the reason we can learn best look at the book and have the testimony is because congress said we need to understand more and need to know what you are thinking and that data is really useful for us. it is not just useful to predict the fed's behavior, which is important, it is useful to understand the economy, the book

is a good picture of what is going on around the country. i would not say that it is just about janet yellen communicating , it is about the fed opening of the data it has so we can look at what it is looking at and make our own decisions about the economy, that is not a bad thing. david: today the house, tomorrow the senate. brendan greeley and polity wire, you. you -- paula, thank matt: there only was a little bit of market reaction. i have the 10 year graph and the yield came down just a little bit. investors buying into bonds a yieldut only 1.75% is the on the 10 year. futures, futures came down a little bit, we read session highs before the meeting, at gains of well over 1% on each of these indexes. 1861,e off a little bit,

16,049 the dow and the nasdaq futures still getting strong. the reaction has been muted. markets typically 10 to wait to what happens in the question and answered, they get tired of it by the second day because the questions are not as smart as the answers. we have a muted reaction as far as the markets are concerned. stephanie: a muted reaction because for the most part it seems like she is staying the course. to your point, when you said you would ask janet yellen if she made a mistake, honestly, could she answered that question? her job is to keep stability and if a person in her position says -- thatright, loops will create instability. paula: her job is to communicate clearly. that is why she tries to control inflation expectations. she is not communicating enough.

when the market does not believe the fed, that is a problem and if you look at the fed futures, the market does not -- no one believes there will be an interest rate change in march. now we are having doubts about june and there is a lot of talk about we are going into a recession and they just raised rates. there is something right -- wrong there, a huge disconnect from what the market sees and what they see and this idea i am trying to plan, we had an opinion about this on bloomberg view, if they got out more and interacted more with elected officials and their staffs, and with the public, then maybe we could get on the same page but now they are not on the same page. stephanie: i would like to go out with janet yellen and stanley fischer more. matt: numeral interest rate protector -- the world interest rate for checked are -- projector, there is a 0% chance of a march hike, now that futures are pricing, a 4%

chance, a 30% chance of a hike in december at the end of the in 2017,in february now we 41% chance. there has been a reaction, although incredibly muted. david: yesterday, a cut. matt: across the board and now it is zero. markets and one of the most read stories on the bloomberg terminal. the s&p 500 down nearly 10% so far this year with the average stock in the index now flat since 20,000 -- 2013. this has set up a frenzy of questions about the possible end of the bull market and wall street has begun giving clients insight into where they should invest if this is the beginning of a bigger downturn. let's bring in julie. let me ask about how worried clients are here the story i am referring to is goldman sachs, they trashed five out of six of

the targets they gave us for the beginning of 2016. citigroup did a survey asking clients how worried are you about a recession, do you think we are heading for a recession or is this just a blip on the continuation of the bull market and 57% thought it was the a blip by 43%. it was start of a bigger downturn, so clients are torn and that means for wall street to appease their client base they will start sending out notes saying here is where we think you should invest if you are worried about the recession, here is where you should invest if you think it will move higher. matt: let me show viewers a couple picks goldman sachs has put in the waste bin and one of them was the 10 year breakeven rate. we have a chart, goldman's target was up at 2%, essentially for inflation. we have seen that sink. another one was a currency that against the dollar and the yen.

goldman's target was much target -- was much higher. do you have this bloomberg screen, their target was much higher than the currency movement and we have seen the volatility in currency this year. julie, let me ask you, where d.c. investors -- where are analysts telling investors to put their money and defensive position or strictly worried about preserving capital? julie: the two firms have put out notes are goldman and barclays, goldman recommends stocks like facebook, alphabets or google, these are, michael you do not have to worry about so much about the dollar. the dollar has been a lot -- stronger than they anticipated. barclays was on the side where they think consumer staples,

health care, telecom stocks with high profit margins and low volatility will do better, like johnson & johnson, procter & gamble, kimberly-clark, household names to consumers recognize. matt: thank you. julie joining us with the stock story from bloomberg news. i gave her the dutch pronunciation first. more and a minute, we will break down disney's earnings, beating the street's estimates but the stock coming down, we will tell you why when we come back. ♪

and: i am in the green room we will take a deeper dive into disney's earnings, was the force with the company? the battle of the charts, will i beat mark?

♪ david: disney reporting earnings beating the estimates. cory johnson joins us. talk to us about the earnings because it looked to me like they blew it out and the stock went down, 3.5% in the futures now. the best quarter business has ever recorded on almost every front. you look at profits of $2.9 billion, double the massive profits from three years ago. a fantastic quarter driven by , merchandising activity, ticket sales and the suggestion that next quarter we could see a lot more of that and a spectacular blowout quarter. yet, concern there is a slowdown at espn in subscribers and

adapting to a new world of cord cutting spooked some longtime disney shareholders who made a lot of money the last couple of years. david: the one place they had a follow-up from last year in their earnings, was in media networks. part of it was cable and espn although that was on the cost side, not on the revenue side. cory: the cost for sports programming has been rising dramatically and disney has been the leader, driving the costs up because securing contracts with the league's and spending a lot more to develop programming and raw content of the sports themselves. they look at that as their key advantage. sports is a unique asset in a world of timeshifting and cord cutting because it is the thing people do not wait to watch -- advertiserses get seen and disney has decided to double down in that world and spend money to get all the

assets and keep them under the espn tent because they think that is a long-term value even as espn has seen some difficulty on the expense side. david: bob iger went out of his way to say they have seen uptick in espn subscribers but did not make the markets go better. cory: that is the long-term concern, while they got more subscriber for espn, they do not think that will last as more bundled packages offered non-espn. we have not seen that behavior in the marketplace. david: we will get tesla earnings today, give us a preview. you followed them closely. cory: everyone is fascinated by the idea of an electric car and elon musk being the thomas edison of our age but the proof is in the pudding and those are in the earnings results that come out today and they will tell us about what has happened with the model s as they make their transition to their station wagons.

the numbers have been getting worse as they have been making more cars, the gross margins coming down. they are part of the story. the company, you would think the more they operate and the more cars they made, the more profitable they would be. beenargins change have getting worse, down 16% last quarter you more cars they make. can they come near the big number they put up last quarter, we know what the production number was, what will the next quarter look like and as they lose more money with every car they make, you wonder what will happen now when they try to make more cars. will they get worse? the ultimate test of a business is how much cash is left over after you build your factories and make your long-term investments. that is free cash flow and the free cash flow numbers for tesla have not only been bad but getting a lot worse, the free cash flow numbers in the last quarter, $600 million in 13

weeks, i will be looking for that number. they are tooling up for a new car even more expensive, a lot of teasing about a model three car in the future. we will look for dates for that. david: that is cory johnson from san francisco. the battle of the charts coming up next. ♪

david: welcome back to "bloomberg ." my favorite part, battle of the charts come around three between matt miller and mark barton. mark, you get to start. mark: inflation's matters when jenny yellen testifies. the breakeven rate, the lowest level since march of 2009, 1.20%. the difference in yield between the u.s. 10 year. concern,ario draghi's

inflation falling to a record low level, the five-year inflation swap rate. breakeven 10 year has fallen to the lowest level since records begin in october 2013. where are the inflation expectations? matt: tell us something we did know. let me show you what i have. something you may not have been aware of. we call it the central bank bazooka, the other countries, euro in green with the u.k. in purple and u.s. and blue. their balance sheet as a percentage of their total gdp, 20% to 25%. look at the bank of japan. , that is% of their gdp what the balance sheet makes up. what do they have for that money , the strongest art to a year for the yen since 1988 and

negative interest rates, i do not know if they are getting what they bargained for. stephanie: we are not giving you a chance to reply. sorry. i really like you but i'm giving it to matt miller. david: a split decision, i like mark. the story of the day, no inflation despite all that is going on. stephanie: our producer breaks the tie. stephanie: home team, matt miller wins it. we will be back with more. when we come back, david's are most joins us for the top three. ♪

david: we are just a few more seconds away from the opening bell in new york city, welcome to bloomberg go. stephanie: listening to our floor director, we are here to

create a celebration and who is helping us? david zervos, chief marketing strategist at jefferies. joe weisenthal is also here. i can see you there flailing, matt miller also here. brendan greeley joins us from martian 10, a lot to cover but matt we take it back to you. --t: let's take it off with kick it off with futures. here, you see the numbers up 114 point and nasdaq futures still strong and s&p futures -- take a look at the graph, we have been climbing all morning and hit 8:30,n highs right before

before brendan greeley delivered us those headlines. the market is not disappointed, but it looks like they may have been gearing up for some a little bit more. as far as european markets go, we -- we see it strength there mainly due to the banks. has gained 14% right now. because of a report that they may buy some of its debt back and that is just a report. the bank has not weighed in at this point. take a look at oil and gold. to therelation of oil s&p has been pretty tight, this year. 4/10 now, we have oil up of 1%, $.12 a barrel it still only at $28.06 a barrel. andty amazing when the iea d.o.a. come in and say oversupply is more over than they originally estimated. that is where you see oil trading.

gold coming off a little bit, a leavened dollars. date, this market is a little more risk on. take a look at the 10 year yield, right around -- whenever the fed makes any kind of statement, you did not see a lot of movement, we are still at 1.76. as a couple of viewers pointed out, the yield to s&p 500 dividend yield and the 10 year is really at the highest point we have seen sense 2011, 2012. the world aave interest rate predictor -- world interest rate predictor. market,tations from the futures are not showing any chance that we will get a rate hike anytime this year or even

in february of 2014 in only a 4% chance of a hike in march, better than the zero we saw before the statement came out, but still very low expectations for rate hikes. let's get to the first word news. the supreme court has delivered a setback to president obama's plan to cut emissions from power plants. a five to four position block the epa until the final months of the obama presidency. two dozen states say the epa oversteps its authority. new hampshire may have been the end of the line for chris christie. the governor finished sixth in the granite state. he says he is returning home to reevaluate his campaign. he canceled an event that was scheduled for today. the man who killed senator robert kennedy in 1958 has his 15th parole hearing in california. he has been that's been

consistent over the years, saying he does not remember shooting the candidate at a los angeles hotel. he is serving a life sentence. stephanie: it is time now for the three stories that matter to markets. i warn you, david zervos just cracked his knuckles. hour, a nervous market we are watching, jenny a lead as she testifies before lawmakers on the hill. , sher prepared remarks says the timeline of rate increases will depend on whether market turmoil persists. let's start with brendan greeley. brendan: i was just a run it by a crowd of interns at the capital. janet yellen says the outlook for risk is still under -- uncertain and she goes into detail on the downside risk. how that playsat

into emerging markets and how it will eventually play into financial conditions in the u.s. and the dollar. also on inflation, something we have been watching, she is looking at survey measures of inflation and sort of wondering whether or not inflation expectations have lost their anchor. i'm thinking back is something we were talking about the last hour which is, is the head properly communicating in the markets? ist i see in the statement perfect communication. janet yellen is looking at the same data and saying she does not see any reason to disagree, so she is not explicitly saying anything. david: does janet yellen have anything to say to you? that you want to hear? david: i want to hear contingency statements. i want to hear if financial conditions were too tight and not in the united states due to some significant change in the

chinese for exchange policy or adverse event -- foreign exchange policy or adverse event, that she remains ready to fight that tightening with a withdrawal of the rate hikes going forward, until she can see clearer or bringing further out a necessarily going the other way. i don't know if you will get all the way there. keep seeinge just labor market improving? china, a volatility in the oil stuff, but we keep seeing the unemployment dropped. wages look pretty solid. david: i think the guidepost is really a late 1990's guidepost where we had significant emerging-market turmoil peaking in 1998 with a russian default in the end of long-term capital,

a banking crisis and the economy was growing at 4%. main street did not care, it had no effect. wall street felt like the atom bomb had dropped, and what the fed did is they cut rates in september, in october and again in the beginning of 99. even against a very strong economy. stephanie: get over it, trading floors, that is not what her job is to hold them nestled in her closing and make them feel good. david: i hear you, but -- is it systemic or not is the only issue and will it affect her outlook on maintaining price stability and the contracts of full employment and my guess is, you may be right, but our job is not to say what we think the right thing to do is, it is to say what do we think janet will do? she is a dove. joe: that fed easing in the late 90's had not held up pretty well

in terms of how people did. people solve them as babying the market that saw them as babying -- saw them as babying the market. would that be the right thing for the fed to do? david: that's a totally different question and i'm somewhat sympathetic to a little's view that too much handholding can cause a lot of problems, that said, that that just came away from the 2008 experience where they let the hand go and let lehman go and think everybody would be ok and it was a pretty ugly and game. endgame.me -- i don't think they are ready to just throw a bunch of wall street guys to the walls. david: the good news is, we get to talk about this more in 51 minutes because we will hear from janet yellen. let's go to number two, shares

of deutsche bank are the most in seven years on the european trading day. they're considering a buyback. the financial times say they would focus on senior bonds and not it's riskiest set. is aneral, this interesting question, if you are ceo of a company like deutsche bank and use your bonds trading think thatr and you is a good buy, why wouldn't you? david: you are a leverage institution and you have debt and you have a lot of assets and everybody runs and does not finance your assets, you will need long-term funding and that is why all these banks have the long-term debt that they do. to come up with their cash and pay up these debts, fundamentally, you believe you have long-term capital locked up and that is a debate that they will have to have inside of the

treasury of deutsche bank, and it's a debate that some people have fallen down on. we can go back to the drexel burnham days and it did not work. stephanie: trestle burnham is a different situation than deutsche bank -- drexel burnham is a different situation than deutsche bank. the german government is behind you and they will not let you go drexel burnham. david: do we have handholding, again? [laughter] joe: i do think it's interesting that outside of the deutsche bank, people don't bring absolutely everything related like all those cocoas, it is not just deutsche bank, all the european banks, everybody dumping equity. to miss a payment, it would not constitute a credit default. stephanie: there are less and less investors who trade credit default.

it was long portfolios using them as a tool to hedge against default. this is not about default. joe: it's about risk management strategy. david: it's a risk management strategy, they banks with large portfolios and dividends saying the risk manager says we have too much exposure to x, y z bank. the only way to do it is cdf. that is all that's happening. stephanie: it is significantly better than the corporate bonds of a high-yield market. david: then you satisfy your risk requirements with your risk managers. stephanie: number three, more poor numbers from private equity, this time it is carlyle fourth-quarter profits falling 57% thanks to lower asset sales. ceo david rubenstein says the market has little value to

carlisle, reporting results tomorrow. from mohamed el-erian to any other investors sitting next to us, it is all about patient capital. what is it? long-term lot of money and private equity -- long-term locked up money and private equity. joe: a lot of them talk about how they're invested in all these stories that have nothing to do with public markets and all of this growth, but in the end, it is hard to ask -- escape the public markets and everything is moving in the same direction at once, regardless of whether it's patient r private capital. whatever it is, it is hard to escape the volatility. david: some of the value of these companies, it is because of the asset inflation that came from central banks. david: we are -- we came to the end of that in the u.s. and we are seeing the europeans and the

japanese maybe not deliver as much as the market was expecting. it is not surprising that we have winners and losers. we are talking mostly about the losers because it is more interesting but these guys have had some pretty good -- stephanie: that is all the time we have for the stories that matter to market. david zervos and joe weisenthal are sticking around. we have a lot more to cover. futures are coming up, in the greens, we take a look at the free market. s&p down, nasdaq up. we've seen earnings out. we saw disney, air methods. the markets don't seem to be so worried about a slowdown. before congress today at 10:00 a.m., janet yellen. her testimony begins at the top of the hour. we will have that. ♪

vonnie: welcome back to bloomberg go. , dropping tond third place. global deliveries of bmw's namesake brand rose 7.5% to nearly 134,000 cars, lagging behind mercedes. 4%, but theose to volkswagen units still outsold bmw. -- forecasting more gains this year thanks to growing u.s. demand. heineken does expect volatility in certain markets. beer sales in oil-producing countries have been falling.

bp is planning for oil prices to stay low for the next six months. the ceo said he is bearish in crude and expects -- into a downturn sparked by opec's decision to keep pumping to defend market shares, prices are still 70% alone a 2014 peak -- below their 2014 peak. at a list if you look couple of the stocks in today's market before the open, about 15 minutes ago, actually more like 11 minutes. disney down 5% in the free market because of the disappointment with espn earnings. beat on the top line with revenue, but it messed -- missed on espn's growth and even though the ceo said he sought update at the beginning of this quarter,

it was not enough to calm investors. akamai is a stock that was getting a big boost because it is going to restructure the company into two different units, one of which will focus on web security, the other on media delivery. a lot of those videos we watch are powered by akamai. on the other hand, big losers today include solar city and a lot of other solar stocks are moving in sympathy because it missed estimates for deliveries and said it will focus more on making money that boosting revenue. you see the stock down almost 30% in the free markets. clean powerbecause has been dealt a blow by the supreme court. it expects the supreme court decision to be unexpected source of relief with the coal industry. peabody energy up 27%. up 1.5% and consol

energy up 9%. withwe come back, more david zervos on whether markets are, and a perfect storm of volatility. ♪

stephanie: welcome back, you are watching bloomberg go. we are watching bank stocks rising for the first time in eight days. is this part of of the perfect storm? three factors were brought to our show, yesterday. number one, concerns about global fundamentals and with that, misses. concerns about central-bank policies and lack of patient capital.

i want to bring back our panel, david zervos and joe weisenthal. is perfect storm -- is the perfect storm hitting the markets? >> some of it is thick elation but if you look into the banks. they have been rallying the past couple of years on remaining low and interest rates rising, and if the economic fundamentals deteriorate the way they have, you are seeing a lot more expectations of cost going up, especially in oil and of interest rates don't rise, those two factors are definitely it and everyone thought that trading could not get worse, but it's not looking like a great first quarter. joe: i think the most important thing he said yesterday was the second point, which is the questioning of central-bank efficacy.

that is the issue that i detected in a client base in jeffries that is the most -- discomforting at the moment. it started with the chinese did the devaluation, then it really picked up again this january, and i think that as people watch the end of the qe. d in the u.s. and they say that see the volatility in china and how the economic easing may have caused a bubble in china, they are worrying about how all the -- all of this can work as we go to the printing outcome which is where we have been heading for a while. david: we saw the efficacy of central banks, they are not doing their designated job very well and the other is, they are being asked to do a job that is not theirs. the point was made that i think it's all been put on the

shoulders of central banks. all kinds of problems in this world, lack of infrastructure and general lack of demand and we need to do something about inequality and maybe that is to be done in the tax code and all of that everything is being put on the shoulders of central banks. one question that i have about what's going on with the banks, it seems like there are two potential issues, what is concerned about another crisis, exposure, another concern that maybe the business models just aren't viable. be some hugel exposure that will blow a hole in their balance sheet and don't have been a profitable business lines anymore and they will need to change their model. not that there will be a huge bust, they just will have the profits that they do. >> if you look at the european banks, they would have faced these issues, anyway, just kind market.erated by the

they're not profit is zero, so i think they have some fundamental questions about -- and there are some legal cross in there, but they have questions about how do they get to profitability -- how do they get to profitability? stephanie: they sold off private wealth in the u.s., they will build it in europe, when? u.s. financial stocks as a ratio of how they are trading in price versus european financial stocks. 22 one, sotrading at it is just a massive overvaluation or undervaluation or -- how do you make sense of this? our u.s. banks worth twice as much as european banks? >> part of it is the difference in the economy. the share of investment banking activity in the u.s. is much higher than it was years ago and u.s. banks are taking a bigger

share of that and taking more in europe because the europeans are scaling back, so that is driving back a lot of it. takebanks were forced to huge write-downs, recap and the view is that in europe, they have not done that in the stem extent, so we are seeing the elongated version. david: we talked about that, earlier this morning. stephanie: michael moore and joe weisenthal, thank you so much. return, we break it down. ♪

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getting to fundamentals. we are not seeing overarching negative news out of japan or europe or oil driving things down. >> the move together. stephanie: we are also seeing earnings out in media companies. we had disney. an underwhelming report from time warner this morning. i want to turn to paul sweeney who knows everything about media. what is going on? they announced record earnings that beat expectations and year-over-year and they are down 5%. stephanie: cory johnson is with us in san francisco. i know he loves disney. he is a huge "frozen" enthusiast. i think what is going on here, the overarching theme for all the media sector here is cord cutting it what does that mean for the cable tv business? we saw it last summer.

people are concerned about the cable television model. if cord cutting is a phenomena, that is lower advertising revenue. people are still harping on that issue. anddid come out on the call say that we added some subscribers to espn after the quarter close. this is not a huge issue for us but the market is not buying it at the moment. david: what do they have to do? cory: that is a really key issue. fundamentally it comes down to how much money it will take out of the cable operations. lower rateibers at a that is not so good for them. there was growth of 3.5%. last quarter it was 5%. it is a big deal may be because of cord cutting and maybe because of cable companies.

fees, they do not continue to increase. it someday gets down to one or zero or less. the depreciation is the bread and butter of what disney's profits are from. star wars was great. frozen was great before it. thoseentally, affiliates were the best disney had. >> let's take a listen on the earnings call. >> the last couple of months, we have seen an uptick in yes tn subs, which is encouraging. we are also pleased with what we're hearing from dish with a light package that includes espn. the service appears to be growing nicely and proves very attractive to younger viewers in particular. >> that is the so-called skinny bundle. >> the concern is maybe espn is not getting the full seven dollars per month that they get from the big cable companies.

the concern is again, it comes back to the fact as cory mentioned, the real profit driver for the company .istorically has been used in investors are concerned about the business across the board. the concern is that they will not be part of the package. that is the fundamental concern. that there will be skinny bundles i do not include them whatsoever. less money would be worse but no money will be a lot worse. extent, aren't they dammed if they do, dammed if they don't? find a new way to distribute over the top in many ways. you know they say that is not the old way. >> you do not hear it from any ceo more than bob. he has embraced the notion that there is massive change. maybe our competitors do not see a benefitybe that is of him being on the apple board as well. bob is preparing the company for a day where cable might not the

the way that people watch tv and preparing ways to benefit even if it means less to be there. thatanie: is it a positive when you look at massive companies across industries right now, one of the biggest industries they face is because notheir big size, they are able to be nimble and you can look to media, technology, finance. is bob the outlier in terms of mega-ceos bucking the trend and leaning into this distraction? cory: i think he is that. you saw the performance in the team park is this, which we do not talk about much. it was really a strong business for them. about to get a lot stronger with shanghai disney opening up. this is a business he has done and initiated massive change. they bought marvel and pixar and have done take acquisitions and

really put those on their platform of rolling them out through merchandising and into the imparts in creating a much acre business for disney. that has all been driven by bob. >> time warner has come out with earnings while we were on the air. >> another mixed bag. share countlower but the revenue mixed and the operating income actually declined year-over-year. it raises the issue from a revenue perspective that, time warner is really levered to the cable tv business. they do not have a impart business and i do not have the merchandise is this that disney does. they are levered to the issue and we are seeing the stock trade down here. great cable networks, they are the basis of every big cable package, they could be at risk if we see the cord cutting accelerate over time. falling are seeing

subscribers. nowhere near the value of yes the end scriber's, but the second best in all of cable. when they see a turn down there, it is a shooting match. matt, do you want to chime in? matt: the s&p, 2014 lows. paying more attention to the markets. >> i want to go back to where cory just was. it seems to me it becomes a tale of two companies. turner, basic cable, and hbo. do these earnings give us any insight into that? >> an issue for time warner is hbo. argue that is the crown jewel of the company. take a look at the valuation netflix has in the market. hbo is a similar animal. >> hbo does not think that. >> exactly.

much better programming, but they would love to have the valuation. stephanie: why doesn't it get the credit that netflix does? >> it does not have subscriber growth that netflix has her that is what the market is rewarding netflix for. it is a subscriber momentum story. stephanie: so they do not get subscriber growth because it is actually coming out. to everything and already had with hbo. >> partially, the business model for the u.s. is the cable model. hbo just launched to go direct to consumer to compete directly against netflix. that is why on this earnings quarter -- >> is that why or is it because of all of the millennial stealing her parents hbo? .> activist interest >> yesterday when you look at slimmed it, jeff

down and took a very simple company. it is two businesses. warner brothers studio, high quality assets at the studio and of course hbo. the question is, should they be together. and analyst raised that question at disney last night, which i think was really strange. you think about a media company that really gets it altogether and weaves it altogether, it is disney. and analyst suggested maybe you should break this thing up, which is strange. but it is deftly an argument for time warner and viacom. stephanie: you break it up when you have got verticals that are failing. disney, theme parks, the studio, networks, you name it, firing on all cylinders. thing here they use one side to reinforce another. you have consumer products trayvon off of star wars. you have got dead businesses in there. thank you to cory johnson and paul sweeney. is not going anywhere.

we will dig into what he loves and hates. we look at markets. >> we are up across the board. are coming back up off the 2014 low. the dow jones industrial average down 16 points. the nasdaq is up almost 1%. take a look at u.s. bank stocks. european bank stocks have been a concern. the u.s. bank stocks are valued at twice that of europe in bank stocks. we are seeing good strength with with one and one third percent. aregroup up, so bank stocks here helping to lift the markets and really helping to lift european markets. if you look at deutsche bank, it is up right now only five are sharesut we see german of this morning 13 to 15% this morning. ubs up 4.3%. if you look at some of the oil

companies out because goldman sachs said they will first of all put on their conviction by list, but also, marathon, the four socks that screen the most favorably among all. if oil stays at a $35 range between now and the end of 2018, you still see devon and marathon down. take a look at oil and gold. 4.5%. down gold down 4% to take a look at oil and gold and i will show you the reason these stocks are falling. it is because gold futures are down in crude is down. crude was up earlier this morning about a half hour ago and it is now down 27.44 a barrel. let's go to abigail doolittle live at the nasdaq which is at occam my

technologies. >> thank you. the company beat fourth-quarter revenue estimates and announced a one lane dollar stock buyback and unveiled a reorganization of the company's up every -- operations into two units. bullish on mainly this. analysts have upgraded the stock to a buy. valuation is attractive. shares are cheap relative to the con. but the stock is down 40% over the last nine months on strong selling pressure that may be tough to reverse over the long haul. stephanie: thank you to abigail doolittle over at the nasdaq. up next, you heard me talk about it all morning, one of my favorite segments. david giving us his lovers and haters of the week. it is an omar to the upcoming valentine's day we will shine delaware janet yellen falls and why. tweet us. i would like to know if you david views her as a lover or a hater?

♪

matt: welcome back. speak to thell whole foods co-ceo and ameritrade ceo. welcomee: -- vonnie: back. twitter is changing its timeline . anticipated but could generate a backlash among most passionate users. jack dorsey's latest defense to invigorate. a billionaire sports mogul is

buying the largest branch in the u.s. on the markets for $725 million or no word how much it actually cost the owner. the range is 520,000 acres, the largest in the u.s. the owner of the british studio where most of the change bond movies were filled may putting itself up for sale. rothschildas hired to conduct a strategic review. that is the latest. stephanie: thank you. back now with us is david. jeffrey's chief market strategist. now, bloomberg intelligence analyst here yesterday, we had on david stockman. director,im, former and he set a recession may be a lot closer than you think. take a look.

>> a recession coming to the united states much cymer than anyone realizes because they are lagging and phony employment numbers put out every month. if you look at what counts, what employers are paying him to uncle sam daily, and payroll tax withholding, it has turned negative on a real basis after inflation, it is running in the last clutch release, -4.5%. that has always been an indicator that a recession is coming, that if it pullback is happening in the economy because the whole narrative about how awesome everything is has been wrong. think?ie: what do you >> it is a rough assessment. i will say i feel i am one of

the only people out there now still holding on to the idea of efficacy and even negative rate efficacy. turned into a very hateful place and we can see it in the price action. let me just say i love david stockman and i love reading his log. he is one of the funnies individuals out there. i do not agree with him at all. i love reading jim, but i do not agree with him here at we had a nice debate the other day. it does not mean he does not have a lot of interesting things to say. i think the risk on recession is lower than he does. but i do not think anyone can predict a recession. nobody can. what we can predict is what the fed will do. we can predict janet or mario. it has become harder to predict the europeans and the japanese and that is why we gave up on them last year. because we think they are not following the right path and

they are becoming unpredictable in their responses. i think janet will deliver a nice speech here that is my bet. i'm sticking with janet. i really do not trust the ecb right now and i do not trust the bank of japan. stephanie: you love janet and you hate the ecb? >> i do not hate them. i'm agnostic. i am trying to wait and see how influential the german contingent on the ecb is going to be. they were influential in december and caused a major market correction. >> you are optimistic. i showed earlier the screen which shows you economic surprises have been mostly to the downside. i want to show you financial conditions. take a look at this on bloomberg. everything from equity market indicators to u.s. money market indicators. you can see if i break out the graph here that financial conditions have weakened since the beginning of the year.

we are now at a reading of -.64. we are down below zero and have been since 2015. you have a former omb director talking about phony government statistics. it is a scary situation in the first place. going on heres with respect to the markets and the economy is exactly what happened to my extremely good friend, tony from staten island. he is a hotdog guy, a famous guide. what happens here is tony is a multibillionaire, selling just his famous hot does at one stand. he goes out and is selling them, can read the papers, does not listen -- read the papers or what any television. he makes so much money and puts his kids through college and

shows up one day and said, if i expand my menu and i put a new place in every one of the five boroughs, and i hire more people, what is going to happen? he goes to his son and asks his son for counsel. he says come you have got to read the papers. we are in a recession and the economy is tanking. don't you read the papers? he says, no. i will not do it. the next thing you know, the hotdog is this goes out of his necessity is done. we are talking ourselves into a recession. the consumer is doing very well right now. spots that are weak, however, there are other spots doing very poorly. manufacturing is arguably in recession. energy is in depression. it depends. but the consumer, most of the consumer industries -- >> there are more people working, they are making more money and getting a quick rake on their gasoline bill.

>> the most important economic indicator is employment. that is what we do here. set a lot of these jobs are not high. >> they are not, but it is that are than the alternative, to sit on a couch, watch oprah, and eat bonbons. to hate sord aggressively on the economy when we have as janet pointed out in her speech today, created 13 million jobs and driven the unemployment rate down 5%, got wage growth at 5%, got a lot of the amazingly negative things hitting this economy out of the system. no one will predict the next recession guaranteed, but you can have these guys come on with their views, saying recession, recession, and you will have them back on and they will be right because there will be one.

once every 10 years is reasonable for a recession. >> or it is very hard because oprah is not actually on tv -- that is my takeaway, ivor hotdog. thank you to rich and of course, david of jeffries. when we come back, we will go live to capitol hill as we await janet yellen's testimony. a♪

stephanie: we are minutes away from janet yellen who will be testifying before lawmakers on capitol hill. all of wall street watching. what are we expecting? final moments. what you want to hear? fanhat we will here, a huge of the chairman -- of the idea that the fed should follow rules and they should have to explain why they are deviating from it.

of is not a big fan policies. what i think we will hear is more explicit conversation about this. the more i read the testimony, the one line that jumps out at me, financial conditions are less supportive of growth. she is looking at credit conditions and the strength of the dollar and thinking this could eventually bleed into american growth and she does say minus imports is not growing as fast as it was a want to know from her just how significant that is, something you hinted at in your testimony. quite thank you for that. matt miller is at the desk. you for inviting me to the desk. i'm interested to hear what janet yellen has to say. dovish than the.'s would put forth. but still more hawkish than the

street expects. it will be interesting to see how she deals with the juxtaposition. the plots as we will have four rate increases. we will see how she handles congress. to her stride spirit she has been a dove for ever. it was a: for me, reminder we got and it is only 25 basis point. willis something -- that do it for us. i know you will stick with us because we are having the janet yellen testimony minutes from now. thank you for watching. we will see tomorrow. ♪

>> janet yellen is sitting down ahead of a committee.

we will go through her prepared remarks in a moment. good morning. watching chairbe yellen's testimony. the question section for fresh guidance on the fed's economic outlook and the plans for further rate increases. we already know from her prepared remarks that she believes the u.s. made further economic progress but recognize financial conditions have declined. as we await her live testimony, i want to head to the markets desk where julie hyman has the latest and how the markets every exit to her testimony and so far, we are seeing a rally in equities. futures tookgh the a leg lower after the testimony was released. we will get to that in detail and moment here we are seeing stocks hold up relatively well. the nasdaq leading advances today. leading frequently on the up and the downside, the s&p up by 1%.