from bloomberg world headquarters in new york, good afternoon. i'm betty liu. spotlight on janet yellen. the federal reserve chair telling congress it is too soon to tell if the market volatility will derail further. >> monetary policy is not on a preset course. evaluation of the likely impact of those developments on the economic and our ability to meet our employment and inflation objectives, those are the factors that will govern the future stance of monetary policy. betty: stocks are having a mixed reaction to her comment. after spiking initially, stocks dropped. the dow is flirting with going lower.

crude oil dropping below $28 a barrel. the fed keeping an eye globally on china. what impact is china having on their tech industry? we will speak with the former head of google china, kai-fu who helped create silicon valley in china. we are about an hour away from the close of trade on janet yellen day. has the latest. it was hard to read exactly how to interpret her comments. julie: she tried to tell that line and michael mckee kept saying the hippocratic oh, do no harm. it seems she succeeded on that front when it comes to risk assets and stocks today. she was watching the financial turmoil we have seen around the globe. but making it clear as she pretty much always does -- as she said, there is no preset

path for rates here. the dow has been flirting with negative. it did just a while ago. disney is putting pressure on it. the s&p and the nasdaq holding better today. if you look at the course of the day, there was a little bit of bouncing around, but it has been positive throughout the day. even if there was some level of volatility. nasdaq leading today, we have been watching to see if it will enter a bear market. the nasdaq not really getting to that level today as we see this bounce. avoiding entering a bear market. group,t performing bouncing back. a financials bouncing back. you are looking at hardware and equipment. financials also doing well after weakness recently. betty: what about the testimony on interest rate expectation? days, over the last few

we have seen a decrease in expectations built into interest rate futures on wirp on bloomberg here. the trajectory is expectations for the november meeting as priced into the interest rate shooters. we saw a big drop in those expectations. and a little bit of an uptick today. that stands, for november, 22%. you're not seeing 50% anywhere on the screen. there is a broad execution we will not see an increase in rates until next year. at, 1.71%. -- it hascontinuing been bouncing around quite a bit today. the gold prices have been negative today. down .5%. and oil prices, want to check on those as well, down .5%. betty: now let's get a check of

the headlines on the bloomberg first news. mark crumpton has the news. mark: the counterterrorism campaign in syria is actually helping the islamic state. they told the congressional committee that russia is strengthening syria's government. russia's campaign is worsening a humanitarian crisis in fueling eckstrom is him. -- extremism. north's missile launch and nuclear test last month. the sanctions would target pyongyang's ability to access money to develop weapons. some of hillary clinton's allies are making moves too short support for minority voters. an organization to expand voter protection,

turnout, and registration of blacks and latinos. it will be crucial to misses clinton's campaign as she faces from vermont senator bernie sanders who won the primary. the department of justice is considering legal action against ferguson, missouri. calling for changes to an agreement to inform police and court operations. -- the fatale doj shooting of a black teenager by a white police officer. individuals arkansas earned -- officials are concerned about the cost of implementing the reforms. global news powered by the 2400 journalists in more than 150 news bureaus around the world. betty, back to you. as we mentioned, janet yellen kicking off two days of testimony where she acknowledged the recent turmoil and global uncertainty. she largely signaled lands to the feds to stay the course. not expectn: i do

the fomc is going to be soon in this situation where it is necessary to cut rates. let's remember that the labor market is continuing to perform well. to improve. i continue to think that many of the factors holding down inflation are transitory. more reaction to the testimony and how it will impact markets and investors, we are joined by david joy, chief market strategist at america rise financials. you satisfied with what you heard today? david: i think she had a very delicate task to undertake today and walk a fine line. not to upset markets. on the other hand, she did not want to admit they made a policy mistake in december either. i think she did a good job of walking the middle course. betty: is the jury still out about whether they made a mistake?

david: yes. the data we have seen and the volatility the last couple of weeks would suggest clearly it was a mistake. economicof the conditions that precipitated the move, i think they were justified. and it was only a quarter point. i think the fed will come back closer to where the market is and move away from the estimated pace. betty: did this change anything for you? david: no. no, it didn't. i thought it was neutral -- betty: expectations are the same? david: we thought we would get increases. that is probably a little aggressive. it hasn't really changed anything for us. betty: judging by the mixed reaction in the equity markets today, where does that leave stocks? david: i would say that we kind of got by this testimony. it was sort of a nonevent.

betty: we have tomorrow still. she might have a hidden surprise. ,avid: always a possibility but i think the markets are back to where we were last week. growth in the market place. the pace of global growth. what is going on in european banks. they are sending an awfully scary signal in terms of the collapse of prices there. i think the markets are back to waiting for some evidence of stabilization either in oil or -- betty: does that mean a stable market from here on out? or do we have room to go down? david: i think the evidence of fundamental stabilization, the markets have more room to go. the s&p is down 12% to 13%. the market is not cheap. it is cheaper, but by no means cheap.

get good evidence out of the economy or energy sector, i think we could see another downside. to wasly to wash out -- was anything oversold or surprising to you? david: two things. at the start of the year, it was almost as if a switch was turned. and there we go. the other thing that surprised me is how localized it is in the financial sector. that is a little worrisome. that surprised me. betty: justified? david: i think it's overdone. especially in the u.s. market. i think financial sector trading, a lot of names trading around nine times earnings and dividend yields. they don't have exposure to parts of the world that will create loan impairment. it from what i can tell.

i think it's a little bit overdone. suggest you move cash off the sidelines now. but if you have the patience to be scaling in, i think you will be rewarded eventually. betty: what is the screaming by? phil miller said homebuilders and airlines are a screaming buy right now? david: i would say look at the consumer discretionary area. homebuilders. the auto sector will remain strong. and in financials, i think the big banks are in good shape and you get a nice dividend yield. they are trading at multiples, price-to-book value. betty: thank you so much, david joy, chief market strategist at a mayor price financial. in the next hour, one of the leading voices in china's tech world. , one of the countries

leading angel investors, joins us next to talk about the state of china's tech boom. and we will see three key earnings reports coming out after the close. i will focus on twitter, maybe the most important one in its history. tesla and expedia battling significant declines in the last few months. and a look at the nasdaq leading the gains today. ♪

betty: welcome back to bloomberg markets. i'm betty liu. first, a look at the s&p. it has been pretty solidly

higher despite the dow not. of about .7% even though oil is trading near the lows. the dow kind of flirting with going back into negative territory. it looks like we have climbed a little bit higher than that, but barely. powering upas been 1.3%. waiting for pretty big earnings on tech including twitter today. time for the bloomberg business flash. a look at the business stories right now. the foreign use of lumber liquidators has a low risk of causing cancer. from out released into the air by the flooring. the products can cause irritation. the studio that made james bond a global icon could be available to the highest bidder. 22 out of the 24 double a seven movies were filmed -- 007 movies

were filmed there. and a new facebook and dell deal could make it cheaper for you to enter the world of virtual reality. oculus rift come with a secular -- with a $600 price tag. to run games, it could cost even more. offeringand dell are steep discounts for the machines, sold for as much as $200 less than their normal price when purchased with an oculus rift. that is your bloomberg business flash update. one note, carly fiorina dropping out of the republican presidential race after the results came in from the new hampshire primary. fiorina, former hp executive, dropping out of the presidential race.

janet yellen talked about the concerns surrounding global growth. yellen: we have not yet seen a drop off in growth either globally i or in the united states. but we recognize global market developments bear" in. -- bear close watching. betty: helping drive selloffs around the world. all intoat perspective, i want to bring in the former head of google china. he is the founder and ceo of china's innovation works, the largest startup incubator. , thank you for joining us today. you are on the ground and based in china. are their fears about the china slowdown over loans? kai-fu lee: well, it is slowing down. overall economy has slowed down

a little bit as we can see through the numbers. .hina really has two economies one is the traditional economy. one is the new economy. tech, e-commerce, social networks, the consumer service economy has been growing dramatically. the question is, will the growth in tech be enough to offset the traditional -- betty: will it? kai-fu lee: growth is tremendous. but it is small. i think a drop in the overall economy is moderated, there will be time for it to be offset. i am not an economist. isty: the tech industry still relatively new in china versus some of the older industries like manufacturing, the industrial sector, and so forth. there are questions people have raised when they look at some of the stock rises of some of these

chinese tech companies, whether the growth might have gotten out of hand in these chinese companies. what do you say to that? kai-fu lee: absolutely not. not overall. companies like $.10 and alibaba are very powerful. betty: there are only a few of those. kai-fu lee: in the tech industry, when you become number one, that is really huge. it you are able to build off that and create a tremendous amount of profit. as we can see from google going to out for that, we will -- going to outfialphabet. the numbers are tremendous. if you look at alibaba, they had a one-day sale of about $14 billion u.s. and in the past chinese new year, they generated a $12

12 billion red envelopes. these numbers are just phenomenal. you have a market that is so large with about 750 million people using smartphones. over half of them are able to pay online any fees. there are no credit card or paypal fees. that will drive a lot of new business opportunities online. a lot of people listening will say that even though it is a very big market and there is a lot of potential, of course these companies will grow so big because the chinese government protects their market share. what about the facebooks and the googles of the world that want to get into the chinese market but can't because of censorship rules? kai-fu lee: there are different american companies. microsoft,ome extent they are doing very well. others are struggling. is, can thessue

american companies adapt to the chinese culture, environment, and requirements? the red envelope i talked to you about. if the company does not understand that concept, they would not be able to capitalize on that. it is a big thing in the chinese economy. for an american company to succeed, it has to reinvent itself for china. betty: i think american companies that sell things to chinese consumers, a lot of them have done well. i think what it comes to then, catering to the consumer on the services side is where it gets tricky. that is where intellectual property and censorship get in the way. is that ever going to change in china? it is lee: i think difficult for any -- there are only two large countries in the world.

the u.s. and china. in terms of having a large population and people that can spend money online. there are not a lot of examples of chinese companies doing well outside china. betty: for vice versa. kai-fu lee: a lot of it is cultural language and empowerment specific. i would not bet on american companies in china at this point. there are other issues as you mentioned, of course. china'saifu lee from innovation works. still ahead on "bloomberg onkets," here is a check how some of the sectors are performing. health care leads the way followed by tech. ♪

julie: it is time for today's options inside.

joining me is director of k km financial. dam, let's talk about today's action first and the sort of not across the board, in the wake of janet yellen's testimony. what are you seeing options wise in the market? what are people talking about? basically, you see volatility expectations coming back a little bit. not too pronounced but i think it's a bit disheartening given that the market was up so much more this morning. that six-hour pain reliever kind of wearing off and losing its effectiveness. now the markets are focusing on oil and trying to find any traction with earnings coming out after the close. you see quick buying on some of the sector names as we close the day. julie: we have been talking about earnings coming from twitter and tesla that can affect those stocks if not the broader market.

the company you focus on came out with numbers, texas instruments. and you are looking at a call spread here. now?.i. right sector andk at that i have been scouring the sector looking for outperformance. the semiconductor sector is down 14%. ti has done about half. ti movingok at forward, they are well positioned this market going forward. we see some stability. i like that they continue to dubai back and the balance sheet looks very solid. i know goldman sachs downgraded them a week ago but the stock is higher now. all those things combined right now, give texas instruments a higher probability of high-performance going forward. out to thego

timeline? what are the prices you're looking at? dan: short-term, there could be weakness. and i would like to define my risk. break back above the average, it pushes us back. i think it will take a little time here. downside.risk on the ,ulie: thank you so much talking to us about texas instruments and a little bit of a rally in the wake of janet yellen's testimony. we will have more "bloomberg markets" coming up with the latest check on where stocks are headed. ♪

the conference call. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voice mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. make your business phone mobile with voice mobility. comcast business. built for business. world live from bloomberg headquarters, you are watching "bloomberg markets." i'm betty liu. mark crumpton has more from our news desk.

big win in the new hampshire primary, bernie sanders is hauling in a record-breaking $5.2 million in just 18 hours. he used his victory speech to make a direct fundraising appeal to voters. he has funded much of his campaign on small, individual donations in contrast to his who hasllary clinton collected large checks at fundraisers. former technology executive carly fiorina is ending her bid for the republican presidential nomination. she finished seventh in the new hampshire primary. the state may have been the end of the line for chris christie's bid to the light -- bid to the white house. suspendingsaid he is his campaign, finishing sixth in new hampshire. he canceled a south carolina event that had been scheduled for today. we are learning details about what caused flint, michigan's

water crisis. they decided not to use anti-corrosive treatments. governor rick snyder once $195 million for the water emergency. it includes $29 million for the possible replacement of lead contaminated pipes. pope francis heads to mexico on friday. it may be the end of the six-day trip that caused the most contention. he will stand on the fortified u.s. border to show solidarity with those trying to cross it. is ames as immigration central issue in the presidential campaign. he is planning a cross-border mass. , record number of applicants more than 39,000 people applied. that is 5% more than last year. only one out of every 20 applicants will be accepted.

global news powered by 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. back to you. betty: markets are closing in 30 minutes. a quick note that the dow has just turned negative. it has accelerated those losses, down by about 60 points. disney a huge laggard on the index as well as ibm. nasdaq has been leading the gains, still holding onto those. abigail: stocks still remain higher at the nasdaq. stayed a bit as apple turned lower. qualcomm.ging one of the best performers is a tale of two cities. taking a look at the laggard solar cities. solar panel installations

dropped, missing estimates. guidance has disappointed investors. analysts seemed to disagree in a big way. we have morgan stanley with an overweight rating and a price of $104. and a sell rating with a seven dollar price target from axiom. it will be interesting to see what comes on a big bearish gap down as buyers seem to have all that disappeared. , shares soaring today after fourth-quarter revenues beat estimates. a $1ompany announced billion stock buyback and unveiled the reorganization of the companies two units. the streets mainly constructed here, analysts upgraded to a buy. a slight discount, but betty, the stock is down sharply.

more than 35%. strong selling pressure to overcome for the long haul. two key companies are reporting their earnings after the bell today. twitter and expedia. twitter, start with the site releasing a new feature where users will see the most first ratherets than in chronological order. part of the criticism drawn from twitter fans, will it change the struggling stock? sweeney joins us with more. let's bring up this chart here. this is perhaps the most important earnings report for twitter, right? in its history, very short history, as a public company. it shows the volatility has peaked at the highest level since the ipo. this is important earnings for the company. almost make or break.

jack dorsey has come back to lead the company as ceo. he has to instill some confidence in kent -- in investors minds that he can jumpstart user growth. they have 320 million monthly users which in itself is a big number. , relative,ll number and it is not growing. it is unheard of in a social media context. people arere spending more time on social media. they have to broaden the usage proposition. betty: what about this change in the timeline? i don't get it. what is it? paul: when someone goes on to twitter, they want to make the most relevant week to you show up first as opposed to the most recent ones. why is that important? i think

they are trying to make it more attractive to non-core users. i'm not a hard-core twitterer. i don't check it every five minutes. i open it up and i want to see the most relevant thing to me. that, presumably, it will make me a more engaged user. it may attract new users to the service. paul, is there a mistake looking at twitter is a social networking site? but should it be compared to facebook? paul: i think from their perspective, the answer is no. it is a tough comparison to make. it started out on a very similar trajectory. facebook just kept going. investors, the ipo investors, the growth stopped. they got to a core group of

users and were never able to take it to that next level. everybody is on facebook, it seems. twitter tends to be a very small selected group of users. they are very hard-core intensive users. some advertisers will pay a premium to get to those people. that they need to broaden the number of advertisers. very briefly. on expedia, that stock has gotten hit. paul: they traded off of the rest of the tech sector and internet sector. there are issues for expedia. they will put up solid growth, but they have the zika virus as something people are concerned about. how that will impact business. travel to latin america. marriott got together. what does that mean when expedia is negotiating room rates?

it clearly got caught in the downdraft of the tech market. betty: paul sweeney from bloomberg intelligence. we want to mention another company reporting earnings. not just expedia and twitter, but tesla. the car company is battling pretty strong headwind. including cheap gas prices making electric cars a lot less attractive. it sent shares losing about one third of their value in 2016. has less shared details of the upcoming model three that will sell for $35,000, bringing the car to the mass market for the first time. joining us is bloomberg intelligence senior analyst kevin tynan. even with the stock slump, let's bring this chart up that shows the short building up on tesla. even with the stock having lost this much value, the short seems to be at a high?

with going on? on?hat's going kevin: gas prices are low, and when you think of tesla's products and their product portfolio, this is not just a bet on new technology. if you think about a flight to quality and a flight to fuel in the automobile industry, this is not just going from 20 miles a gallon to 80 or 100 miles a gallon, this is a new way to propel the vehicle. to thate implications in terms of the infrastructure. do you have a charging mechanism at your house? at your office? there is range anxiety. plug-ins less or attractive. doesn't it make it more

attractive when you're talking about a $25,000-30 $5,000 car? $35,000? kevin: i'd be interested to see how it drives. betty: are you calling it a unicorn? kevin: the model s, when you look at the base price and the revenue contribution per vehicle , thathey are loaded up price is significantly higher. close to $100,000. cheap cars come cheap. tesla has a reputation for being a premium brand. i'm not sure these are going to be vehicles that will be very impressive at the $35,000 price point. betty: isn't it possible? it's clearly possible, because others are doing it. kevin: anybody can do it and

they can sell it for whatever they want. ?hat does it do you can build anything and sell it for whatever you want. it certainly can be done. the giga factory can be a big part of that. remember, you're doing that in the light of sub $30 oil. when you talk about cash burn, right -- what are their margins right now that tesla is getting on a model s? chemical deserve that margin if they go to a $35,000 model? can they preserve that margin if they go to a $35,000 model? i think it would be very difficult. it will be very difficult for them to sell. when you think of what it takes

them to get a $35,000 vehicle and sell it at a profit, it will be practically impossible to do. it certainly won't be initially. of bloombergtynan intelligence, our senior auto analyst. we will bring you complete coverage of twitter and tesla earnings in the next hour. but much more ahead on "bloomberg markets." janet yellen facing congress despite rocking the financial markets. don't think it will be necessary to cut rates. monetary policy is not on a preset course. that it would be necessary, obviously the fomc would do what is needed to achieve the goals that congress has. ♪

betty: good afternoon and welcome back to "bloomberg markets." a quick look at how the markets are trading. the dow was the one to go negative first and the s&p is just about at that level. we have come off of the highs of the session and it looks like we may be headed towards a mixed close on a day when fed chair janet yellen finally gave her testimony to congress. the first time she has spoken since the december rate hike. if she is talking about the labor market. yellen: we took one small step to raise short-term interest rates but continue to have an accommodative monetary policy which we see as consistent with further progress in the labor market. it's not that we are trying to

reverse progress. even with modest increases and interest rates, we want to achieve it precisely because we think all of the unemployment .ates are at levels we want to see more progress. betty: joining us is joe weisenthal. it feels like these days, the labor market might be the only bright spot we have here in the u.s.. joe: you are absolutely right. measures a try to gauge how will the data is coming in for expectations, the data on the labor side keeps expectations. everything else has basically been negative. that is important for the fed -- half of itss mandate is full employment.

of the biglice spectrum of data, but it is uniquely important. betty: that's right. there was another piece of data that came in in the last few days about the number of people quitting their jobs is at the highest level since 2008. that is a sign of economic confidence. assign you have money, savings, you can get another job. sincet its ties level 2008. especially given the volatility in the market we have seen since august. it generally measures economic and consumer confidence. it has not deteriorated too much. it is kind of a measure of economic confidence, i would say. it's holding up. betty: it is. how do we match that with the lack of confidence in the markets? , sort of,is the trillion dollar question. something has to give.

either the labor data will start to deteriorate and the consumer will take a hit. or the rest of the economy will bounce back. it's hard to imagine that we continue to have weakness in the market and weakness in the industrial areas. and the labor numbers are fine. betty: exactly. i know you will be talking about janet yellen's testimony on your program. watch the second day of testimony tomorrow as well, 10:00 a.m. eastern time as well. much more ahead on "bloomberg markets." the close of trade moments away. the dow is lagging right now, down almost 80 points. disney, ibm, boeing some of the big laggards today. the s&p is barely holding on in the green. ♪

betty: welcome back to "bloomberg markets." in 10s are closing minutes time and stocks are declining for the dow and now the s&p. julie hyman has more on the market check. julie: another bouncing and rocking session. it we should be used to this by now, shouldn't we, that a? betty?ldn't we, the dow has been a laggard and now deeply in the red. the s&p just taking into the red and the nasdaq hanging on for dear life. over the course of the day, it has been bouncing around quite a bit but managed to stay above this line. this is the zero line, so to speak. the unchanged line. what is this push and pull? what has changed over the course of the day?

health care still maintaining its gains. that is why the nasdaq is doing a little bit better. materials falling along with copper and gold prices. turned negative. industrials are the biggest drag in the s&p 500. stocks like boeing, 3m, caterpillar pulling back. if you look individually, you'll see those declines. they are putting pressure on the dow. and there is the continuing decline in media stocks. yesterday it was viacom and 21st century fox. now it is disney and time warner. concerns.s causing both of those stocks in the red. i want to point out we have been seeing rates rise today. note, they gain in

the yield for much of the day, now they have gone away. we have seen money flowing into treasuries and out of stocks. 1.7%, the lowest in a year. oil prices as energy stocks lag. those losses getting deeper as well. it is the fifth straight losing session for wti. betty: breaking news on the corporate fronts. the financial times is reporting the pharmaceutical company maker of the epipen is expected to announce a takeover of a swedish drug company called meta. -- called meda. the stock has been higher earlier. it is now trending a little bit lower. ae company is set to report

takeover of sweden's meda. another drug merger in the works. on janet yellen's testimony. oil continues to pressure the market with prices falling again today. michael regan. make sense of this today. mike: i wish i could. betty: and five words or less. mike: leave me alone. [laughter] if you had one eye on janet yellen, you probably had the other eye on oil. a big spike after the inventory report showing a decline in inventory. but people just not buying it. it's a real turning point. they believe it is a temporary situation. oil todayd not track but the general shapes were there. betty: is that a good sign?

like the correlation between oil and stocks is a little bit looser? mike: i think it is still there, but a little looser. energy shares seem to have put a temporary bottom. they weren't leading the market down by any means. anadarko cutting its dividend. not really causing too much distress. most people expected that is going to happen. the most fascinating sector right now is bank stocks. has anrg intelligence index of the biggest investment banks around the world. literally all of them are trading below book value. meeting people do not believe they are worth the value of their assets. betty: surprising. huntingr value investors, it will make them salivate. betty: a bonanza for them. mike: people have said that, but

they keep falling further. people saw value in energy stocks throughout last year and it ended up being a bit of a value trap. there is a big disconnect between what executives that banks are saying about the credit cycle and what the bond markets are saying. a lot of people believing the -- shares seem to indicate investors are not so liable on what they're saying. betty: that is it for "bloomberg markets." and aid you miss is next lot of earnings rolling out in the next few minutes. ♪

alix: we are moments away from the closing bell. weisenthale .

[closing bell] alix: u.s. stocks erasing a rally. joe: what'd you miss? scarlet: market turmoil could throw the central paying -- central bank golf course. leadingks are on the edge of the latest selloff. balance sheets are stronger than 2008. lehman brothers former cfo joins us. alix: twitter and tesla report earnings this hour. we will break down the earnings. scarlet: we begin with our market minute. the dow losing ground for the fourth straight day, the longest since late august. the nasdaq outperforming a three-day decline. jenna