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 yellen last spoke the dow has dropped 17

points, s&p has lost 10%, kbw bank index down 20%. alix: that puts it into perspective. the banks are in bear market territory. it was the theme starting in australia today. those stocks sinking into a down market. closesocks, the stock lowest level since july 2014. a lot of weakness overseas in that arena. moving to europe, a different picture. you had a rebound. euro stocks rebounded from its lowest level in two and a half years. games.e the dax making having the best a since august. the question being was this a relief rally, we are so oversold you have to have some momentum to the upside. joe: looking at the treasury

market not making too many waves they are in either direction. increase, 10eld year ticking down. everyone is concerned about that flattening of the 10 year below 1.7. as it gets closer, we see the yield continue to go lower. alix: the most flat since 2008. that is what i keep hearing. you are seeing direction in currencies. scarlet: the yen continues to strengthen. moving past 114, the highest since 2014. there is a growing risk they could intervene to sell yen, to cut rates. that risk is now there. joe: that last rate cut doing the work. scarlet: it has not delivered the right of fact.

alix: does it actually work? i want to take a look at oil. these guys diverged a little bit. oil had a wide ride. inventory came out and was bullish. was still see there over 500 million barrels of oil stored here. brent was higher. copper, to highlight biggest two-day drop since september. it was behaving better but the oversupply worries keep adding on. will allow them to import more copper. scarlet: those are your market minutes. let's take a deep dive into the bloomberg terminal. alix: two-year versus five year yields. this comes from stephen england . the decline is much deeper than

we have seen in the two-year yield. we have seen a big shift in expectations for what is going to happen over the longer term. he is like why? have reduced expectations for demand, or or global the fed is going to have to hike more and diverge more from other essential banks. this is saying something about the u.s. economy. joe: moore signs of flattening regardless of where you look. i want to look at the danish shipping global giant. one of the largest ship in the shipping companies in the world. a bellwether for the global economy. they say world trades have not seen it this bad since the financial crisis. they are getting slammed on oil. the stock plunged. look where it was in march of

last year. it is down 52%. how quickly the view of the world economy has deteriorated in less than a year. oil, all kinds of other stuff. they cited that today. thatare gigantic ships ship everything. scarlet: that ties back to the china story. joe: all these factors are slowing trade hitting this one company. scarlet: you mentioned how financial stocks are in a bear market. u.s. financial stocks have nothing when you compare it to european banks. this is a ratio. the 10 year yield at a 52-week low. hold on. that isthe ratio trading at a to-one ratio, a record high.

there we go. farpean banks down 17% so this year. it reinforces concern of their capital levels. deutsche bank facing questions over whether to make good. joe: it's speaks to the divergent path of the financial institutions in the u.s.. in europe american banks really took a hit early on and then have been improving where europeans have have this slow drip of write-offs and losses. scarlet: mile is going to buy buyer -- myland is going to meta. this is a creative deal that will add to earnings. it is going to be buying this at 165 per-share.

it is close to announcing this acquisition. as the news crosses. you can see these charts and more on twitter. now, carling us riccadonna. what's your take away? carl: she is not showing buyers remorse for the lift off. she is not signing -- showing signs of turning. she is a minimal to a slower toed but she is not wavering the degree the financial markets are wavering. i think she tried to shake the markets and say all is not lost, look at what the economy has going for it. spending. out auto housing is performing well.

the government spending will help as well. you look at the stock market since the start of the year, things look bad. alix: what does she say? the: she is attuned to depressant effect on the economy from financial conditions and the selloff inequities, credit market spreads and other factors. however, she categorized in a way she said if these persist they may have an impact on the economy. that is different than saying that is the upper end of the applecart. not seeing a sustained impact which drawls a parallel back to what we saw in late august and tighteningmber, this

of financial conditions but not a sustained impact on the economy. alix: just to talk about the market reaction, you can take a look at the function -- it doesn't seem like janet yellen did anything to say, to our four rate hike scenario. we did see them go down. we only see 29% likelihood of a fed hike. carl: she will let the data accomplished that, not try to do it herself. that will happen if her forecast is correct and we see job gains, wage inflation. beingted the upside risk improvement in the labor market and faster wage gains. , oncet is materializing ,e get out of this soft patch

market expectations will create back in the 2016 rate increases. joe: there has been more chatter about the idea of negative rates that could be in the fed toolkit if it needed to ease again. what did she say? that.she was asked about this is a fed not looking over their shoulder at this point. they are slowing down the pace of rate increases but not looking to reverse course. she views it as a tool in her toolkit. , she highlighted we don't understand how the u.s. financial sectors plumbing would operate in such an environment. it doesn't seem like a high priority. the more available options would be one signaling fewer rate increases or no rate increases at all. or revisiting operation twist, which is a long ways off or

revisiting quantitative easing. those things would be more likely than moving into negative interest rate territory. scarlet: thank you. we do have breaking news coming out. i start with amazon. the company authorized -- authorizing a buyback replacing a prior buyback of $2 billion. we will get some management shakeup here. weeks -- naming window wendell weekes to the board. amazon shares arising in response. speaking of buybacks, fiscal and announcing a buyback of an increase to its stock or purchase. as for its earnings for the quarter that ended earnings per share of $.57 beating the

estimate by three cents. gross margin was 64.2%. analysts are looking at something under 63%. by 6.8% inflying up after-hours trading. alix: coming up, our banks behind the recent selloffs? we look at how they are stronger than they were in 2008. ♪

mark: bernie sanders victory in new hampshire is paying off. after a big win in the primary senator sanders is holding $5.2

million. he has funded much of his campaign on small individual donations. that is in contrast to hillary clinton who has collected large checks at fundraisers. republican candidates side is getting smaller. carly fiorina is entering -- ending her bid. it also may be the end of the line for chris christie. to supporters who requested anonymity say the new jersey governor is suspending his campaign. health and delaware hel officials have confirmed zika virus in their states. more cases will probably show up . federal and state officials say cases have been confirmed in 13 states in the district of columbia. we're learning new details of what caused the flint michigan water crisis. officials were worried about

bacteria so they decided not to use and the corrosive treatments in the water pipes. scarlet: we have breaking news. tesla reporting its results. let's talk about fourth-quarter revenue. than what analysts had anticipated on a non-gap reporting what points five $7 million. revenue coming in lighter than anticipated. for the fourth quarter the adjusted loss per share was $.87. the range among analysts was fairly wide. anything from a loss to earnings $.45.pence -- 30 loss of 13es with a since the year before. in terms of margin coming in at

18% for the fourth quarter analysts anticipated a 22% gar -- gross margin for the time. vehicle, the unveiling will be march 31, the more affordable vehicle, $35,000 price tag for those who cannot afford the model x. alix: we were talking to andrea james who have the price on the stock and her key was gross margins over 22% was going to be the money growth margin. adjusted growth is not doing the trick. at $4.5 million. i want to bring in cory johnson now from san francisco. andare skeptical of tesla its ability to have free cash flow. what did you learn? cory johnson: they didn't really

-- release the full statement. they don't have to. they released an annotated version. we don't actually know all the things that went into the statement. the gross margin conversation is interesting. the more a company runs its factory the more efficient it should become. they can run the factory more often. here we suggest the opposite. a company running its factory at the highest capacity it ever has, gross margins are increasingly worse levels. we already know they lose money in cars. but the old joke about losing money, making it up in volume, they are losing more money with more volume. the stock is trading down 4% at after-hours. we will have other growth stocks. as far as the model three stuff goes that was a deadline they

pushed in may. they have missed a lot of price targets over the years. anhaniel weiss put out incredible report, a magnet -- magnum opus, listing all these issues with tesla, and six things he has called exaggerations from tesla. i will believe the price when i see it. i believe these numbers now. scarlet: thank you. we will continue to look ahead for the tesla results and we anticipate twitter results as well. longer buyinge no hold investments. they have become trading vehicles. bragg, banks in the u.s. and europe are driving the latest leg of this selloff. they are actually strong will fundamentally than they were.

is there pessimism justified? guest: they are some of me quite it -- from a credit point of view. the issue isn't that. the banks are no longer widows and orphans. they are not things you put away in a portfolio. they are under continuous regulatory pressure. they are easy prey for attorney who ares and officials aspiring politicians. they have gotten rid of all the low hanging fruit. they have cut compensation. they are still not beating their costs. that is hardly an argument that says these are things you want to own. they move up and down with the cycles in the economy. >> the argument is not that there is going to be some big , just that the business model is garbage these days?

guest: yes. that is as good way to characterize it. joe: that these are just not particularly profitable businesses. guest: garbage was one of those technical terms. you are right. i was involved in a survey of managers,rtfolio investors who cover institutions around the world. there was a believe the banks were not quite be able to be the cost of capital over a five-year time. . not a widow and orphan stock. alix: we have the chart to prove that. we have a gap in 2014 from our oe and 1.39% of 2020 -- 2020.

the banks are not able to generate those kind of returns. is the market repricing to this gap? it is certainly the bank atif an analyst with looking the banks today will they be worried about? that rains are going to rise. the banks have been hurt a low interest rates. they are worried about the disruption in the marketplace. typically it doesn't. the risk that the economy flipped over. if the banks are trading the kohl's against macro economic cycles and they are uncertain the banks are going to get hurt. what you are seeing is more fundamental issues. when you look -- when we did that study, what we found was a belief regular trade change was

going to continue. poor jamie dimon. he can't adjust his business model as fast as changes going on. that is one of the reasons you see the banks lagging. scarlet: and one part is fixed income commodities. it is the problem child. normal looke new like going forward? alix: the charges looks really ugly. that says the survey -- these are supposed to be the experts. fixed income is going to grow. at the sign time the survey showed that capital markets was going to grow. if the fixed income markets are solid, what is happening is the yield on total market capitalization for the banks is

dropping and we are seeing that because banks no longer can do proprietary trading. they can take as much risk. derivatives is under pressure. larry fink is complaining about lack of liquidity. part of this is larry, pay more and you will get the quiddity. scarlet: all right. we'll be back. ♪

scarlet: breaking news from twitter. it beat analyst estimates. revenue coming up slightly higher at $710 million.

that is where the good news ends. in terms of monthly active users , 320 million monthly active users, the same as in the third quarter. no growth for twitter from the third quarter. in terms of the outlook, revenue to $610growing million. that trailed estimates. quarter earnings before all these adjustments was $191.4 million. coming in ahead of estimates, it's hard to overlook that. on the high-end coming in at $610 million, estimates were for six or $27 million read also missing on the top line estimates for the first quarter. and ugly report for twitter. we will monitor these headlines as they cross. twitter shares falling 13% in

after-hours trading. ♪

mark: let's get to first word news. after a big win in new ispshire, bernie sanders halloween $5.2 million in 18 hours. he has funded his campaign on small individual donations. that is in contrast to hillary clinton who has collected large checks at fundraisers. the campaigns says in syria is helping islamic state. a u.s. envoy told a congressional committee russia is strengthening syria's government. he noted russia's campaign was worsening on the two-minute hearing crisis in fueling extremism. the islamic extremist group boko haram blame for 20 suicide

bombing in nigeria. 56 people were killed and another 78 wounded in tuesday's blast. they were carried out by two females at a refugee camp which houses 50,000 people who have been driven from homes. turkey's president is firing back at the win for its demand its country open borders to more syrian refugees. turkey has accepted 3 million refugees great most syrian. he's accusing the yuan of being an effective when it comes to the crisis. global news for hours a day powered by our journalists and 150 heroes around the world -- journalists around the world. recapt: let's get a quick on how markets close. janet yellen induced a rally but it faded with the s&p closing down. nasdaq a three-day decline. we got breaking news tesla, earnings coming in better than

anticipated. the adjusted loss was worse than anticipated. in terms of revenue that is missing the mark. $1.75 billion on its non-gap bases. thesempany did say it is number at -- it is these vehicles delivered for the full year. the consensus was for 36,000. shares rising 5%. alix: not so good news for twitter print stock plummeting in after-hours trading. it has never dipped below $14 and is currently trading under $13. monthly active users coming in at $320 million, no change. you had a first-quarter revenue guidance coming in.

been $627ate had million. scarlet: other breaking news, cisco was a company that beat analyst estimates with profits and sales margins for the quarter that ended. it added to its buyback. you can see the share climbing 8%. amazon announcing it plans to buy back $5 billion of its own share, replacing stock for a purchase program authorized in 2010. shares in amazon also higher. let's get a recap from cory johnson. you were focused on the free cash flow number for twitter. we didn't get the details on that. tell us about the monthly active users number. tesla.s focused on if you look at the slideshow that will accompany the

presentation a conference call they don't get into decimals but it looks like the u.s. users for twitter, 64 million, debt to 64 -- get to 64 million. for the first time twitter losing users in the united states. international they made up for that. growth was flat. user growth did not happen for the first time ever at twitter. that is bad news for this company. have monetized a little better. none the less the decline in users slightly, the lack of growth. you can care that -- you compare that to facebook linkedin, twitter, twitter has the smallest audience. they have the most room to grow. they are not growing at all. 4.5%.ve linkedin growing you have facebook growing at 3%.

twitter, facing the same universe of people as every other social media company, unable to grow users at all in this quarter and lost users in the u.s.. that is a great concern even though they are monetizing a little better. joe: on this issue of number of users, not good. they talk about all these users were not their core users. how does that look? johnson: they have given us information during the conference call about daily active users that we don't have a good metric to monitor who are the people who are most important. revenue starts to tell us that story. marketers are more effective at using twitter. they are paying more to reach those people who have some kind of influence. understand, the cynic says of course they will tell us it doesn't matter when it user growth slows but it is a

reasonable argument. growth, it is declining in the u.s.. it nothing but a bad sign. bloomberg, the ceo -- the coo twitter will be joining us. alix: what did you miss? the great recession of 2008. roger farmers. >> face for joining us. tell us about your research. decline have a significant effect on the real economy and employment. tell us the just of your work. guest: that is absolutely right. if you look at the facts, i find that from the 1950's through now and even before, the stock market is a significant factor in helping to predict future

recessions. if the stock market growth by 10% you can expect unemployment to be three percentage points higher than it would have been in the absence of the drop. that raises -- joe: is it a predictor of what happens with employment rate or does it actually cause it? to management of companies, does it cause the decline? guest: that is a really good question. imagine 2 scenarios. one would be imagine that you watch the weather forecast every night. that helps you decide whether or not to take up the umbrella. statistically the weather forecast predicts the weather. it would be much help if you wanted to change the weather. someone dropsio, a cigarette but in the forest in

the middle of a dropper that could lead to a forest fire. dropping it caused the forest fire. in that case, you have a significant explanation which is change. i believe the stock market, unlike what other believe, is not like the weather forecast, it is like the cigarette in the fourth. as you allude to, the reason is a wealth of fact. scarlet: can you delve into that more? people end up lose -- losing money they are not spending? guest: exactly right. ,f you are a 65 euro couple your 401(k) drops by 10% and goes back up again the next day, you're not wait to do much. if it drops by 10% and stays down for three or four months you might decide not to take that cruise you are going to take. you might decide you can't afford to put money into your

grandchild's college fund. you're going to cut back on spending. challenge. joe: what do you know, what can you say about what we are about to see in the economy? we have had a lot of volatility. some say we are in a bear market, at least large sections have declined quite a bit. do you see rough times ahead due to what we have seen since august? guest: things have been flat for a while since the end of qe3. the markets have been bouncing around a lot. i think a lot depends on whether declines remain consistent, whether the market comes back up again. i don't see other signs of a .ecession it is not looking good.

i would be very much on hold at the moment. look at a chart that encompasses the last couple of years with the fed and its stimulus, what roger has noticed is you have the stock market stalling here as the fed pursued different forms of this quantitative easing. the market basically stalled. one popular idea, the stock market is dealing with the aftereffects of stopping is quantitative easing program. guest: i think that is correct. if that were to happen it would be a bad sign. we are waiting of course to find out what happens with interest rate policy moving forward. alix: thank you for joining us. great insight. scarlet: coming up, janet yellen

reiterated it the idea to raise rates gradually. a quick look at the shares of three big tech names. risingaining, cisco earnings and profit, beating estimates. ♪

scarlet: it's time for the bloomberg business flash. eda forill buy m

$9.9 billion. they first tried to acquire it in 2014 and the offer was rejected. shares falling in the after-hours trade. alix: tesla posting earnings that missed at smits. $.87 a share. analysts jacketed a 10 since per-share. predicted it to be at $.10 per share. scarlet: and twitter growth is flat, down 3.6%. 20 monthly users -- 320 million monthly users. that is your bloomberg business flash. let's move ahead. yellen's testimony to congress earlier today, she remained dovish and suggested they may delay rate increases, not abandon them. like i don't think it's going to

be necessary to cut rates but monetary policy is not on a preset course. that that would be necessary, the f one c would do what is needed to achieve our goals congress has assigned us. scarlet: now the three main takeaways from her speech. the possibility of a fed rate cut -- we were thinking along those lines. it has been steadily increasing. guest: it's interesting how high the probability has gotten. workan go on our great function and make these charts yourself. we are not seeing a greater than 30% probability that the fomc cut its rates by its september meeting which would have been unheard of by a few weeks ago. you heard her say that we don't

anticipate we're going to have to cut rates but monetary policy is on a preset course. alix: there were all these charts going around of the central bank's around the world that tried to get on zero and went back. everyone said this is her worst nightmare. markets think she will not be able to avoid that. guest: it is tough. only one central bank has done it, that was the fed and they needed road were two to do it. alix: another sign, if you take a look at the curve for euro dollars, how much you can borrow in dollars. that break significantly coming down. guest: this chart is striking. you can see the red line was where we're at it the end of 2013. it came down a lot in 2014 and in 2015 it came down a bit more.

wet in the last six weeks have had more curve flattening and we had in all of last year. that goes to show how big these markets move. joe: just consistent with everything we have seen around the world. the plunge and financials, all this stuff. a dramatic repricing. not unlike what we have seen last year. guest: you her about that all the time. alix: if the market has to replace quickly, the fed mines -- what kind of volatility will that create guest: in the market? guest:it's not clear. obviously they hiked in december . the curve just cap flattening.

environment would do much to longer-term interest rates, they could keep falling as investors judge the fed. charge, this has to do with what options are telling us about inflation. but do you see here? guest: this gives us context why the curve has flattened so much. you have different inflation rates. the y axis is the option premium to hedge against inflation higher than those rates. you can see over the last few years, there wasn't much change in the cost to protect against inflation. in the last six weeks we have have had this big move down across -- joe: to help viewers, you look at that 2% number on the x

access, that is the strike price if we have 2% inflation. we have seen the big drop from the orange line last year to what we have seen this year shows how much less it costs to hedge against inflation. guest: exactly. it kind of shows you as last year the curve flattening may have been more of a roll rate phenomenon, in the last six weeks investor expectations for inflation have collapsed. maybe not expectations per se but the asset class. take of sideto bets on inflation. it is just amazing. we are talking 10 year options. the pessimism just goes out. make a callt would on where oil prices are and no one wants to do that. alix: do i want to make the

call, no i don't? scarlet: watch the second day of janet yellen's testimony tomorrow. trader wants to know when we are going to run out of storage for oil. ♪

alix: one big question every oil trader wants to know is when does the u.s. run out of storage? stockpiles are about 400 million barrels, the highest since 1930. they are bearish on oil as storage tanks fill up around the world. we out of space?

a special thanks to bloomberg intelligence for helping out. this is where the oil is stored in the u.s. had 2in areas to note, includes cushing, 13% of capacity. this is the u.s. gulf coast. where are we now? these were the numbers released today. this includes oil in pipelines, in transit and least. we are at high levels. this is pushing right here. are we maxed out? cushing has a bit more room as you can see here, not at max capacity. little sketchy here. this includes pipelines and in transit but it looks very full and a little bit of room left in

5. believe it or not a chunk of it is imported, traders are sending oil into the u.s. to be stored. last week we did see a fallen imports. part of that was because it was foggy and ships weren't able to get approval for 12 hours to get into port and that may have distorted data. energy aspects said imports will hit the east coast in the coming weeks. is oil storage tight? this is the price difference between light louisiana sweet crude versus two months. prices are just under two dollars cheaper than in two months. $.50, tradersound store the oil because they can make a profit waiting to sell. the fact that this has blown out so much shows the storage just isn't available where someone

else would have used it. next, what winds up happening next? >> this is something we keep hearing about, oil storage is at maximum capacity. it has often regularly. what is different this time? >> europe is running out of space. europe is maxed out. they are actually building more storage as we speak. if europe is running out you have to spend it here. in some ways it makes more sense to ship it. >> i was just going to talk about the tankards. the wtianalysts say needs to have that. oil prices have to be that much cheaper than in the future. $13 over one year. where have to fall more

you want to spend the extra cash. >> great stuff. fantastic maps. up, but you need for tomorrow's trading day. ♪

>> hong kong market opens tonight at 8:30 p.m.. tomorrow morning pepsico reports earnings. >> initial jobless claims coming out at 8:30 a.m. tomorrow.

goldman was at with a note that said this might be a sign of weakening.

>> i am so excited the donald trump