>> unbelievable rally. u.s. stocks heading higher into the close. the question is, "what'd you miss?" is the panic over high-yield european banks justified? joe: plus is all the recession banter all point? the data shows the economy may be right on track. alix: we will dig into the legal argument over unlocking the iphone. rallied into the close, we talked about the s&p 500 erasing it loss for the month. holdout was chevron but it has closed in the positive. one -- dow is more than 1000 points above its low. joe: we are back to where we

were january 6. remember those really ugly days that started the market? most of these your doesn't look that bad anymore. extraordinary gains we've seen in the last week and a half or so. alix: in some ways the rally was not expected today. the shanghai composite of the most in a month, you had the overnight repo rate klein. it really wiped out the 10% rebound since its low but u.s. stocks were able to claw their way higher. another wild thing that happened in asian trading. i didn't know that japan has a 40 year government bond. i sort of assumed it cap touted 30 years. now that is trading below 1% yield. the bank of japan

went negative, the yields have really collapsed. that is just crazy. the dollar pretty much holding steady. strengthening on support that support is growing to impeach the president. in our weekly has to do with oil. we have headlines crossing around 2:00 saying that venezuela's oil minister was saying that russia and the saudi's agreed on a march meeting during a tv interview. the huge spike in oil, it's now at the highest level this month. tose headlines continue focus on the oil market. we're talking about how good or bad the u.s. economy is. one of my favorite economic indicators that i mentioned yesterday, my desert island

indicator. if i were on a desert island, the one economic indicator i would look at to keep track of the u.s. economy. jobless claims. one my favorite ways to look at that is to take the 52 week , you strip out the noise. a brand-new low on this measure, the best level since the crisis. that is the pink line that you see there. no sign in the high-frequency week to week ada of deterioration in the labor market. you can find that chart on the terminal. the other big story and commodities was natural gas. this compares in short positions in oil with natural gas. on the surface, there is a lot

more pessimism in the oil market. now you're creating a really big gap here. if you back it out five years to get a real take on this, you can see the white line is natural gas. morell the market is much pessimistic on natural gas and oil prices over the longer term. that was surprising to me, but it's the same story anyway you slice it. .he demand is little bit dicey as i remember thinking about natural gas, people say how cheap it is. alix: we've had natural gas in the northeast under one dollar. dive, --as for my deep

scarlet: when it comes to japanese stocks, you wonder if history is repeating itself. the white line is the nikkei now since june. nikkei frome is the 2007-28. you can see it's a similar pattern. the fed began a series of rate , according to a morgan stanley strategist. it says that the parallel could continue if u.s. and japanese policymakers take the wrong action, specifically the plan increase in japan's consumption rate. joe: very ominous. you can see all these charts and more on twitter as well. peter joins us now. good to see you.

it's been a volatile 2016 for every asset class. pick your poison. rates in japan. investors continue to flock to safe havens like the yen. the dollar is weaker and the yen stronger. i know you said markets are not functioning as expected. is this what happens when a paradigm shift meets liquidity? probablysterday was the best example we've seen where all of a sudden the market started rallying and you just had a continuous momentum in one direction. then it reverses quickly. as the fed has cut back on risk tolerance and the market becomes choppy, you just don't have true liquidity. scarlet: do you put a lot of stock in the rally we've seen today? peter: we've kind of hit a bottom in oil. if you look at some of the problem markets, it's been

, it's been pretty stable since december. that sets a nice tone for rally in markets. stocks focus on energy and banks and not participate in a broad rally. energy stocks and banks, people have been freaking out about negative rate coming everywhere. is that fear just overdone? peter: i think the fear is overdone. it's a risk, but it's only a small portion of most banks portfolio. it's easy enough to manage. everyone so concerned about the shape of the yield curve. they make most of their money from credit spreads, not from betting on the yield curve. they are in an ok position to do reasonably well. so energy sector has been beaten down, it creates a nice opportunity.

>> if seen the correlation between bank stocks and energy. what reverses that trend? peter: we have hit the bottom at least for now in oil. and people will start getting rational. one thing that happens, everyone looks for a trigger. in the heat of the moment, you trade what makes sense at the moment. was bad for jpmorgan but they .till had a profitable quarter people have to take all this and put it into perspective. europe is aory in specific security issue, it's not something that's going to impact u.s. banks. you need the impetus like oil going up and from there the rally can extend. people have lost sight of fundamentals. now might be a good

time to enter european banks as a tactical by for the short-term. joe: another thing we were talking about earlier in the year is china. night andged 6% last that would've been the kind of thing that in january would have dominated the day. another thing that was overblown as a risk factor in the global economy and the markets? they clearly manipulate. they say they are trying to manipulate it. watching it go up and down and thinking it's giving you any useful information about the underlying economy, it just doesn't make sense to me. the chinese economy has some issues but they are taking steps to encourage inflows of

capital. i think they will ultimately create a chinese bond market to help fund their attempt to keep growth going. i like that we have decoupled from it. alix: the other issue has been negative rates. they cannot doing thing to help the global economy. we are back to the levels we were before the boj went negative. is it all much ado about nothing? peter: i don't like the idea of negative rates. bankst like the fact that and asset managers have to already deal with tough areas to make margins. liquidity inneed the capital markets. one of the big advantages the u.s. had over the past several decades was robust capital markets that help the economy. the more we do things to break up the big tanks that are already on their knees, it's going to hurt the economy longer-term.

it's not that effective and the best tool and what the fed is trying to do, i think it supports the idea that we have to get through a time of volatility. we have to get off the fed as being a crutch. they are not feeding pablum to the markets on every little guy. if we can get through this without fed support, that -- that's the best thing for the market. the rally is not just based on fed support. i thought it was interesting that janet yellen did not give much to the markets. she is not try to throw them a bone to stop the volatility. peter: by the end of this, the people who own stocks are people who like it, not because they think the fed is going to support, and that is good for the market. scarlet: peter, thanks for

joining us. discussionsopec lead to a widespread freeze of oil production? and palo alto networks reporting earnings right before the close. it has resumed trading now and it's down a little bit, about 1%. ♪

mark: apple wants a judge to vacate in order that would force it to hack into the iphone of one of the san bernardino shooters. the fbi director said the case may set a precedent for smartphone access.

government'she approach during testimony before the house intelligence committee. the white house says president obama will host congressional leaders tomorrow to discuss the supreme court vacancy. he will meet with senate majority leader mitch mcconnell, senator chuck grassley and they will be joined by senate minority leader patrick -- harry reid. said he brian sandoval told the white house today he doesn't want to be considered for the nomination. somalia's president said at least 180 soldiers were killed in the country last month in extremist attack by al qaeda affiliate. they declined to give an official death toll. major league baseball and the players union have agreed to end the practice, hoping to avoid a repeat of last year's playoffs when the dodgers chase utley

broke another player's leg. alix: "what'd you miss?" a march meeting, after deciding on a production freeze last week. iran said it freezes ridiculous. the saudi say a freeze does not mean a production cut. circumstances doesn't freeze get to a production cut >> if they don't raise production we will get to flat production. we will not get higher reduction. is -- basic idea joe: so a freeze is a de facto cut? jan: our own balances have risk. we think things will be balanced by the end of the year.

if they pull a rabbit out of the hat, production rises. saudi arabia produces so much more in the summer because it's hot in the have to meet mystic demand. if we stay at these levels, in very that would be eight 400,000 barrel a day production cut. jan: so you will get less exports from saudi arabia precisely when you would need more. it does talk right now, nothing has happened just yet. what is it due to the $29 oil costs, is it on the table? jan: we are tracking a little higher than that. in my view, it removes a piece of risk that we will go much further down. you're absolutely correct, all they are doing is talking.

so the point you are making that all they are doing is talking, talking is good, because it is a start. is a federalre reserve of oil and the fed speak about communication. jan: you hit on something really important. have a seat at the g-20, what is the entire g-20 worried about? deflation. have they gone too far? oil is contributing to deflation. they got the call, do something. a lot of the rhetoric that happened when opec did not cut back in 2014 was that opec no longer matter, that opec was dead. does this conversation of a freeze show that opec is indeed very much alive?

the important part of 2014 was not that opec was dead or not dead. opec, thisation of wonderful institution that you pay peanuts to join, what has become the driver of opec in saudi arabia, what did they say in 2014, go balance yourself. we need torabia says stabilize. he said there's no sense in wasting our time seeking production cuts here and they will not happen. what will happen is we will all agree to freeze production and eventually the market will balance. deputyt seems like the crown prince is very progressive when it comes to reform.

but taking production cuts on the table makes me wonder, is there discord? jan: that's what i was trying to say earlier. and oil minister executes that piece of national policy. who sets national policy? experienced manager and executor of oil policy. the powers that be say where to go to doha? joe: the counterpoint to all this, goldman sachs has argued that as soon as the price of oil rises a little bit, we will just get more production out of texas . ultimately there's nothing any of these players can really do anymore. what is the problem with that argument? regardless of who it comes from. jan: the argument that i prefer

different in a few nuances. i think things are going very well on the demand side, more so than most people. we do not think we are in a recession. we may get to one if things go the wrong way. tode oil demand is going grow. when crude oil supply is no longer growing, and when domestic and other opec solutions are in a world of trouble and finally beginning to guide down. you know me, i tend to be a little more optimistic than the next guy. we had a target a little on the high side last year.

at the same time, what it looks like to us is that things like inventory building is slowing down. demand is not falling off the table. china seems to still be kind of all right. alix: good to see you, jan stuart from credit suisse. scarlet: gap reporting earnings falling 4%. we will keep an eye on that. the stakes in its fight against the government. we have the latest for you. ♪

scarlet: apple says the

government cannot force it to unlock the iphone used by one of the san bernardino attackers, saying it violates constitutional rights. what is next in the standoff? cory johnson, give us a synopsis of the apple statement. corey: it's not just unlocking one iphone, they want the right demand unlocking any iphone whenever they want. said's compelling apple to create a product and write software code that does not exist. powerfulg is a statement of apple's point. they said the demand by the government compels apple to create a new operating system, effectively a backdoor to the iphone that apple believes is too dangerous to build. it's ae is really saying

fundamental change in what they're offering to customers and the government knows this but wants to use this case of terrorism to inspire the courts and the public to adapt to this change. throughout this document they customer information, personal, private information. cookame quote that tim used last night, the information about where your children are and certainly about privacy. about whatand talk it means for the implications of how their business works. it is certainly a business issue. apple wants customers to trust that your information is secret and they think that their sales could be hurt if secrecy is in doubt. alix: what does it mean for other tech companies?

>> twitter may be doing that and will look for other companies. we will have the former ceo of yahoo! on bloomberg west today. cory johnson, thank you so much. apple closed near its highs of the session following the release of its statement and it rallied with the broader market overall. we will continue to analyze it from the legal perspective as well. three charts that you cannot miss on inflation, next. here's a look at stocks in late trading. ♪

dinners such the >> apple wants a federal magistrate to vacate hackrder that the company into the iphone. the fbi is seeking dangerous power through the courts. it's apple's first response since the judge ordered the company to provide specialized software as part of an investigation into the san bernardino shooting. the fbi director testified on capitol hill today about the does it. shows all trump and hillary clinton leading the field of presidential hopefuls in virginia. the poll had mrs. clinton would forsupport compared to 32%

senator bernie sanders. on the republican side, donald trump has 41% followed by florida senator marco rubio in texas senator ted cruz. a major policy shift in italy today. the senate granted legal recognition to civil unions. it was described as the story but gay and lesbian groups announce it as a betrayal because the provision allowing gay adoptions was removed. a launch was postponed last night due to bad weather. global news 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus around the world. i'm mark crumpton. scarlet: a quick recap on how u.s. markets closed. equities rallied into the finish and the s&p 500 has wiped out its decline for february. the s&p 500 closing at its best

level since early january. the dow is more than 1000 points above its february low with all members higher today. alix: february 11 we thought everyone was going to fall off a cliff. now levels are higher than before the fall began. quite a comeback. oil prices helping with that, the best level so far this month. fence preferred gauge for inflation is released. joe: earlier last week we got a solid cpi reading that showed inflation may be starting to firm. but the fed doesn't really focus on cbi as much as tce. core cpi, which is cpe.ng hotter than core

still a long way from its target goal of about 2%. why is it running so much slower? big aspect of it has to do with health care spending. at 17% it's the largest single pce. within core health care inflation has really been trending down a lot lately, partly due to economic reasons, partly due to regulatory reasons , partly due to legal changes. but that could be changing fairly soon. let's look at healthcare services. this was from the ppi report the other day. it has beent months picking up. were starting to see perhaps some early signs that health care relation is starting to rise. if that's the case it could feed into the core pce and perhaps

bring it closer to the fed's target. artest is here to help us look at the inflation story in the u.s. economy. if the inflation data set to trend higher? >> i think that is the case. there has really been to major factors that explain what's happening in inflation and the divergence between those two metrics. health care is largest in the core cpi that's dominated by shelter costs. we've seen red-hot housing inflation because homebuilders have not kept up with recovery in housing demand following the in 2006 started back and has extended for several years. housing output not keeping up, rent is searching. what we're finally seeing is that inflation costs are rent plusbeyond

shelter costs. health care a big story here and health care inflation, if you go back to cpi, is outpacing a lot of other categories. also spreading to other categories as well, specifically service categories that are dominated by labor costs. play, wereere at starting to see wage pressure and that means were seeing a diffusee -- a more inflation backdrop. saying theme deceleration is transitory rather than a true reflection of the underlying inflation environment. some credibility to that. there were comparisons that let inflation higher. but we have been seeing in the

increasedal months diffusion of inflation pressure. that seemed like it was apparent in last week cpi report overstates the case. wage pressures are picking up fixedmoving toward a inflation target. that will be a story for the back half of the year. big picturethe stories that's causing head scratching among economists is productivity. everyone knows productivity growth has been mediocre for while. ,esterday we talked to jw mason and he said everyone is getting it all wrong. listen to what he said about productivity. is the opposite of what you expect.

labor productivity fell a lot during the great depression. most people don't realize this. ii, productivity growth accelerated again. joe: could it just be a function of the lack of robust demand? >> it's very much tied into that story. we have seen cheap labor. that's been one of the dominant themes. cheap labor from a producer side is a good thing. cheap, businesses are quick to hire workers. when you're hiring lots of workers in a slow moving economy you get low productivity growth. it's not particularly perplexing. as we see labor become more expensive, businesses will opt for capital investments that reduce their labor input cost

and that will lead to a rebound of productivity. just like we've been waiting for wage pressures to turn up, that will cure the low productivity products that have been plaguing the economy. there is no great mystery behind the story. alix: what happens if demand is not materialize as strongly as companies think? .> labor slack is being reduced you will get the wage pressures and then see the rebound of productivity. thank goodness for low productivity numbers. this means that in an economy that's been plugging along at 2% or so, we've seen decent job gains. the actual numbers are 2%. would get an update on that next week and you will see productivity revised even lower. the economy grew basically zero last quarter and we thought job gains north of 200,000.

a conundrum with people wondering if we may be recession bound. remind us what a garden-variety recession looks like because we have not had one for 15 or 16 years. >> a garden-variety recession is typically caused line access developing in the economy, whether it's too many houses being built or too much inventory accumulating which has been historically the most common cause of recession. it tends to be relatively benign. 2001, weok back to didn't have that rule of thumb to quarters of contraction. it would lead to a backup in the level of unemployment. these are things we are not seeing right now.

i think we can be confident that a recession can be avoided. people need to refocus and i think the odds of recession or 15 or 20% lower. the last i.s. him service has been declining. for while in the manufacturing surveys were deteriorating, people pointed to the service surveys and said that's the big part of the economy. >> the service sector is not immune to what's happening in the manufacturing sector. during moments of market stress, they tend to have a sentiment component to them. purchasing managers may be seeing a rise in production but the headline outcome tends to be impacted when the market is swimming. that's what we've seen over the

last couple of months. can the canadian prime minister handle the deficit? that is next. ♪

scarlet: time for the bloomberg business flash. shares of baidu rising in extended trading after it posted fourth-quarter revenue that beat analyst estimates. mobile the number of search was 657 million in december, a 21% increase over the same time last year.

mobile revenue represented 56% of total revenue in the fourth quarter, up from 32% a year earlier. alix: cap forecasting profit that trail analyst estimates. it says profit will be $2.20 a share. it's struggling with the plan to reignite growth. scarlet: the chairman of viacom summerstify about redstone. he wanted the court to squash the subpoena. the nature bloomberg business/. canadian prime minister justin to go looking like he will break all three of his fiscal campaign pledges. candidate will most likely be $22 billion in debt on april 1.

joe: luke, what did justin trudeau promised during his campaign and what is he saying now when it comes to government deficit? >> he promised the highest amount would be $10 billion a year. those are two the biggest things. he also said he was balanced by the end of the term and that looks increasingly unlikely. instead they are going to probably table a budget deficit of $30 billion. going to bee actively more fiscal stimulus or is it just about lack of revenue? update that the finance minister recently put out suggest that the starting point for them is greatly dented by lack of revenues,

particularly corporate that keeps going down. but about $10 billion of that will be increased spending. i would shy away from calling its stimulus. the last great recession showed us that it took a long while for us to get those funds out the door even after they were announced. and the ones that were shovel ready of those projects were the ones with the lowest multipliers. let's talk about specifics with the canadian economy. the oil crash has not helped. there is anxiety about residential real estate investment. is basically crying out for reversion. the question is will it happen fast to the downside. where it gets interesting and speaks to the strength of the canadian economy in years past and weakness is that one analyst pointed out that the share of

residential investment as a share of gdp has never been this different. the credit cycles are so the synchronized. in post crisis the u.s. has been very subdued. >> the fact that we weathered the storm so well. a few weeks ago people were posting on social media that thanks to the week canadian dollar, cauliflower prices were searching. if you look at official price data you can see resch vegetable prices in the inflation data has been through the roof. what is the story here? fruit andjust fresh vegetables. when you go into the other subgroup categories it is north 42%. of a canada symbol

that's lost its purchasing power and consumer angst because of that. >> so the government is going to how much ofeficits, that is just going to leak out by higher import costs? front, there is a big debate in canada about whether this is stimulated at all. are saying any increase in spending will be offset by higher loonie and by higher interest rates in those sensitive sectors. joe: thank you very much, luke. scarlet: coming up, apple versus the u.s. government. that's next. ♪

alix: apple rebuffing the government's court order to unlock and iphone use by one of the san bernardino attackers. the tech giant says the demand violates its constitutional rights. how firm is apples legal footing? covers politics for bloomberg. is the likelihood that apple will succeed in overcoming this government request? this point, the government has an uphill battle. they are fighting to have apple a new software modification of the existing operating system that would allow the fbi to hack into one

of the san bernardino shooters iphones. this point they're really asking apple to create a new product and there is a murky legal precedent that would allow them to do that. this could be a fight that goes to several levels of appeal. there's a big policy debate over whether this is something the government can compel apple to engage in. course it leads to a lot of pr, both positive and negative. apple tends to release products around the month of march. will this overshadow that? today we were seeing headlines from one of the product website saying they were expecting an apple event in a couple of weeks in march. how they do it is by generating a lot of buzz. right now the buzz is all about apple and its privacy battle with the government and not and how itext ipad

will be the coolest thing ever. joe: what specifically should we be watching for in this story? >> now that apple has filed its response, in early march the court would be accepting amicus canfs or third parties who weigh in on behalf of either the government or apple's side. by seem public support voice facebook, twitter, and a couple of other software companies keeping their eye on this litigation. mobile device manufacturers are concerned with the legal precedent this sets. in early march of the other parties weigh in on the legal debate. after that both apple and the government will have a chance to while additional briefs. on march 22 the government will consider these arguments and issue an order after that. there's an article in

the new york times about how apple has begun developing new security measures that will make it impossible for the government to hack into phones. alix: what has the political reaction on the campaign trail been in this battle? >> i talked to donald trump last week. he said that if he was president, he would come down so hard on tim cook that his head would be spinning. that's the kind of red meat that does well on the campaign trail. he called for a boycott of apple products until they unlock this thing. there is an ongoing discussion andt privacy and security that is taking up oxygen. joe: other candidates are being more measured than donald trump. it raises the issue of

what role congress could wind up playing in the longer term to force someone to comply at the end of the day. apple is not covered by the same laws as at&t. we're expecting this will go to congressional hearings beginning next week and the debate is already beginning. some proposals for legislation trickling about and lawmakers are definitely talking about it. is, if congress is in gridlock during an election year, what actually occurs is even murkier than everything else. alix: thanks for joining us. what youcoming up, need to know to gear up for tomorrow's trading day. ♪

releases data at 6:30 p.m. eastern time. a new metric excludes fresh food and energy. alix: i'm checking out chinese property prices for january. we need to see some kind of housing recovery in china. what are prices telling us about that? korg pce comes out it 8:30 a.m. eastern time. we will see if it picks up and starts to close the gap with core cpi and closer to the 2%

number the fed is hoping it can trend toward soon. thanks for watching. joe: have a great evening.

due respect to mitt romney, i know harry reid. you, sir, are no harry reid. ♪ mark: hello again from historic, beautiful charleston, south carolina. with the clock ticking down to the democratic primary on saturday, we've cracked -- crept into the 48 hour red zone.