vonnie: good afternoon, i am vonnie quinn. here is what we're watching. stocks are fighting to extend their rally to five days. the dow, nasdaq, and s&p are flirting with nothing their losing streak. from my perspective, we have more upside, but i think this market, the bulls have something to prove. we have been more neutral in our allocations to equities, allocation strategies. we are looking for signs that that macro momentum is truly taking hold. iron ore gains 18%, its most ever in a session, as the chinese government signals a willingness to do whatever it takes to boost growth, but is this still a realistic target for the chinese?

shake shack report earnings after the close. shares of the burger chain are down 5% in the past year as there are growth concerns worrying investors. we are one hour from the close of trading today and the for-day winning streak is in serious jeopardy here. julie hyman has been watching the action. the s&p 500 and nasdaq falling today. some headlines on the economy right now, consumer borrowing was down last month. credit card debt down $1.1 million. total credit of $10.5 billion. a lot of the increase accounted , includinging college tuition and auto lending. not a market moving number but one worth mentioning.

the dow jones is faring the best. the nasdaq is down .3%. large-cap tech shares continued to struggle here. microsoft, apple, facebook, amazon all falling today. not any big catalyst. we had a note on apple that was somewhat negative, cutting the price target. time, we had a goldman sachs call that was positive on apple. declining, it looks like, because of some commentary from analysts at itg. not optimistic on subscriber additions for this year. some defenders have said it is really an international story now, not necessarily a domestic story. nonetheless, share declines have been accelerating along with large-cap technology. , one of the worst performers in the s&p, down

3.7%. thellout from nomura, analyst saying that the stock will not recover unless we see a dram memory production cut, which looks unlikely. pricing for these companies not very optimistic. vonnie: we may not be surprised to learn who the other performers are. julie: of course, it has to do with oil. the s&p, it is helping to mitigate he declines. quite a leg up now. 5.5%. there was not a catalyst around this time making oil go higher. there does seem to be better sentiment around the technicals, the potential for a production freeze at the very least, and also the declining rig count here in the u.s. on friday. if you look at the stocks doing the best from an oil product perspective, something i talked

about earlier that is still relevant, these are in many cases, heavily shorted stocks. so it looks like we are seeing a short squeeze in many of these companies. vonnie: thank you so much. now let's get a check on the headlines with the first word news. mark? big newshigan is the for democratic and republican candidates. republicans hope presidential primaries in mississippi and idaho, as well as caucuses in hawaii. president obama said he once had the opportunity to meet with nancy reagan, and of the former first lady could not have been more charming or gracious. who ordered flags be flown at half staff in honor of mrs. reagan, said she provided comfort and strength to president reagan in hard times. she died in her home in los angeles. she was 94 years old.

committee isdget delaying action on its annual fiscal blueprint. republicans have disagreements on spending levels and long-term budget cuts. the election year delay comes as the house is gridlocked on its own plant because it endorses spending increases for domestic agencies that were part of last year's bipartisan budget and that pact. peyton manning has called it quits. one month after leading the broncos to the super bowl, he ended his career with an emotional farewell. >> i revere football, i love the game. so you don't have to wonder if i will miss it. absolutely. absolutely i will. things, he other says he will miss the annual handshake with patriots quarterback and number one rival tom brady. manning, who won two super bowl's, was named the league's most volatile player a record five times. valuable player a record five

times. thank you. as we have been saying, u.s. stocks continue to fluctuate. our next guest says it has all the trappings of a bear market rally. he sees low-volume, credit markets and bank stocks lagging badly, several key groups are performing as well. the strategist from military back is with us. , was reading over the weekend many are saying it is time to buy. are we out of the woods now that we are down only 2% on the s&p for the year? >> i don't think so. it is impressive, this rally. as you mentioned, i talked about these issues that make me worry about the quality of the rally,

even though it has been a sharp one. really, the stock market has done nothing over the past 18 months. we got to the 2000 level around labor day on the s&p. labor day we touched it, and that is where we are now. that was basically the same time that the fed's qe program came to an end. economic growth has been stagnant the past few years. ,% or less on gdp growth earnings growth below 5% and falling, well below 5% now. not think the qe programs is what helped the market rally in 2013 and 2014. without that, it will be harder to move higher from here. vonnie: there is good reason for investors to be hesitant. we had a job report on friday. now we are waiting on the federal reserve next week. >> that will be a big issue.

the one thing that concerns me about that, we have had people how the ecb chair always delivers, helps the market rally. that did not have been in december. we have a 12% rally in the s&p the last three weeks, 14% rally in the japan nikkei. european markets are up the same amount. a lot of times, when they deliver, it is when the market is flat on its back and is allowed to pop. now expectations are higher and we have had these rallies. get anybe hard to upside follow-through from whatever they say. vonnie: we heard stanley fischer moments ofere were inflation in the u.s. economy and on the phillips curve is not broken down by any means, and it

is actually the employment figures that is leading to this inflation. so would you say wall street is in for a surprise, as goldman said, that we could see an increase in march? thisdoubt we get one month. they are usually very good at telegraphing those things in advance. even though they started hinting go from for this year, now to one and done. think -- our economist looked at it -- and we are thinking maybe two more for the year. i don't think the strength has been enough for them to pull the trigger. vonnie: talk about resistance levels. you have been looking at certain gauges in particular to look at sentiment. the snp is at a key resistance level. 2000.

we can get into the minutia of it, but this is a fibonacci retracement that is providing some key resistance. but aa big round number, lot of times those numbers are not important here this time, it is. above that, 2050 will be the next number to keep an eye on. we are overbought on a near-term basis. that havehe issues been causing these problems here, like oil, oil has had a huge rally, but has not made a major breakout. we still have always to go. we could see an breakup above $40. vonnie: i know you have been looking at transports, xal for some clues. transportation index led the market on the way down, bottom to earlier this time, had a nice rally, and now is near its

200-day moving average. i'm looking at the airline stocks. that is right on its 200-day moving average. that has been key resistance for several months. it has gotten close several times but each time has rolled over. if this index can break out to the upside, that should help the transportation index overall, and positive for the markets. that is something to be watching, especially because it has been going up as oil is going up. vonnie: now that we have this bounce in oil, brent up for the first time in on not even sure when. mold is roll over into the u.s. performance? >> we will have to wait and see. the movement in iron ore is unbelievable. it is almost like the shortcut shorts gottoday --

washed out today in iron ore. also in these commodity related stocks, it is not just short covering, but you have these high-frequency trading algos that exacerbate this when you have a sharp move in either direction. upside to see more follow-through. let's face it, they have been in a bear market. you need something more sustainable. the next pullback will be key. a shallow pullback and then rally again. vonnie: thank you so much, matt maley still ahead., it is no secret the u.s. government is running a budget deficit, but with recent forecasts saying that it is going to get worse and not better, maybe it is time for investors to start paying attention. here is a look at the dow.

chevron, caterpillar, dupont the leaders. the laggards, nike, visa. ♪

vonnie: welcome back to "bloomberg markets." it's time for the bloomberg business flash -- a look at the biggest stories in business right now. major asset managers in japan will close their money market funds and return money to nikkei.s, according to meanwhile, japanese stocks fell slightly today due to your offices to utilities and insurance companies. the sec is charging the rhode island economic development agency with defrauding investors stemming from the states $75 million deal with 38 studios,

the failed videogame company started by curt schilling. 2012ran out of money in less than two years after the state agreed to give it a $75 million loan guarantee in exchange for moving from massachusetts. president obama is rejecting criticism from the left and from the right who say his administration has not done enough to prevent another financial crisis. speaking at a meeting with financial regulators, he said changes enacted early in his tenure have worked. he said dodd-frank made the financial system more secure and did not hurt the economy. the u.s. has made major strides in reducing its annual deficits in the last six years, but that is about to end. the cbo is now forecasting the budget to grow over the next 10 years, so why is there not much concern in the markets?

christopher maloney is here to explain why. buttoo much concern so far, give us the numbers. christopher: if you look right now, as a percentage of gdp, approximately 2.5%. the cbo has said that will increase back to almost 5%. this is not nearly as bad as it was in the dark days of 2011 with 9%. if you look at a graph of the u.s. dollar vis-a-vis a basket of foreign currencies, it's been increasing steadily during that time. it is not so much the fact that budgets have been improving. it is also that we are the reserve currency of the world. that certainly helps. 4.9%, butcking up to not until 2026. at the moment, 2.9%. it doesn't sound too bad to me. this isn't just my

opinion. you look at the cbo and treasury. fiscal year 2015 statement, the look ahead, both point to the budget and say it is not sustainable. .19 trillion worth of debt the next 10 years, they are looking at another 9.4 trillion on top of that. it gets to the point where you have to balance the budget at some point. vonnie: we will get to the issue of forecasting in a moment. what about the stronger dollar and the fact that interest rates are so low, and even given how low our interest rates are, they are way higher than 40%'s of yields the rolled over. christopher: that is the problem that we have right now. in terms of the spread, compared to the german 10-year, for example, vis-a-vis the u.s.

10-year, we look relatively enticing. but if you constantly look at more budget deficits that will, over time, spark inflation. right now, the inflation we have had has stayed in securities markets. if you want to see where it goes, turn on your terminal and hit tra. it has not gone into the cpi basket yet, eventually it might. vonnie: that spread that you were talking about is about 150 basis points, but that could change fast. what the even know next administration will be made up of, so how can you forecast something like this? christopher: over the past 46 years, the u.s. has had a budget 46plus for years out of years, during the clinton administration. we have averaged a quarter trillion dollars per year since 1970 when nixon killed the

brinton woods agreement. there is a limit to everything. eventually, investor sentiment can turn on a hairpin. vonnie: christopher maloney, thank you. i would urge everyone to read his story online or on the bloomberg. ahead, we will check in on how the options market is handling today's action, and a look at the biggest winners in the s&p today. all energy companies. ♪

julie: it is time for today's options insight. joining me is the derivatives strategist from mkm holdings. like so many, he has been waiting for the ecb's mario

draghi to let us know if there will be additional stimulus. you are looking to see if there are any potential ways to play it. one of the things you are doing is compared volatility in the u.s. to what's happening in europe. we have a chart of that on the bloomberg which i made with your assistance. x, theks at the fix -- vi spread between that and the v2 index of volatility in europe. we see volatility is higher in the u.s. how is that informing your investment decisions? >> we are always trying to get an edge on of the markets. expected that the ecb will announce more stimulus. an increase in qe purchases on a monthly basis from 60 billion euros. as you mentioned, what we're looking at is the ratio between v2x, europe's equivalent to our vix, versus thev ix.

spiked sharply in january to february, but the ratio is still near multiyear highs. another way to look at this is, the euro stocks index, using the money straddles, is producing a 3% move. by the end of the week, that contrast with the s&p 500 at half of that. bottom line, it appears come out of the options market, a lot of volatility implied through friday. when we would also take out of vix ratio, if the ecb canopies markets, we could see the ratio come in, and that would benefit european stocks by themselves and also relative to u.s. stocks. julie: do you by european stop calls as a result? >> that is what we like. there are not many ways to get

long etf's that focus on europe via u.s.-listed options. what we show this morning is going out to april, encompassing the meeting this thursday, and buying 25 strike calls. you are paying $.45 for that. a nice come inexpensive way to get along on european and german exposure through the ucb. -- ecb. julie: diamond resorts, a resort timeshare owner. the company has been under scrutiny from activist investors , as well as regulators. when you have all of that in the mix, what do you do as an investor? >> last october, a couple institutional shareholders sent a letter to the company, wanting them to realize some of value, on evaluation basis, trading at half of its competitors on and ebitda basis.

two weeks ago, the company announced they engage in investment bank and was looking at strategic alternatives for the company. what we want to do is go out to august, encompass this period brewery think there will be an announcement, you buy 125 strike call, sell two. they just under two dollars for that. whether they go private or not, it looks like it could happen, $32 to $35. julie: thank you. we will be watching. ♪

♪ >> life, from bloomberg world headquarters, you are watching "bloomberg markets."

with first word news today with mark crumpton. mark: the funeral for first lady, man -- former first lady, nancy reagan, will be held in seamy valley, california. she will lie in repose for public visitation on wednesday. the funeral starts -- the funeral will be close to the public. she will be buried next to her husband at the library. the cornell university president has died of: cancer. her death comes less than one year after she was inaugurated as the first woman to lead the school. she was 52 years old. of absentee and early voters in florida shows over 571,000 republicans have already cast their ballots. the crucial winner take all primary is next week. republican voters outlawed them -- outnumber democratic voters. they are a closed primary, meaning only party members can vote in the respective

primaries. a bombshell they from maria sharapova. >> a few days ago i received a letter that i had failed a drug test at the australian open. i did fail the test and i take full responsibility for it. mark: she said she tested positive for a drug that she has been taking for 10 years for health issues. the drug began of -- became of and substance this year. the world tennis association has not announced a penalty. 150 news vonnie bureaus around the world, i mark crumpton. what with our 150 news bureaus around the world, i'm mark crumpton. back to you. abigail, tech is down? abigail: this is an interesting day. lower, the nasdaq was

trading higher. it appears to be recovering, but as you mentioned, tech has been a big drag all day long, amazon,g microsoft, apple, and google. there does not appear to be any new fundamental moves on any of these. interestingly they are also all the worst point drag year to date. it could just be a reemergence of those selling pressures. netflix and micron are the worst in the nasdaq, both on bearish analyst comments. itt research is modeling below consensus for subscriber ads for netflix, taking the stock down sharply today. downgrading micron to reduce from neutral saying that there is a dram oversupply. wasrestingly, netflix literally the top stock last year, micron the worse, but this year they appear to be finding common ground, both trading down your today. vonnie: there are plenty that

are higher, right? abigail: one sector in particular is standing out, gilead scientists boosted by the fundamentals around the company's drug franchise being strong. the new price target of $130 suggests that there could be an upside on the stock that has been beaten down pretty badly from its record peak last year. vonnie: thank you so much, abigail. turning now to china, increased debt will be used to fuel goals in china this year as growth slows. they said that they do expect to fall between 6.5 and 20%. with the headke of china research. have a listen. say, 6.5 to 7%,

that's just not plausible. i'm sure that they are going to report that. they always report that they have achieved whatever target they set out. we think that the number is far closer to maybe 4%, that's realistic. they will continue to kick the can down the road on debt, just like they have learned from other countries around the world, until they cannot kick it anymore. you are right, how will we know that? take us throughout the year, where will we see that discrepancy? >> it won't be in the official data. you will see the discrepancy in weaker economic activity and other numbers that are independent. weakness in electricity consumption. weakness in rail freight and airline passengers. in industrial production and consumption of a variety of industrial products, like iron,

or, and steel. they won't support that number. jamie: i think that the numbers are already lower than advertised. no one really knows, but it could be in the 4% or 5% growth rate. we will continue to see this slowing and the basic problem is that china has misallocated pretty much every resource, starting with political power. they know they need to reallocate what they are doing in their economy. the move towards greater reliance is on services, innovation, and consumption, but they cannot do it because every time they begin to have this transition they get scared that the gdp numbers are going to go down. so, they are addicted to this stimulus. it's like a sugar high. they constantly need to get it. the reason for that are the concerns over legitimacy. if you support us and keep out

of politics, we will deliver economic growth. now they have one style of economy and they need to transition to another but they cannot do it while keeping up the same high levels of growth. even if they are less than what has been historically true. are saying is historically powerful. that there cannot be economic reform without political reform. >> that is my core message and i say it over and over. at the end of the day what china needs to do is empower people to do different things to consume, to feel comfortable about their future. if china continues to have a top-down structure, the people on the bottom are not going to step up. they are not going to be able to demand their rights, whether it is for social security, health, environmental protection or anything else. >> given that that structure isn't changing, what is your outlook? >> i think that china is going to bumble forward. relativelying to be

low growth, historically. that is going to put a lot of pressure on their leaders. they will continue to try these knows,n reforms. no one exactly, this is my guess, but at the end of the day is going to be a big choice. they are nationalistic and smart enough that at the end of the day, like in korea and taiwan they are going to have to open up in some ways politically. but it is a big and open question. donald there.and bite ahead, can tick tack through earnings and high-value asian's? -- hi valuations? chipotle, they are having a green day. pinero bread, mcdonald's, and yum! brands as well.

vonnie: this is "bloomberg markets." i'm vonnie quinn. near the highs of the session, a quick look at the markets. a look at the nasdaq, it's the laggard. down 1/10 of 1%. the s&p 500 has crossed levels that we were talking about earlier. will it stay there for the close? still of a point on the session. the dow jones is up, 66 points on the dow. let's look at the sectors that are leading. up 2%.he energy index is materials are up 1.2%. 4%sumer discretionary, down of the group. infotech, tech is down two thirds of 1% as a group. time for a look at the bloomberg

business flash. for wallge bonus street bankers fell 9% last year according to estimates by thomas dinapoli. $146,200 was the average. asset management under investigation by the justice department. the company says the probe is connected to a private -- credit fund in 2013. and that the federal government has requested valuation and concern with it. -- in concern with it. court,at the supreme they ordered that apple pay $450 million in a settlement. the supreme court refused to question the supreme court ruling that apple organize the scheme to raise prices for electronic books. that's it here at bloomberg's

business flash. shake shack, sales leading investors to question the stock's high price tag. or at least the pe ratio. this year balanced sales have their investors find appetite again. mike joins us from princeton. sorry at office, mike. it's almost unavoidable. -- sorry about this, mike. it's almost unavoidable. 45% growth is still not too bad. mike: nothing to shake a stick at. it's still very strong. it's just going to moderate in the quarter. the openings are going to occur -- they occurred late in december. some of the tailwinds rolled off as well. for the first nine months of the year they received a benefit from the relaunch of the crinkle cut fries and 6% price increase in 2014. now that that is rolling off, that will impact the revenue as well. vonnie: why more enthusiasm over

the stock, though? we will get to the valuation in a moment, and maybe that's why, but if you look at the analysts it's not exciting anybody. two holds and one by. -- buy. results throughout the first year as a public entity have been fantastic. they really have done a nice job in terms of generating good traffic and sales. storese developing pretty aggressively. so far, so good. get to the's valuation. that is the elephant in the room. why have investors priced it this way? there was a lot of hype -- mike: there was a lot of hype about fast casual restaurants last year. ticked that box. they also have a small float and high shortage that tipped up the

price significantly. the stock more than doubled last year. now it has come back down to earth, but it still has a premium valuation. the other fast casual names are at about half that. higherbout three times than fast food names. the company has done a good job growing earnings into this valuation. you know, the question is -- how fast can they do it? vonnie: is shake check somehow -- shakeng the right shack somehow not picking the right places? they seem to be fine in new york city. there still remain significant whitespace in new york, but they are growing all over the country. it could create supply chain issues. their beef distributor is in new york. they will not be able to provide a source of beef throughout the

country. they are kind of stretching the supply chain a little bit. the other concern is in the small, fast, rapidly growing companies, it really does matter, site in the restaurant business. we don't have a lot of data around this. we are still kind of doing this intuitively and that really is not the kind of thing that investors want to hear. they want to hear a hard, solid, data-driven approach. vonnie: did the chipotle food scare have an impact on shake shack? mike: that's a good question. we will see that this afternoon. one of the surveys out there said that most customers ended up eating at home more. --q qdoba brand didn't get a benefit. there isn't a ton of overlap in terms of chipotle and shake shack. we will really just have to see what they say this afternoon. we will be looking out

for your writings and intelligence on it. thank you so much, michael. coming up on "bloomberg markets," the close of trading is just minutes away. and here are the major averages. ♪

vonnie: this is "bloomberg markets i'm vonnie quinn -- bloomberg markets." i'm vonnie quinn." your -- earlier we spoke with jim tierney and asked him where he sees the market going. you look at the economic reality, it's tough out there. it's slow growth. look at the companies with their -- motors, their own value their own drivers to create value. >> you notice expectations of

inflation that may not be where they should be. this is a 10 year breakeven. it basically shows us what investors expect things to look like over the next decade. it certainly has come up on the lows since february 11. the average component was basically the weak link. do you believe that anti-inflation is a bigger risk than what's being priced right there? jim: whether it is search jets tickets,y, it's all moving higher. if oil gets back to 60 or $50, ultimately there will be real inflation in the marketplace that is not being appropriately reflected. wereat kind of pricing pie to the manufacturers -- pricing power to the manufacturers have? when minimum wage is going

up, ultimately when you are going to have higher minimum wages, everyone will have to push up prices. -- >> how do you flaw this with what is actually happening. jim: where someone doesn't, we see real deflation. refinancing a mortgage right whole a are saving a lot of money, giving the consumer more purchasing power with discretionary things like a disney trip for jets tickets. when it comes to sectors or companies that you like, how do you focus on quality and growth in this kind of environment? find one with organic volume growth. if all they are can't -- counting on his cost-cutting or share buyback, that's a tough place to be. >> what about if it is through transactions? we hear about how bsf is trying

to crash the dupont merger. they are considering making a bid. more of this transnational mna to occur over companies are in fear of missing out? it does two things for you. maybe you get revenue synergy, and then again there is cost synergy. he gives those companies a window where they can grow their earnings based on the merger. i would expect to see more of that. how hard is it to play that game? i would rather find companies with underlying organic growth. that's a more predictable way to invest. jim from av was growth, speaking earlier on "bloomberg markets." julie? julie: we are- seeing a down to the wire close here with markets limping along. the dow has been the strongest

of the three majors throughout the day, that does continue. let's take a look at the push and pull going on like -- right now. commodities related shares have been a store's of strength for much of the day. energy and materials shares, on the bottom we have got big cap technology continuing to struggle along. the commodities that i mentioned, we should take a look at how they are trading. specifically oil prices have been rising today. it seems as though there were a number of different factors. not that there is anything that new today. a lot of technicians talking about maybe february 11 being the short-term bottom for oil. we have got a little bit of optimism for that increase. nothing new. we also have the count on friday falling to the lowest in's 2009. natural gas continuing its bounce off the 17 year lows. we've been talking about the iron ore story all day long. a record one-day gain after the meeting in china over the weekend with commentary and

indications that there will potentially be further stimulus. although analysts have tried to pour some cold water on the rally, saying that it is not going to be sustainable. here ineantime, back the united states, we have seen an increase in bond yields for the 10 year and two-year, which more closely reflects interest rate expectations, at its highest january. we heard from stanley fischer today saying that he does inflation -- does think that inflation is heating up. we have still seen a substantial rally from the february 11 low. julie, thank you so much. following the market all day long. our short stocks feeling the entire rally? they are after all beating the s&p i 15%. here is help to explain what's happening from oliver ran it. -- oliver renick.

all of it, butot when you talk about push and pull, pulling is what is bringing up the market and keeping it from crashing further. we've got a great chart here breaking down how the short stocks have been performing compared to the overall index. goldman sachs, rolling short on the s&p versus the s&p itself. year to date you can see the s&p is up around 9% to 10%. the outperform is the biggest degree of win for the shortest stocks for that time, going back to like 2008. in the back of that you can see what's happening in terms of short interests. when you look at the terms of how many people are out there shorting stocks, it's pretty amazing, it's still very high despite the covering of the magnitude of shorts to such a degree that they are still pretty high up compared to where they have been in history. looking at where it happened, breaking it down in the market,

it's hard to deny with happening here. you can see that the average change is pretty much flat. stocks are moving up on average, it's pretty incredible. fascinating.nie: how are people sorting the markets? -- shorting the markets? coming right now it's from oil. kind of a boring story, we talk about it over and over, but hey, it's what's happening, it has to be addressed. first you broke through 30 and it stood, now we are back to 40. a lot of these companies got so short it became -- the by proposition towards 30 and below --was a much tougher vet much tougher bet to make. a lot of companies were getting in short, kind of just hedging, you know? guess what? now there is a lot of buying power.

energy with a lot of shorting happening in consumer discretionary as well, which is a different story, a story about valuation and stocks giving back 9% and people wondering if the levels can hold. other than that it's pretty much still related to energy, industrial and materials space. those companies are still betting that they will go down. talkingwe are not done about this, thank you so much. check out all those stories on the bloomberg. or bloomberg.com. that's it for "bloomberg markets." "what'd you miss?" is next. less than four minutes. ♪

scarlett: we are moments away from the closing bell. joe: alix steel is off today.

♪ bell]ng crude up thent first time since december. joe: the question is, what "what'd you miss?" scarlet: we asked our guests where the opportunities are in the asset class. our guests say that a greek exit is still less likely now than it was in 2015. scarlet: we have the explanation on the big market moves. we begin with market minutes. after confusion on where the direction is, stocks of close up on the day. fluctuating your the two-month highs. we are right