markets. ♪ from bloomberg world headquarters in new york, good afternoon. i am betty liu. and i am vonnie quinn. investors are looking past weakness in the labor market to focus on the likelihood that interest rates will stay low for longer. shares plungeiant as their earnings and sales forecast has that a turnaround is a multi-year process. the u.s. auto market is running on all cylinders since the crisis but seeing fueled in part by subprime loans. on whether the bubble -- chuck stevens on whether the bubble is about to burst. betty: let's go to the market

desk where ramy inocencio has more. we are seeing green, but the nasdaq, just in the past few minutes, it has slipped into the red, and it has been falling over the past three or four hours or so. the dow is up one third of a percent. past thee this go 18,000 mark, and we are off of the session high. it on over top see where the s&p actually traveled throughout the course of the day, and this is where it is -- actually, this is a snapshot of where our last record high for the s&p was back in may of 2015. you can see how close we are to that, just 7/10 of a percent away. for 2130 and some change, so we're going to see where we go today as well as few

days if we can hit that. and come to my bloomberg terminal. i also want to show you a snapshot of the s&p sectors, and it has been a pretty much broad rally throughout the course of today. energy has been the biggest leader throughout the course of the day, 2.3% is where it stands right now. telecommunications is the second biggest leader. on the flipside, health care has been at the bottom and has been the laggards most of the day, down by about half of 1%. energy and talk about why energy actually has been rising higher, and the reason is because what is happening with nymex crude. nymex crude is up at session highs, crossing the $50 per barrel mark right now, if two dollars and $.41. of course, we are waiting on crude stockpile data from last week that is expected to show another supply fall for the third week in a row. also this. energy winners.

reset gainers, these up simply on the order of 5%, the highest in the past four or five weeks. on the flipside, as i was saying, health care, health care being the laggard, biogenic plunging the most in almost a year. -- biogen, and alexion also down, and the drug here is for a rare neuromuscular disease, guys, also failed to meet its goals. betty: all right, thank you, ramy. mark? mark: paul ryan is blasting the supports fore president, talking about blasting the federal judge hearing the case about trump university, calling the remarks racist and indefensible.

speaker ryan: claiming a person cannot do their job based on race is a racist comment. it is absolutely unacceptable. but do i believe that hillary clinton is the answer? no, i do not. speaker ryan says there is more of a chance of getting were public and policies enacted then there is with hillary clinton. and the race for the democratic nomination, according to the associated press, mrs. clinton has enough delegates to win, and that includes the delegates she has one and commitment from superdelegates. today,gest of six states polls show she is in a tight , andwith bernie sanders sanders says mrs. clinton is depending on superdelegates who do not vote until july 20 five, and he is hoping to change their minds. italian prime minister silvio berlusconi has been hospitalized for tests after irregularscovered an

heartbeat. he has had a pacemaker for years and has been largely sidelined from politics since a tax fraud conviction. city killed 10 people and wounded 26 others in the commercial area of a city which is located some 55 miles south of that dad. 55 milesmediately -- south of baghdad, and nobody has claimed responsibility. global news 24 hours a day howard by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. betty, vonnie, back to you. said chair janet yellen chair- said chair -- fed janet yellen. body: a guest with an outlook

for the rest of the year. it is hard to have a brand-new outlook when we do not even know what is happening? that is right. there are a lot of uncertainties, but one thing we have been saying on last year is you should expect more that is theand theme of the outlook, which is selectivity, including fonts, commodities, alternatives, as well. a lot of investors, especially in 2013 and 2014 got used to a lot of simply broad market gains. big numbers, double-digit gains, and it is really time to start thinking about the economic cycle being and may be the sixth or seventh inning, and it that point in any cycle, we usually are more selective about which asset classes in which stocks. right, but when i hear something like that, which is get ready for more volatility ahead, things are uncertain, we

do not know what the fed is going to do, i my money in etf's. of people are doing that, but you can really improve your return if you can be a little bit selective going in in the first place, and then secondarily, you start to think about rebalancing more frequently. that means taking profits on the things that have done well and looking for values on things that have pulled back. betty: what is going to be different, outside of that ready? what will be different in the second half of the year? paul: we try to bring this out in our report. over the last couple of quarters, there has been concern we see u.s., and growth farming. the manufacturing sector has started to rebound. we are already seeing it in orders and a consumer who has been holding the line all along, it seems like he and she are really ready to continue doing

that, so if we have that steadier growth going forward, we will not be talking about the dow and s&p flirting with record highs. we will be talking about them blowing through those highs, and even if the fed creates uncertainties, those create more buying opportunities. we are not talking about great gains. we are talking about modest gains. anchor: and if the fed raises rates? paul: we have done some research on that, and in the past, the beginning of a rate hike cycle is typically negative at some point, but at this point, we are starting at such a low level, it is hard to imagine a trajectory for interest rate hikes that is flat, more flat than this one right now. betty: the beginning of a rate hike cycle is often negative for an economy. we have seen tightening. paul: that is right, and this time, we have some thesis up our

sleeves, which is housing, which typically leave the country out caserecession but in this was flat on its back in the beginning of the recovery and is now proving to be a significant tail went for the economy, so, no, we are not worried about the cycle ending right away. anchor: what about oil? micah a stop to the manufacturing bullishness? wells fargo? paul: it could, but we think it is unlikely. us like many commodities markets these days, still in the throes of a bear market, and you can have a period in a bear market where you have a low, and then in a second phase, you bounce off. let's not forget that one year ago, oil was flirting at $60 a barrel, and then at the end of the summer, the stocks built up,

and the prices collapsed, and we think oil has put in a low, and supply and demand is working towards rebalancing, and as soon gets close to 60, and it can't, you will see suppliers increase supplies, and we will move in the opposite direction. betty: hall, we know you have a different outlook, particularly the american consumer, but i want to bring up this chart on how expensive stocks are, right, so if you look at the ratios, do we have that chart? it shows that the hase-to-earnings ratio continued to climb over the last several years, and we are at a high since about four years ago, and more if we bring that chart back even more, so are stocks deal expensive relative to where we are in the economy? paul: it is a variable we watch very carefully, but we think no.

stocks as expensive compared to what? inc. about in comparison to treasuries right now. looks versus treasuries very attractive when you think of how expensive treasuries are right now. if you go back to previous cycles, that is where you get that median multiple of 17 or 18 being fair value. in previous cycles, it was a lot cheaper. so you would stay in the u.s. and in blue chips? paul: yes. it is about selectivity. ,e like consumer discretionary industrials, health care, and cyclical and those are sectors. we like the large caps in those sectors, but we have pulled back a little bit on small caps in emerging markets, where there is the most volatility, anticipating if there is some new disappointment oversees that

could once again make investors worried. ok, paul, how many rate hikes in the next six months? hall: we think one, and our money is still on december. betty: paul with wells fargo investments. up, valeant is getting hammered. can he put the company on the road to health? that is next. ♪

♪ this is "bloomberg

markets here well i am betty liu. vonnie: and i am vonnie quinn. close of trade, you can see we are coming down, the dow up 49 points, and the nasdaq has now gone into the red. in time for the bloomberg business flash, a look at some of the is the -- of the biggest business stories. some cities have approved a $15 an hour minimum wage. a city council voted on it, and it would push the wage to $18 an hour by 2020. the mayor has pledged to sign the measure. vonnie: and the was a plane seen as necessary and unaffordable, but now, congress wants to put the f-22 back into production.

betty: and boosting interest rates and tightening criteria for far worse to qualify. interest rates will increase by 55 basis points, and they also lowered the ratio of debt to income to bolster investor at lending club, and they said they were going to delay their meeting. vonnie: in massachusetts, lawyers are arguing over whether or not sumner redstone is mentally competent. redstonesuing pertaining to entities that control fire, and cbs. they say the 93-year-old redstone does not have the capacity to remove them and that he is being manipulated by his daughter. betty: that is your bloomberg business flash update. arees of valeant plummeting.

i a conference call this morning, the new ceo aim to assure investors that he could help. >> we try to be realistic with what we know and where there is bee uncertainty, we tried to good with what we are trying to accomplish. if we get a quick resolution, if we get quick approval and get ready and get it launched on time, there could be some upside, but i think we try to be conservative in those assumptions where there is some uncertainty in the marketplace. reportere bloomberg who listened in on that call joined us, and investors reacted very negatively to that, despite what papa was saying. the problem is there were a lot more red flags

raised, and they start to get this feeling that just when we feel we are getting out of the with someone point, something else comes up, so sunday's that comes up was can learn about a program that they put in place as a distribution network, and they were losing money through that channel, that was very disconcerting, and they are having trouble with one of their big drugs, a gastrointestinal drug, and they talked about potentially coming up against generic competition so some of the things that came up in the call and the guidance they provided was pretty close, so this whole issue of whether or not they're going to be able to be compliant with their debt agreements, it has just been -- i think no matter what he tried to do, it has only been a month, and he has not been able to show street.leant to wall vonnie: it suddenly went

downhill with the guidance for 2017. there could be more to come. cynthia: it is interesting. was tried toapa give more transparency to the company that in the past. he is new to the role, so there might be more to do yet, but with this company for years had to get used to or deal of the act that they do not get a lot of transparency even beyond the top-selling products. you really do not know what is at the bottom of the portfolio, pharma, you-- the know what is at the bottom of the list. he wants to be more transparent. him guess we need to give another earnings call or two to see if that will happen, but i think as the call went on, and list were starting to get inpatient, because they were not getting answered. -- answers. betty: i think he mentioned

dermatology? dermatology, and they talked about bausch & lomb, and that is a key asset. they talked about some new markets. so there are pockets of strength , so i think some of the key issues here are how do you make this walgreens program work, because, presumably, they are going to put more through that. they only have dermatology, so how are they going to put me drugs through their successfully, and this is not a small problem. this is one of their biggest drugs, and they have to show they can grow sales sustainably there, though those are the two issues that i think people got really spooked by. betty: cynthia, thank you. the story still continues. still ahead on "bloomberg markets," one stock up sharply since the deal with pfizer was called off.

that is next. ♪

is kevin.ining me good to see you. markets up two days in a work, the dow flirting with 18,000, and the s&p is up, 2130, flirting with that record high, but after the comments yesterday, do you think we are going to go even higher? what what is interesting about the equity markets is they are being supported by the bond markets and the valuations there, so a lot of people are starting to get back into them. what is similar is last year's set up to summer and this year's set up to summer. last year, about 15 trading days where we saw the absolute high on the vix and the absolute low

on the vix. we peaked up just above 53, and that was because of the fed, so people were anticipating a rate hike, especially be chinese, so what did they do? anticipating the rate hike, they devalued their currency, and we could see something like that again. we are not predicting a big volatility spike, the we are predicting one. anchor: this is very nominal compared to the 52 or 53 that you just mentioned, but still higher on the day. what do you think they are alluding to? willdo you think traders do? kevin: you are seeing an uptick, and that is showing that people are going out there and starting to hedge, because it is so low out there, it is cheap. especially as you get towards the top of the trading that everyone has been looking at, so

people have been nervous about the market, and we are starting to get to the higher levels. anchor: i want to go to your trade. allergan. it is down. people watching it knows there is something that happened since the start of this year. tell us about that. kevin: the pfizer-allergan deal got called off. back in may, at may 10, they announced a $4 billion high back. they also have another deal in about $40 billion. they have a great pipeline. what is interesting is in may, the health-care sector was actually the second best-performing sector, and allergan is one of them, so even after this giant run-up since may 10, what you put to do is sell the $245 before they announced earnings, and you can collect because of volatility is still elevated.

you can collect about 3.5% and lower your cost. anchor: we have got a little more time, so i want to go to the rate hike. a lot of people are thinking it may happen in july. what are your thoughts there? hasn: i think the fed painted themselves into a corner. they have come out to say the economy is strong enough, so if they do not do it, that will send shockwaves through the system, because what does the fed know that we do not know that they cannot raise it another 25 basis points? allergan: all right, thank you very much for your time. this is bloomberg markets. ♪

a

♪ bloomberg world headquarters in midtown manhattan, i am scarlet fu. and i am alix steel.

mark crumpton has more. alix, thank you. not ready to endorse a candidate right now, according to press secretary josh earnest. he will be in new york city tomorrow to attend democratic fundraisers and type an appearance on the nbc "tonight show with jimmy fallon." bernie sanders is assuring his supporters he intends to win the primary, and jeff weaver says the democratic presidential race the continue until democrats passed ballots at the convention in philadelphia next month. there is news from the associated press that clinton has gotten the nomination which they say threatens to suppress voter turnout. russian president vladimir putin hosted benjamin netanyahu at the kremlin, the talks expected to

focus on boosting bilateral ties and the situation in syria. it marks 25 years since the restoration of diplomatic ties. moscow is courting factions with israel to coordinate any possible incidents. and more than four out of 10 aren in the united states facing obesity according to statistics from a small government survey widely considered to be the best measure of the nation's obesity problem. obesity rates for men and women in the u.s. had been roughly the same for about a decade. the world health organization says 15% of women worldwide and 11% of men are obese. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. alix, scarlet, back to you. : abigail is live at the

nasdaq with more. abigail: the index has basically been flat, flipping between ever so small gains and losses. behind thesion here flat or neutral position, especially coming from biotech and technology, and starting out with the uglier, some pharmaceutical shares are plunging, dropping the most in more than 10 years after the company positive muscle disease a marker,d to meet and even so, the ceo says there were some positive signs in that study and that he knows of other drugs for rare diseases that are meeting primary endpoints, and there are some analysts out there who agree with that possibility, and also dragging on the nasdaq, the worst right and biotech are the shares of ogen, and thisi

has caused their shares to be while piper jaffray says clearly some changes are especiallyiogen, around rmb, and we do see lots of uncertainty in the form of a trading range between the buyers and the sellers, and on today's weakness, the stocks dropped right back down towards the bottom of that range the question could be whether it will hold or not. alix: as mentioned earlier, the tension is coming in biotech. beingl: the nasdaq is affected most by apple, three days in a row now, and today helping the shares of apple are comments that say the stock is in the trading range or remains range bound. one person sees limited

downrange based on the valuation. as for the upside, it was said that that would require the company to put out some outstanding growth in services or to introduce some new products, and that is what has been happening today at the nasdaq, ladies. scarlet: that was abigail doolittle reporting. stevens saysck there is more room for growth. scarlet: they talked about earnings and about concerns of subprime auto loans. take a look. to aen we look at growing full-size cap, similar to some of our competitors, there is still room to row, for merely here in the united states. outside the u.s., their artful but we woulds, expect to be able to more than double our earnings from gm

financial. ended with about 30% penetration in retail deliveries in the u.s., and we would expect that to be up in the range of 50%, 55%, so there is room to grow in the next years. reporter: there are rumblings about some subprime auto loans, and there were some numbers from jd power that came out that said as much of a third were below, the equityially value of the car with less than what was owed on them. does that give you concern? remember americredit. they never lost money during the downturn. that is their specialty. managing that kind of credit risk. and, frankly, over the last number of years, the number of originations at gm financial has not really grown. it has been pretty steady as they have grown more of their

prime business, and our credit performance has been very stable, as well, and it is obviously something we monitored very closely, but we feel the business is in good shape today. reporter: and you are protected against a downturn in case something went to the downside? chuck: there is always downside risk. and 100% ofsiduals, our leases go through gm financial. we are very closely linked with the lease guys relative to residuals. we monitor used car values, and we are taking actions outside kind of the lease business to ensure we optimize the car values. first, we reduced our reliance on fleets and we looked at weivery straight secondly, really try to optimize the supply and demand of used vehicles to ensure that we are

being able to optimize residuals. : there are projections that there'll be many vehicles coming off of a lease, millions. won't that have downward pressure on used car sales? : what i think is that the used car pricing will normalize. it has been a pretty strong levels. leasing, tivoli 25% of the industry, fell to almost nothing, and now it is just building up to more natural levels, and we see used car pricing moderate. truckscally cars and continue to be very strong, but as we think forward, building into our planning that there will be some moderation to more normal levels. scarlet: that was chuck stevens. are joined now by our bloomberg intelligence senior correspondent. kevin: pretty close to it.

it is at record levels, so the idea that we stagnate or level out a little bit above 17 million units is a good place to be. scarlet: so if that is the case, kevin: i see this think with bloomberg technology seen in the last couple of years, i would think that you could probably see a leveling with the units we did in 2015 and 16 and maybe even again in 2017. you have got an existing fleet that the average age is fairly old. there is a lot of great new technology on the safety, connectivity, and fuel efficiency side, that once people get into the showroom are interested in new vehicles, so i

could see flat for 2016 and 2017 before anything dramatically to the downside. we have beenel talking about this for a while. it was years ago, and it is still at this level. you do not have money, how are you going to go and buy a new car? we just heard from chuck stevens. is there a concern? is this due in part to subprime auto loans? in some cases, the concern about subprime is a little overblown. it was not that big of a factor. chuckst recession, as stevens said, this is what they do. you have to pull buyers and from the sideline. wall andto climb that get new people into your vehicles, and i think also what he said was interesting in that the level of subprime lending has not increased because

ultimately, there are more subprime people post recession. those numbers are stable, but i would not control growth through that way with the concern that it is all going to low up. i do not see that happening. that is one thing unique that i think a lot of us are surprised about is that people are favoring suv' is because of the cheap gas prices, and you are saying this may be one that is more of a permanent shift as opposed to one dealing with low gas prices. kevin: yes, and i think due to technology,in and suv's are capable, more capable than cars are, but you are still getting comparable fuel economy. pricing is similar, so i just think people like the feeling of height,the higher ride and in some cases, you have all-wheel drive capability, so the consumer does not go back to

cars, because everything they need is available in suv a possible yes and crossovers. to me, there is no gasoline price that would make consumers buy cars again. you do not see the suv market rolling over? this is a permanent trend? correct, because you have crossovers that are offering comparable fuel economy as a car, and there is no reason to give up the utility for a couple extra miles. thank you very much, kevin tynan. scarlet: raising interest rates, but are they changing the playbook? we will discuss, next. ♪

scarlet: this is "bloomberg markets your quote -- "bloomberg markets." i am scarlet fu. and i am alix steel. a few points away from the intraday and the closing high of 2130, still not a lot of pressure to the upside. scarlet: in terms of the performers, the energy index up downside, theyhe drop to about 16 of 1%. and time for our bloomberg news flash. itpike in the s&p index, and was up as much as three point

2%, the highest since the end of december. undertaking campaigns at companies including american capital. the bank of tokyo mitsubishi could be the first bank to drop out of the group of 22 dealers for government bonds according to the japanese newspaper nikkei. i also say their decision to of a is over concerns of negative rate due to the boj policy. scarlet: a launch number of shareholders refuse to back the tribune nominee tribune said it was changing its name. among thebilliton final bidders in one deal according to people with knowledge of the matter. other firms had submitted final

bits to the mines, and anglo american could reach an agreement for the mind, -- for the mines, and the deal could still fall apart. scarlet: and that is your business flash update. some breaking news on a company that has hired goldman sachs according to reuters, and we will keep an eye on this preview can see the shares getting an immediate jump on the report, up by 13% on that report that it has taken an interest. ix: at its highest level since august 2015, so deftly getting a jump on that news. and the chicago fed president has said that the fed should not hike rates until core inflation hits 2%. that diverts from foreign -- current policy. scarlet: so joining us now to talk about what is at stake is our bloomberg news editor joe weisenthal.

versus real inflation expected inflation, right? joe: yes, and the speech came , editedy like 4:00 a.m. not get much attention, but it is an interesting call because, of course, of course, charlie evans is an influential member at the fed, the chicago fed, and basically what he is saying is we want to be confident that inflation is going to go towards 2%, why not wait and see if it actually happens? anchor: does that mean lower for longer? joe: whether it is the pace of hikes thereafter, presumably some sort of data dependent kind of thing, but going back to talking about evans influence long ago, long before the fed started hiking, he was the one who said, why don't we just say if we are not going to hike at all or talk about hiking until --her flechette is around

inflation expectations are around 2.5% or unemployment drops to below six and a half and so he said set a level and make that clear, so it is a bit of a reprise of what we called the evans group back then, what he is suggesting now. anchor: so the kind of adopted that for a while. joe: yes, they did, and one of the measures of stimulus that they conducted, and there was qe2 andt qe and then then operation twist, and then they said here are some levels, and we will revisit them -- anchor: periodically. exactly. anchor: and they are looking at housing being a huge growth driver. capital from other sectors.

joe: yes, they have been same probably will not go into a recession because there is this lift we have seen from demand, but maybe it will be an even bigger deal. it will not just be the cyclical thing that affects the entire economy. anchor: like software leading the world six years ago. alix: ok, joe, thank you, and coming up later, more guests. scarlet: the close of trading is just minutes away. looking at how things are faring, the nasdaq still off by a 10th of 1% but still holding at its best level so far this year, the s&p above the 2100 level but losing some momentum, gaining 1/10 of 1%, the dow up by 25 that. this is "bloomberg markets." ♪

scarlet: this is "bloomberg markets." i am scarlet fu. and i am alix steel. scarlet geomet we would check in with ramy inocencio. the dow is down about a 10th of 1%, similar to the s&p, about as solid as it has been, in negative territory, and we will get to this and just a little bit. flirted out, we had with the 18,000 mark, and we are well off of that in the s&p 500, falling away from that 2130 mark, which was the record high setback in 2015, right now 2112 and some change there. bloomberg,r to my let me show you the s&p sectors, and energy is up the most, and

that is on rising crude, pushing past the $50 mark, telecommute dacians up 1.4%, health care down, and this is in large part because of a couple of pharma biogen and alexion, both having trouble with drug trials. and some of the companies we have an watching today, one has been valued pharmaceuticals -- the biggest fall in three eant pharmaceuticals, and adjusted eps, about two dollars less than what it saw back in march. also, bending club postponing their annual meeting two june 20, and i just want to show this little flatline right here. this is actually where trading was halted for about 12 minutes, the company saying it is going

to postpone its annual meeting and saying it is just not ready to complete its report to the public. this company is down year-to-date percent, and then looking at the homebuilder industry, pulled the homes -- pulte homes up, the highest in and the reason is because a management company says they are taking a stake after the cofounder criticize the current ceo and asked for him to resign, so traders are seeing this as a positive for potentially better leadership. alix: thanks, ramy. david from bloomberg news is with us. you have done this thing were you can go through the internals and look at what the s&p 500 reached in the first hour of trading. what does that tell you about investor appetite for equities right now?

david: there is what we saw today, and nonetheless, what we have seen in the past week or so is investors taking advantage of early declines. if you are watching the declines, that is the sort of thing you're interested in, because you want to get a sense of what happens when stocks move. you have prices down. it is opportunity. it is not just a reason to go out and dump more shares. in the first hours of trading -- alix: you also had a great chart out. we talk about the recession, and when you're looking at is when profits have bottomed, the increase you have seen for the s&p. david: right. dollars overion richard bernstein advisors. that is setting up the idea of an earnings-driven bull market, and this is all kind of key to the idea that profits have

bottomed out, and they are ready to turn, and what the chart shows you is when we have been in this position the four, when we have seen for an profit and the s&p 500, and this has happened 18 times going all of the way back to the 1930's. an average gain of 13%, and you have been up 15 times. these are the kinds of numbers that are in favor, it certainly bernstein is paying attention. scarlet: and the other side is that what point, with the economic data back that up? we will have more on that forecasting number in just a bit. "bloombergis it for markets," with "what'd you miss?" up next. ♪ . .

scarlet: we are moments away from the closing bell. i'm scarlet fu. joe: i'm joe weisenthal. alix: and i'm alix steel. [closing bell ringing]

alix: u.s. stocks closing mixed, the s&p clinging to a 10 month high as bankshares faded. joe: but the question is "what'd you miss?" a tale of two global economies -- which tail is the fed reading as it considers when next to raise interest rates. joe: and we will look at what could be one of the egg's stories to watch over the next five years. alix: and in an exclusivity interview with mary barra, she talks about how far that company has come since dealing with its ignition scandal. scarlet: we begin with our market minutes. looks like we were going to get to that record high. we got within 1% of that level and then with drew and since 2:30, it has been a straight line down with stocks falling more paring their losses.