[closing bell ringing] u.s. stocks closing higher with dowu.s. -- what the s&p and reaching higher. tech earnings kick into high gear. we break down the results in just minutes. turkey'su.s. warns on place in nato. we will talk about what it means for the country. oliver: and we have a live report from cleveland to what to expect at the republican national convention. scarlet: we begin with our market minutes with u.s. stocks closing with modest gains in a the dowading range with and s&p at record highs. the nasdaq at its best level since december. seven out of 10 major groups rose with tech and materials the best performers. consumer staples were the laggards here. joe: we had a selloff on friday

but that has been completely erased. oliver: we are inching up day by day since we broke those records. speaking of a the drop, i want to start on friday afternoon, looking at the s&p futures. aftermarket, pre-markets, that did you see is friday after we coup attempt in turkey. we are raced it by the time we came in this morning. everything was pretty much back to where we left it off and obviously a pretty big move in the tech stop -- tech stocks. on the year-long chart, i pulled this up because tech has not broken the new highs yet as of december 2015, so getting closer.

joe: u.s. 10 year yields have been itching higher for a while. -- inching higher for a while, moving higher but till not back to where we were earlier this month but the trend is definitely for an increase on those. scarlet: we just got netflix results coming out. netflix coming out with -- the stock trading in after-hours, taking a bit of time here -- 1.966 billion dollars. earnings per share of nine cents a share. not sure if we are comparing like with like because the consensus analyst was for three cents. stock tumbling and one number that stands out

is international streaming net adds 2 million -- analysts were looking for 2.5 million. the international expansion seen as crucial to the company's strategy. -- apears to be a mess miss. not only did they miss on this quarter and that's especially important for these companies looking for projected gains. scarlet: here is some color to that international streaming growth. as we wouldas fast have liked, so a little bit of a disappointing read from netflix itself. edition,e domestic net the consensus was for 695,000, so less than half of what analysts were looking for. that outlook for

earnings-per-share was for $.13, so this is a big miss by any measure. cory johnson is looking at the numbers. we knew coming in that the company would have an outsized reaction in the share price one way or another and in this case, it is a big miss. big for totala subscriber growth. there's so much vocus on subscription and i get it and understand why you want to see how big the market could be. but it's a direct relation to the product you sell and how much you sell it. you've got to imagine what a decreasing marketing cost is going forward and last order, the paddle is no longer to the metal on marketing. they were not spending 12% or 14% on marketing. that drop down to 10%.

so this is crucial. if they slow down on the marketing, what's the result? when they spend less on marketing, fewer people go to -- four up for netflix netflix. it leads to a disappointing number in terms of subscribers and that is a great concern. it still a growth stock and is priced with great relief that they can expand into every geography. scarlet: and investors are willing to see netflix pay for the growth. earnings per share was expected to decline somewhere in the neighborhood of two cents or three cents. it did increase, so it looks like netflix is posting a profit increase if you compare it with the same time one year ago. cory: at the end of the day, it

is about free cash flow. if they can add the subscribers, lower the marketing costs and keep it manageable, someday they can be profitable enough. maybe they can squeeze out other competitors along the way. at hbo we are looking and showtime or hulu and amazon prime, the cost of producing this is going up. don't give us a clear indication of how far they spread that out and how valuable is the first season of house of cards or daredevil when it is four years old? do they use it over 18 months or change it over time? they've got some wiggle room in terms of the cost of content. rising,nt cost is

content is getting more expensive and you can see the result. ist you don't see commitments and contingencies going forward. not everyone pays attention to that but that was $12 billion in minimum commitment to content they have to pay out in the coming years. they have to grow the subscriber base to pay for the content they are contractually obligated to. it's disconcerting to people who worry about things like that. more reactionet to these earnings from the president of created -- of creative strategies. skiving in.r what do you see on these net looks earnings? if you look at netflix,

this happens every three or four quarters where the numbers are up, down, up, down and it's clear at this point that these lee's investors. my sense is if you look at the broader sense, they put a lot of money into original programming. at this point, that is partially reflected in these numbers. looking at the volatility of these netflix reactions, the stock moves on average 13% on investor days. what makes investors so reactive? is that concerning at all? guest: historically, when the theters happen, think about reaction investors had when they wanted to change from the distribution of cds to just

digital. investors went crazy and did not understand that reality was moving to streaming. mailing would be history. they saw the future and started moving. they probably started moving too fast and hit her numbers but if you look at this original from puttinghave the cost into it, that's going to impact earnings in some quarters. scarlet: and we have ibm results out as well. slightly higher than anticipated. earnings-per-share of $2.61. estimate was $2.89. we have different parts of the

ibm business here with technology services and cloud revenue coming in at eight $.9 billion. second-quarter adjusted gross margin, 49% of what analysts were looking for. stock picking up a little higher. how do you assess that companies progress, all of these enterprise companies being judged by the progress they are making their. guest: they are making significant progress. they are fundamentally in the top two of cloud business is at the moment. watson gaining a tremendous amount of ground. keep in mind they are very in iot.to what is going on in

that's helping them add new numbers to revenue. -- you really need to do -- look ate cases the overall vision. at this point, she's really delivering. i want to bring it back to cory johnson. what stands at to you? cory: revenue growth. for the first time in 18 quarters and after ilion's of dollars spent, we see a tiny bit of revenue growth. they want to move people to their cloud solutions and get people to use the platform they call watson. is they are still slinging hardware come in trying

to sell big piles of licensed software and that is being replaced by the cloud stuff they are trying to -- that is something amazon is willing to push on the world and ibm has this fundamental conflict where the new stuff they sell is less expensive. i want to turn back to netflix because there's something here that tim said that is dead on. much they arehow spending on original content and content they are buying for other places. we know they say it is more expensive, but this is a hit driven business. i would be hard-pressed to name more than one or two shows on after "house of cards" and "orange is the new black." the original content is not as big, important and successful as

the older stuff, but the cost are higher. they talk about increased turn due to anxiety about higher prices. the letter talks about whether it's a result of total market penetration to other online video providers. of that highere churn and how much of a problem is that for the company? that is good and honest. that has been an ongoing question -- what makes customers come in and what makes them stay and how much control do they have? have enough hit shows to keep people on season to season? do they only need a few hit --ws to keep that user on or you want to keep the customers you've got because the cost of getting new customers is extraordinarily high. oliver: just to take it back to

ibm with a bit of a beat there. how come investors in that stock are not jumping right now? he market is pretty much flat after hours. what is holding them back? the shortn't know is answer. it's inherently in conflict with itself. the tells you about estimates. improving topline is important but when the top line turns around, operating profits will get a lot wider and we just haven't seen that. we've seen a compression of operating profits. if you sell a stuff, you have to make more money with it and i really don't see a significant improvement in operating earnings. johnson, stay with us. we are still awaiting yahoo!'s results. it might be their final earnings

call today when it does report. that company due to report any moment but we have seen numbers from net looks and ibm and netflix is tumbling in after-hours trading. ♪

mark: i'm mark crumpton. let's get to first word news. french officials confirmed the attack in nice that left 84 people dead, the assault was called a terrorist act. ask people are being detained and one of them allegedly received a text am the man police say drove a rented van into a crowd of people. officials a there's no evidence linking the suspect with islamic state.

the turkish president's crackdown on could jeopardize turkey's position in nato and potential membership. kicked offead purge with a wave of arrests over the weekend. eu laws bar capital punishment in member states and people in turkey have been demanding the death penalty for the coup plotters. the gop has long-awaited draft platform is expected to be approved today as the party closes in on nominating donald trump for the presidency. the document is said to have been finalized last week. it calls for more account ability and transparency at the federal reserve. the platform is also suspected to urge no significant trade decisions be made during a lame-duck section after the election. hillary clinton's lead over donald trump is slipping. mrs. clinton leads mrs. trump by three points, 43% to 40%.

in that same survey last month, clinton had a six-point advantage. governorick of indiana mike pence will not influence votes. 11% say this election makes them more likely to back trump. news 24 hours a day powered by more than 26 hundred journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. scarlet: we are awaiting ibm earnings. let's recap netflix and ibm -- subscriber addition growth disappointed investors and ibm up after its revenue beat analyst estimates. i want to bring in our guest joining us by skype and bloomberg's cory johnson joining us in san francisco. netflix is paying for this content, perhaps not getting the

kind of laws and reward that it did from the first seasons of "house of cards" and "orange is the new black." when it comes to its content cost, is it worth it to go into these international markets and create these specific national market programs when they don't have the scale to spread out the cost? tim: i don't think they have a choice. if they want to continue international expansion, they cannot guarantee how house of cards is going to play, even played well in china, it might not play well in south america were other parts of the world. they will have to do much more localized content. when they did this original transition from cds to digital, that was a huge, disruptive thing. there's another stage at the

moment where they move from existing content to creating new content and that's going to be turbulent for a while. they not only have two have the hits in u.s., but some of these international markets and only time will tell if they are able to pull that off. that, the better the chance to get international subscribers as a result of that. if this is just becoming a hits driven business, does the stock deserve to trade with a tech multiple if they have these massive growth expectations? if this is about the sort of luck, whether you are hitting them or not you should investors ?hink about the stock tim: look at the history of

podcast. abc of the fortunes of cbs, and nbc was based on hit series and those have gone up and down depending on what those series were. in the 80's, it was one network and in the 90's, it was another network. we are starting to see that kind of is this model shift to streaming media and it's going to be harder for investors to figure out what to do when you are moving to what happens when hits drive the process. scarlet: cory johnson is with us and waiting as we await yahoo!'s results which still have not been released. when we come back, we are going to go live to the republican national convention. of the floore shot interrupting in protests. a lot of people tweeting there is chaos on the floor. we will get you a live report with an update on it is going

on. ♪

joe: chaos at the rnc in cleveland. an extraordinary development on the floor of the convention. explain what just happened. reporter: a data development happening -- 11 delegations we are told, 11 state delegations led a protest and called for a vote meant to embarrass trump, meant to cast a symbolic protest against his nomination. they were shut down by the chair and then started and straighten now the convention is at an impasse.

they are not sure where to go next. the anti-trump voices are not that aside and the pro-trump voices are chanting "we want trump, we want trump lowe's quote and trying to shut down the protesters. joe: what was the tactic the anti-trumper used. reporter: they tried to force a vote on a rules package that would have been unfavorable to trump and force them to jump through more hoops. it is intricate and little complicated but the thrust is they want to embarrass trump and embarrass the pro-trump forces. what the rebellion is about. we are told can to jelly, a delegate from virginia is part of the leader of this -- is the leader of part of this rebellion. joe: so whoever is running the convention, they were not compelled to abide by the signatures?

how are they able to ignore that motion? reporter: the chair asked for a duick voice vote, the ayes an nays. the pro-trump voices yelled latter and -- yelled louder and they moved on. dissatisfaction and protests -- joe: what next to watch for? get the votethey they want and what they do if they don't. that is what to watch for right now. we will be monitoring this story for the rest of the hour as things get a little crazy down there. we will be right back. this is bloomberg. ♪ proud of the very delegates you chose to represent you during our committee proceedings. intelligent,gh,

and they worked with rate stability and common purpose to write a republican platform. ♪

crumpton.mark let's get to first word news. as we have been reporting, republican leaders hastily approved rules that would govern the republican national convention in cleveland over loud of actions from anti-donald trump delegates. the dissident delegates wanted to hold a state-by-state roll call vote instead. congressman steve womack who was cheering the proceedings called for a quick voice vote. texas senator ted cruz is scheduled to speak wednesday at the convention, but he is telling politico he is not ready to endorse the likely nominee, donald trump. he says there is a lot of despair that trump is the

party's standardbearer. he accuses of -- accuses the media playing a role in his ascension, saying he received three ilion dollars in free media. hillary clinton is condemning the killing of three police officers in baton rouge, louisiana, saying this madness has to stop. she made the comment addressing the naacp convention in cincinnati. she said the recent killings of police officers in dallas and baton rouge gotten the ability of the nation to make progress. white house press secretary josh earnest says president obama has not called the turkish president p.nce friday's failed cou he says the u.s. is cooperating with nato to determine accomplices but is urging the regime to show restraint and uphold human rights. some 6000 suspects were detained over the weekend including hundreds of judges and prosecutors.

the associated press reports it has obtained a document showing restrictions on iran positive nuclear programs will ease in slightly more than a decade. the ap says it is the only secret text link to last year's agreement between iran and six four and powers including the united states. in at least 11 years, iran can replace its 5000 inefficient centrifuges with 3500 advanced machines. the ap says the two diplomats that provided the information requested anonymity because they were not authorized to do so. global news 24 hours a day howard by more than 2600 analyst and analysts in more than 120 countries. back to you. let's get a recap of today's market action. then across the board with tech heavy nasdaq having a good day. rally continues.

oliver: it did continue in a pre-good jump in the tech sector. we have earnings that we just ran through, in particular some of the ones that just broke with ibm and netflix. revenue -- a little bit of a beat their which seems to be helping the stock in after-hours trading. adjusted earnings of $2.95 a share. solutions group increased. the first time that part of the business has registered gains and the stock is up four dollars from where it closed in trading today. netflix is getting absolutely destroyed, down 15% after new subscriber additions came in lighter than expected,

particularly on the international side. quarter notfor next expected to be any better. thats a slight beat at ofes in comparison in terms comparison to subscriber additions. scarlet: microsoft is the next big cap tech name to report. the ceo is trying to transform the company to make it more relevant in a world that prioritizes cloud computing and mobile technology. last order, microsoft boosted capital expenditures, spending more to build data centers and expand cloud services. take a look at microsoft's revenue growth. it makes up 28% of the business and includes enterprise services.

it has been trending higher but the growth is not happening fast enough to make up for the weaknesses in one time purchases of software. that revenue growth comes at a cost. you can see how operating margins have plateaued. this stagnation is a result of a slowdown in microsoft legacy projects. how next chart shows windows releases have affected the sales over the years. microsoft announced it would not meet its goal of getting windows 10 on a billion devices in two years. the failure is going to its windows phone strategy. microsoft paid more than 84 times linkedin's earnings, the highest of any takeover valued at at least $5 billion.

we will look for color on that deal as well as the rest of the outlook on tuesday after the u.s. closing bell. turkey's rating may be cut to junk after friday's failed attempt at a coup. moody's lowered its forecast and the turkish president promised a new turkey. the u.s. and eu are asking him not to use it as an excuse for an authoritarian crackdown. joining us is the ceo of greylock capital. thank you for joining us. we saw the lira gets matched get -- get smashed. what do is thence like this for tell for investors in turkey going forward. my whole pitch was

turkey's investment grade country does not make any sense. there have been a lot of in turkey and whether it weren't did probably since the beginning of the year, certainly you had to figure the economic policies of the country are going to take a backseat to the president establishing political control. makes -- takes a hit. most of the corporate's are 40 or 60 basis points and i think you'll see more of that. are an investor and held positions in turkish debt, do you get out of that or do you hold your position based on whatever the fundamental reason why do and when you got into those assets? guest: it probably depends on what strategy you are taking. anyone who is a short-term trader should get out of the

way. i don't see this situation getting better before it gets worse. we've seen time and time again that when a government focuses on consolidating political control, the economy suffers. it never gets better. scarlet: what is the timeframe where things all apart? does it happen abruptly or in stages? slow upou see growth already and you see inflation ticked up a little bit. are going to you see a big bump in activity. tourism is -- turkey is not going to be the favorite destination of turkey -- of people for a while. generally, this can take years. you can start pulling apart and economy if you start getting the leadership focusing on consolidating political control. scarlet: the central bank is going to meet tomorrow and

economists are expecting a rate cut. traders are not counting on one. they are thinking the central bank will stand pat because of the increased risk profile. does it matter what the central bank does? putting some liquidity in there to manage the effect is one thing but starting to widen out rates, we will see what happens over the next few weeks. but investors, especially on back of an announcement like this, fitch came out citing the issue that the cu attempt is not going to help the economic situation. you are probably going to see downgrades and 25 basis points is not going to bring people into the bond market. mention it's never a good time for growth when a leader starts consolidating power -- can you give an example where we have seen this playbook before? guest: it might be an extreme example but if you look at the

lost decade of argentina, the issue was kircher, when he became president, he began to try to consolidate political economy, anyet the economic decisions he made were to control theim political situation. it cost argentina a good 10 years. i don't know what's going to happen in turkey but if you see this rupture between the president, the eu and potentially the u.s., this is not constructive economically. oliver: you don't think simply rate cutting or some kind of action by central banks are going to do it, what can the turkish government due to shore up confidence? prefer not to publicly execute the coup plotters. the rhetoric needs to be this is a great place to invest, not so

much retribution. we can manage our political issues and there are some things -- there are a lot of things he be saying and doing to say we are still open for business, not i'm going to call who -- going to cull whoever doesn't like me. stress with their be due to the foreign funding situation? guest: i'm not sure. i don't think we have a lot of transparency on that. it's clearly not a good number in the market movements today where we saw the corporate's widening out more than sovereigns coupled with this headline, it's a very emotional thing to have a buyers strike. we will have to see. oliver: lots of questions still

out there on the turkish situation. scarlet: italian bank shareholders may be mourning their losses but shareholders their blessings after the brexit vote. this is bloomberg. ♪

the country is recovering from its longest recession since world war ii and now it is working on a package of measures, including fiscal reforms. here with some insight into the italian economy is jonathan hopkin, an associate professor at the london school of economics. for coming in.

we have great concern about the state of the italian economy, the state of the ranking system. tot can the government do alleviate some of these concerns? what thee thing is do.rnment would what is facing at the moment is an unstable situation in the banking. it would require some kind of the current with interpretation of european rules, it would not be allowed without some kind of they'll in in ofestors -- bail investors. scarlet: i want to break -- yahoo! reporting adjusted earnings of nine cents a share. a decline from last

year at the same time when the company reported $.16 adjusted earnings share. revenue excluding that passed on to partner websites is actually higher than analysts were looking for. a decline from the same time one year ago. $39.1ing profit was million. analysts were looking -- yahoo! reporting a non-cash goodwill impairment charge of $395 million. the outlook from yahoo! is a miss on the bottom line, a miss on the top line as well. the tope me, a beat on line, though these are steep declines. tumblr, the blog they bought. i want to bring in cory

johnson to sort this out a little bit and figure out what is going on. does that mean anything to you? cory: adjustments and yahoo! is like adjustments in hewlett hacker. the company has been adjusting for 15 years. admission is a big one. it's the same time instagram was purchased for the same price. instagram has gone to be a fantastic success. the emphasis is interesting because they admit they have had , a 32 percent year-over-year decline -- just a disastrous decline in all of their businesses. but they are talking about having a cost of structure change in place. they talk about how popular yahoo! mail is an they want to

convince someone it is a important platform in mobile when all of the numbers suggest the opposite. when you look at yahoo!, a lot of people are saying this will be the last quarter the company reports. is this because there could be an agreement to sell the various parts? ons it matter what they say the earnings call to investors? cory: i think it does. they could look at the business and say it's enough. the market might not like it they have to get something near what these businesses are worth and should not just take any offer that comes in. we can expect the leaks coming out our not to be believed and there could be leaks with other people just trying to raise someone else's bit. let's wait and see what the offers are. if someone wants to keep marissa

mayer is someone who understands this business, she's very convincing to people when she explains her strategy. yahoo! also saying price per click increased 8%, but -- cory: it's the exact opposite of what google says. uggla says we are willing to sell lots and lots of clicks, so even if the prices are coming down, we're going to sell so many and make money. yahoo! sees the exact opposite result. back withe will be more on yahoo!, the rnc and the italian banking system. this is bloomberg. ♪

joe: what's get back to our conversation on the italian economy with the associate professor at the london school of economics to joins us now from london. you mentioned a gap between what italy would like to do or what it needs to do and what it would be allowed to do. domestic it mean for policies if the government is seen as being stymied by brussels or germany and what does it do to the country's belief in the euro? guest: it is clearly not going to help. the main forces of opposition, the parties of the opposition looking strongest at the moment are anti-european parties, the five-star union -- five-star movement and the northern league are hostile to the european union generally. smacks of being on

able to protect the italian economy and retail investors because of your pm pressure -- european pressure is going to be bad for the banks. turn to theto brexit. after the vote, there was a lot of concern that it wasn't so much financial mid -- financial risk that was the main concern, but political repercussions and movementsf anti-eu and what if we saw the referendums repeated -- it's ont been a couple of weeks whether the anti-eu parties have seen momentum increased elsewhere in europe. guest: it is soon to say. there have been some polls that said just and increase in support in european integration in some european countries in the immediate aftermath of the vote here for i guess a lot of it depends on how bad things get

in the u k. if it is seen as deciding to leave the european union has bad consequences for the u.k., then we can expect the bad news for parties advocating similar steps in other countries, but the real test is in the forthcoming elections. to go back to italy, there's a referendum on the constitutional reform in -- constitutional reform. it's a similar vote and though it is not formally about the european union, it would be perceived as a similar vote. similarly in france next year, we have presidential elections and marine le pen is looking strong. we will have to wait a few months to see. will they inextent form the way europe negotiates with the u.k. and do they have a

desire to punish the u.k. and make sure leaving the eu does not look like an appealing thing to do? guest: they have a very delicate balancing act to perform. making it easier for the u.k. to leave or allowing compromises that would allow them to keep all the clear benefits of eu membership without paying the cost would be precisely the kind of thing that would encourage anti-european parties. if britain can maintain access to the market while denying freedom of movement, that's the kind of thing that would appeal to anti-european forces in other countries. joe: thank you very much. we will be right back.

. .

post-outbreak -- just breaking out on the floor of the rnc in cleveland. what is happening now? we have seen seems that we have not seen in decades on the floor of the republican national convention. a group of protesters attempting to force a roll call vote. they did not expect this to make the threshold to have a rollcall vote and they are moving on to the nomination, but the protest are something we have not seen. it just shows how this divides the party as his wife melania trump gets ready to speak tonight. scarlet: donald trump introducing her as well.

this was supposed to be a convention that unifies the party, or at least glosses over the fissures. that does not appear to be happening. megan murphy on the floor of the rnc in cleveland. be sure to watch "with all due

♪ reince priebus: this convention will come to order. >> a little frustrated. [cheering] ♪ john: it is here. we are here, and man, we all really need a beer. the republican national convention has officia