tv Bloomberg Markets Bloomberg July 22, 2016 3:00pm-4:01pm EDT
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vonnie: we are alive from bloomberg world headquarters in new york, covering stories out of san francisco and washington. forunich a manhunt underway at least two shooters who opened fire at a shopping mall in munich, killing 6 people at least and wounding others. david: stocks on track for a fourth week of gains, pushing towards all-time highs. why investors are pushing political uncertainty to the back burner. wall street still not pleased with the airline industry. david: we are one hour from the close of trading. julie hyman has a look at the latest here. julie: i'm checking the latest stats.
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we will see what the next hour holds. we are seeing a pullback in volume today on the three major averages on this summer write a. it looks like all you money s&p the 20 day average. we are seeing an extension of gains as we get towards the close. the nasdaq up 1/2 of 1%. the week and another winning week, the fourth week in a row we've seen gains for the s&p 500. take a look at the s&p over that five-day period. here are the intraday highs that we saw on wednesday for the s&p 500. we have not exceeded the intraday level. right now we are above those levels. we see how it plays out over the next hour or so. we are watching the chipmakers today. we have a tale of two chipmakers. advanced micro devices posting its first quarterly revenue gain, going back to 2014. it is on increasing demand for
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chips, as well as chips to power video games. sky works is lowering. the company talked about some issues and its largest customer. it is forecast for fiscal fourth-quarter revenue growth without the effects of its biggest customer would be 10% to 12% instead of its forecast. precision accounted for the biggest portion of the company's revenue. there is a bit of a read through for sky works going through to apple. paypal for years had not recommended that its users use credit cards, rather linking directly to bank accounts. visa shares are higher on its earnings but there are concerns about the agreement effect on paypal earnings. david: yesterday we were talking about chipotle. vonnie: -- julie: and how terrible those
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chipotle numbers were. same-store sales down 23.6%. it's a huge drop. stock was lower earlier in the day. it looks like chiptopia is to thank for this. the ceo did make some encouraging comments on the call, saying sales trends were starting to improve and he gave some credit to this new loyalty program. asjust want to say chiptopia many times as possible. matt miller a proud member. those shares have turned around. vonnie: thank you so much. now let's get a check of the headlines on the bloomberg first word news. mark crumpton has more from our newsroom. mark: we begin with the latest details on that story developing out of germany. the public broadcaster said at least 6 people have been killed
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in a shooting at a mcdonald's restaurant at a mall in munich. police are hunting for police two shooters at this hour and urging people to stay inside and avoid public faces. my colleague is in munich and she joins me on the phone with the latest tr. elisabeth, are the authority so far labeling this an act of terrorism? they have stopped towards somewhat of labeling an act of terrorism. they have been saying there may and therorist attack, federal government has so far referred all our questions back to the authorities here in bavaria. i guess what is most important to stress is that there is little information on those sorts of things coming out right now, while the police are still hunting for the shooters, which they suspect to be 3 people.
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mark: what are you seeing, what are you hearing? reportsh: there were and rumors of shooters right in the city center where the bloomberg office is located as well. there were earlier people rushing through the streets and screaming, which is really quite scary when it happens right next to you. since then several police fans turned up -- vans turned up and continuously police vans are rushing through the streets. it seems to be calmer now than earlier, which is related to the fact that the second suspected shooting turned out to be wrong. mark: yesterday the german chancellor met with the new british prime minister, theresa may. they talked about counterterrorism cooperation. and you give us a sense of how that has gone with germany and from some of the other countries in the eu?
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elisabeth: i guess especially since the attacks in paris and then the attacks and nice, -- in nice, there is an urgent sense that corporation -- cooperation needs to be intensified to counter these terrible acts. at the same time, what we are seeing is with nice, with perhaps the attack on the train in germany on monday, there's little authorities can do to prevent such attacks from people seemingly acting pretty much on their own. mark: bloomberg's elisabeth behrmann joining us from munich. we have reaction from president the president saying that our hearts go to those injured in germany. willid, germany, an ally, get needed help. the latest information we're getting is at least six people have been killed in a shooting at or near a mcdonald's in munich, germany.
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shooterre hunting for a or shooters at this hour. the city of munich virtually on lockdown on this friday. back over to you. vonnie: u.s. stocks advancing today towards all-time highs, led by rallies in the phone companies and utilities. s&p 500 said to edge higher. if the longest stretch of weekly gains for the index since march. joining us is the chief investment officer at commonwealth financial network. do you think this rally will continue in spite of some calls out there, that there are some indicators that might be saying this rally will not continue? >> i think the rally is going to continue for lease the near term. we just broke into new highs, as you mentioned. earnings coming in better than expectations. expectations for the future are quite strong, and the economy is improving in such a way that they looks like it's realistic.
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i think right now the trend is very firm. david: earnings coming in better than expected rate how low of a bar are we working with right now? >> pretty low. part of that is by construction. if i'm a company manager, i would rather go a little bit lower and then beat that. the expectations are a little bit below what they should be. given the improving situation, we set it up even more than we would otherwise get. it's a low bar, but not as bad as it would seem from that. vonnie: utilities and phone companies had been the beneficiaries. what will be the new leadership? >> i think you will move back into consumer -- consumer led companies, consumer gain staples. they will have money to spend, they are going to spend it. consumer discretionary. you are going to start to see sectors, like industrials, start to bounce off the bottom.
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we have seen expectations start to come back. often we see capital expenditures wide with that. what is your sense of sentiment right now? >> bullish. if you look at the major indices, it's bullish. almost too bullish. that gives me some pause. i think the trend is up and we have some more room to run. vonnie: you must spend a lot of your time on the phone to advisors explaining how they tell their customers that this will continue, given the 7, 8 year bull run and the fact that what looks to many like a bubble in treasuries too. >> i think there probably is a bubble in treasuries. the question is not are we going to have a bear market. the question is, are we going to have it now. we saw a big hole back at the start of the gear. we saw a smaller pullback with brexit. if neither of those could sink
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the market, what out there will sink it in the near term? i don't have a good answer for that. i think clients, when you explain that, see the big picture. david: i wonder how you are factoring what the fed is going to do into your decisions and when they in fact are going to do something. >> the fed has gone back-and-forth so many times. i think they are scared of giving an indication. i don't expect any news at all in july. i think there's a possibility that september they might hike. i don't think that's the base case, but i feel like -- i think they feel like they have been caught wrongfooted a couple of times and maybe it's time to go. if that's the case, we will see more signals of that. i think right now the betting is december. david: thank you very much. cio of commonwealth financial
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looks to divest non-core assets to raise money. the potential sale could bring in more than $1 billion. that is your business flash update. let's turn to be airline industry. shares of american airlines group are higher today after the company reported second-quarter profit that topped estimates. yesterday shares of southwest tumbled the most in seven years. was hit with a computer outage that forced the cancellation of 1400 flights this week. george, set the scene for us. we've seen fuel prices so low. how is unaffected earnings? -- how has that affected earnings? ini think the real challenge this space is we are concerned those record innings will
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continue. we are concerned they are not going to continue. falling because airlines are trying to take market share. they are adding capacity and lowering the price of fares to fill airplanes. that lowering of price, fares has diminished revenue and is starting to affect profitability. southwest yesterday essentially warned us that in 3q they will be less profitable because fares are falling and that some airlines, the price of wages is rising. those two things are starting to hurt margins. vonnie: for them to offset the more people onut planes or more planes in the air? >> a lot of them are trying to combat it with efficiency. they are going to larger sized airplanes. the challenge is that the industry needs to get revenues to rise, fares to rise. that will make revenues rise. we are seeing too much capacity being added to the market to get
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there right now. that was the part of the challenge yesterday at southwest. the community was pushing southwest to say they would pull back their capacity additions. southwest would not say that on the call. the shares tumbled 11% yesterday. today you have american. they were more circumspect about it or they will grow 2% this year. they are watching things closely. i think the markets are better and that's what you see them doing. david: on the subject of southwest, i mentioned that outage yesterday. hereense of what happened and how damaging can an incident like that he? -- be? >> they had a server problem. overall yesterday was a rough day for southwest. they are a well regarded airline.
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southwest will move past this pretty well. these things happen from time to time. united has had the same problem. when you get it through united having its problem, united seems to have more problems more regularly than southwest. i suspect southwest will manage this well. vonnie: what about hedging? is that something that southwest does? >> this morning there's a lot of discussion about hedging with the american airlines ceo. american has been one of the airlines and never hedges. his angle was, it's a game you can never win, so why would you engage in it? it's a bit of a challenge in the industry. if we think fuel prices well bump along in the range of 40 to 50, it costs money to hedge. that is money that will hurt your bottom line, so why do it? i think in the u.s. they believe in lower for longer fuel and oil
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prices and they are reticent to hedge. the other challenge is, if you hedge and your competitor doesn't, you will lose because your margins are hurt by the hedging where his aren't. right now it looks very against hedging. vonnie: thank you for that. let's bring you up-to-date on the breaking story we are following out of germany. mark crumpton is here with the latest. mark: more details on that story developing in munich, the associated press reporting at least six people have been killed in a shooting at a mcdonald's restaurant in a mall in the city. police hunting for least 2 shooters at this hour and they are urging people to stay inside and avoid public spaces. mass transit systems are frozen at these hour. today's violence marks the second attack in germany in a week. president obama weighing in on the news, saying germany is an ally and will receive needed
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david: i'm david gura. vonnie: i'm vonnie quinn. it's time for insights with julie hyman. julie: joining me is scott our of trading vantage. he's in chicago. are we on this low volatility day, fourth straight weekly decline for the vix. i want to talk more generally about the drop in volatility you are seeing, and any takeaways you might have from it. in volatility, this is something we expect every year around this time. it is the summer doldrums.
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volume is low, volatility is low. there's not much going on. we have some individual moves on macro-wise,cks, but there's not much going on. next week is a big week. hopefully we can see volume overall pick up. we have a fed meeting, gdp repor ts. i would expect more volatility next week. we are seeing the vicks almost automatic here -- bottom out here. i really hope next week in general we will see a lot more market activity. julie: we have the fed and other macro stuff going on. going into this earnings season, there is an estimate of yet another job overall in earnings. how far do we need to get through before you start to see some big reads on how this earnings season really turned out? >> so far, overall it's been pretty positive.
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all the guidance and expectations have been lowered. so far it's been pretty good. the bottom line really remains is for those companies that are solid, that have at least some growth moving forward. the bottom line is, where are you going to put your money? there are still these influences coming into the marketplace because there's nowhere else to put it. i give it another couple weeks. once we get a google, once we get apple coming out, once we get those stocks coming out, that can set the footing for whether we build this space and continue this rally or not. julie: one stock you think will perform well coming out of earnings is gilead, big biotech company. can you talk me through it? what i want to do for this coming weeks options, the ones that expire next ride a, i want to buy the 88 strike call. i want to sell the 92 strike call, four dollars wide spread.
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about $1.20, for $1.25. is to the upside, we will see that stock perhaps flow past 91 1/2, 92 or so. if we get that moved to the upside, and this spread expands, max profit can be 275 or 280. the most i can lose if the stock goes down or really sits unchanged below 88 is $1.20. i'm really bullish on gilead, this whole biotech space right now is one of the hot spaces. q2 --y led the market, gilead has had a huge buyback rogue ran which will help their bottom line. they've had a lot of new initiatives in the pipe wind that were just approved. looking for this call spread to hopefully max out by the end of next week.
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julie: we will see. good to see you, scott bauer. talking gilead, which comes out next week. david: we are continuing to monitor a story out of munich of a shooting at a mall. you are looking at live pictures of a police press conference, police have confirmed 5 people have died so far in a shooting in a mcdonald's restaurant in the mall in munich. police saying three shooters are at large with long guns. this is a story we will continue to follow all afternoon on bloomberg television. german police saying 5 people have died. this is bloomberg. ♪
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the headlines. we go to mark crumpton. mark: we begin with the latest details on a story in germany, at least ask people have been killed in a shootout in munich. police hunting for at least two shooters and urging people to stay inside and avoid public places. the mass transit systems are frozen. antiviolence marks -- and balance marks the second attack in munich this week. and looking for the expedition of the turkish cleric who is blamed for instigated support for the failed coup. he lives in pennsylvania and has rejected the accusations. he is urging the u.s. to deny any extradition requests. others are being arrested across turkey. president obama is insisting that perceptions presented during the republican convention -- during a press conference
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with the mexican president today, mr. obama said that the al immigration is less of a problem today than 30 years ago. this idea that america is on the verge of collapse, this vision of violence and chaos everywhere doesn't really jive with the experience of most people. mark: he said he was too busy to watch the republican convention. donald trump says he would accept the endorsement of ted cruz. he says ted cruz should have endorsed him the other night and he might set up a super pac aimed at defeating ted cruz if he wants another presidential bid in 2020. ted cruz said that the attack on his father and wife -- ♪ mark: global news, 24 hours a in, powered by journalists
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more than 120 countries. this is bloomberg. david: markets close in under 30 minutes. we go to abigail. abigail: we certainly have a nice rally for the nasdaq, up .5%. and this is a nice week for nasdaq. in fact, the fourth weekly gain in a row, the longest since the middle of march. and it is all about technology. starting with the biggest, microsoft, the second-biggest member, up about 5% on the week after the software giant beat fourth-quarter estimates. estimates.at other and there was a bit of a recovery in the company's legacy server business. what stands out the most on microsoft, is the fact that shares are still, despite their
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strength this week, 5% shy of the all-time record high that was set all the way back in 1999. david: 1999. abigail: turning to one of the best performers on the nasdaq this week, ebay is up about 13%. the best weekly performance since 2011. ebay not only carved out a new record high, but added $.4 billion of a market cap based on a solid second quarter. they were looking for a lobar quarter, nothing great, but instead they put up 5.7% revenue growth and really wowed. as for whether it is too late to get into the shares on ebay, hitting a record high, there are technical indicators suggesting that it is overbought. the relative strength index is at levels last seen in 1998 when they went public. david: how about some losers?
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abigail: netflix, they are the big loser down about 13%. amazingly though, we do not have to go back very far to find out the worst week, that was in april when they were down about 40%. that was in the march quarter. this week, the weekly performance for netflix, also driven by a quarterly report, the second one. investors very disappointed by the growth in the subscriber numbers come up both -- numbers, both domestically and internationally. and some say it is due to the factors such as the price hike, pressure from the olympics. looking at a longer-term chart, we see shares dropping down into a bearish range, an uptrend reversal, suggesting some of these pressures could stay around longer than some expect. it shows sellers want to push it lower.
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david: thank you. just may befighters getting their medication from a chinese factory with a history of poor quality control. during inspections in the mid- 90's, fda found missing records and possible sanitation issues at one chinese drug manufacturer. matt: lasser, they reported things have not changed much, so why are they allowed to be sold in the u.s.? asking us is anna, let me about the amount of supplies we get from foreign drugmakers. ingredients used in our drugs come from india or china. guest: that is right. in recent years, the u.s. and all of the world, patients have become increasingly dependent on ingredients from china and from
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india. they do not know it. that the bigger drugmakers are purchasing their ingredients there, instead of making them themselves. why a lot of businesses go there, it is cheaper. david: the regulatory body is looking at pharmaceuticals, how much part -- how much power can they exert over these countries like india and china? guest: they can go and inspect them, but there are issues there with getting visas, with the company is being warned beforehand about whether the fda is coming and on wednesday. and -- on what day. and issues on when the fda gets there, do they necessarily speak the language, are they looking at everything at the plant that they hope to be able to see. and when they do find issues, they can ban them from selling
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the products in the u.s. but what we see with this plant is the problem with banning them is we are so dependent on them, if that happens then there are shortages and that is what has happened here. if they were to ban some of the chemotherapies, there would be cancer patients who would not get their drugs. instead, they must rely on plans that the fda -- plants that the fda says does not meet standards. matt: if the drugs, and with alluded -- drugs come with polluted ingredients, they go to the drug maker that way and i guess they are sent back? ideal that would be the situation. the drugmakers are supposed to test the products when they come through, so that they can make sure that they are strong enough, potent enough. but there was a former fda
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inspector i spoke to who said that is not always the case. not pointing to specific companies, but financially it saves money if you do not have to do that. and the fda themselves are not testing the products, to kind of be a backstop. they do not believe in testing their way out of the issue, is where they say. matt: so we do not know if the drugs that consumers are taking are ultimately save. for the drug companies, it would be too expensive to test them, and the fda to an extent, they do not have time. so consumers could be buying drugs that are polluted or the incorrect strength or with incorrect ingredients. guest: that is the bottom line. with chemotherapy, you would worry about if it is the correct strength. when a drug is contaminated, that is something a little bit easier to track. when it is something that could
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not work as well, with a cancer patient there is a possibility that they were going to die, so a lot of people do not relate that to the drug they were taking and the fact it may not have been working. that is not regularly tested or on the minds of doctors. david: you mentioned the dilemma that fda officials face and what do you know about the dialogue within the fda about whether or not they should allow the ingredients to continue to be used? guest: they inspected this company in march of last year and they decided to institute a ban on some of the products in september, then they exempted the products, many of them which are cancer drugs. it did take them several months to reach that decision. and, they did not give me much insight internal a into --
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internally into it, except that they do a risk analysis. do people need these more than we need to make sure that this plant is completely reprimanded. matt: thank you for joining us. david: coming up, in interview with the ceo of pandora and what he has to say about earnings and the rumors that liberty made an offer for the company. this is bloomberg. ♪
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business flash, a look at the biggest business stories in the news. jeff bezos becoming the third richest person on earth. networkon.com founder's topping buffet's. his revenue has increased this year, marking resurgence after it fell more than $43 billion in february. and posting second-quarter numbers that fell short of what analysts say is uncertainty. shares fell 23% after posted earnings of 48% -- $.48 a share. estimates.sed nigeria's local currency fell to a record low against the dollar. they are a struggling economy. met lastank governors week with investors in the u.s. to make the case for stocks and
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bonds, but it is said to be a hard sell with inflation rising and the economy weakening. and with oil down since february as militants attacked pipelines and inflation rates rising. the government says the consumer price index is 1.5% higher than a year earlier, that is higher than the median forecast of 1.4%. and that is the business flash. matt: pandora has investors' tongues wagging today, because they are the subject of a possible sale to liberty media. ceo is trying to steer it into new businesses like concert promotion. earlier today, he spoke to emily chang. she started asking about earnings, which listeners fell,
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but the hours are up. guest: we expected to be flat for a while. we are surrounded by these free demand services that we cannot compete with yet. we are on our way to do that. we will build new products to address that. but this is a positive signal, the court listening base -- core listening base is listening more and that is part of our improvement, the team has grown and we have more distribution. we cannot wait to offer a more complete marketplace. growth is decelerating and now we are looking at the listeners fall, so why should we trust your plan? guest: we have about 100 million people who have come to pandora in three months and it is growing. and we have made a huge investment on the backend with advertising. we are growing and we are getting more efficient. as we look ahead to the next
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time for us, expanding the product and diversifying from advertising, we are going to start downloading a business where we are optimizing not just for advertising, but for the inscriptions. and with 20% year on year, the business is in good shape. >> you are working on an on demand service, so what will be the key differentiator? there are so many of these other, apple, spotify, what will make yours different? guest: we have a lot to bring to the table. this is not a youtube product. on-demand services are basically about 30 million songs. that is not what you need for an average consumer, pandora brings an enormous base on which we know a ton. when you come to the on-demand service, we will be able to iterate that and make -- curate that and make it into it of. -- intuitive.
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i think one of the biggest problems solving right now, a lot of data, a huge audience, delivering something that is very different. >> you plan to have a tier system that would engage with the radio product? guest: again, you start with a foundation of 100 million people who listen about 24 hours a month. and this is about adding the cross sale opportunities, so we can be to you in the context of your radio experience and we say we noticed this about you, do you want to do this as well? and we can find the right ways to hook people in. and what is encouraging about our dialogue with them is that they see that we are incremental to the business and we will solve the biggest problem they face, how do you take a mass population and bring them into the pain -- paying services. >> what are the key sticking
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points? guest: we feel confident based on the progress of the last few months. ultimately, what is taking time is we do not want a cookie-cutter deal. we want a more considered product that requires additional totures, that takes time explain, but i think we are able to understand the potential opportunity that we bring. >> there is an ongoing review of royalties for streaming services, how could that impact things? guest: the big pieces on the performance side, that is what we are negotiating with labels. and we are confident that we can sign deals that preserve the long-term economics, that is critical for us to diversify. >> on the report from the wall street journal, there was report of an offer from liberty, so what really happened? guest: we do not speculate on those rumors yet we look at
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long-term value,. that is the lens in which we make all of our decisions. we are growing. i wish i could show you the project that we will launch later this year. we are bringing so much to that product, we are really going to reinvent the space. >> and i have asked you this question many times, are you open to the offers that cross your desk? guest: again my job is to look after the long-term shareholder value. that is the job of the board. we take it seriously. that is how we make decisions. >> it is political season and he told me that pandora can tell if you are a republican or democrat, how? guest: if you combine your zip code with the music you are listening to, we have a 90% accuracy to pinpoint your party. and that was an exclusive
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what you have? guest: it takes a look at the latest report from tom leaks, a pretty optimistic strategist. he is looking for a gain of at least 8% in the s&p 500. possibly, 10%. when he has a note of caution, it gets your attention. he did that today. and the reason is embodied in the chart. what he does is look at volatility. relative to the volatility in the bond market, based on similar gains that are tied into the treasury bonds. and the options on the etf. matt: i have the chart. viewers who have the bloomberg terminals can access it. you can use the code on the bloomberg. this is from tom who is usually so bullish. guest: that is right. he went back and he ran the
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numbers. when using the bond volatility gauge as far below the vix as where it has been, it is way out of whack. 68% of the time the s&p 500 was down in the next 20 trading days, so basically talking about a month of trading. that is his take. average decline of 1.43%, so he figures this is pointing to a pullback before you get more later in the year, giving you the 8% move he is looking out for the second half. david: the news this morning was about yahoo!, breaking the story that for the battle for the assets, verizon is in the lead. we are looking at the chart of yahoo!, you can see that these are up most recently. looking at revenues, you can see the diminishment. interesting because in that bidding war for yahoo!, the
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thing for verizon would be the ad value and technology. very interesting. matt: and it has been a hot story, such a hot story it feels like maybe it has cooled off for me. [laughter] david: you think so? matt: i have another charge that dave possibly made. i found this on the bloomberg terminal. david: call him out. matt: this is the third most accessed chart today and you can get it at 2226 in the library. it shows you in blue, the world p 3%. of -- u and in white, disappointing industries. that is airlines. southwest came on yesterday and said that it will continue to get cut. costs aree saying
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hard to control. they are down 18%. by the way, one experiment on radio we get dave wilkins -- dave wilson's e-mail address. nine people are signed up for the chart of the day mailing. and i want to give it to you now on tv. onbloomberg.net. they are fascinating charts. i use them everyday. dave, thank you for joining us. david, a pleasure working with you. "what'd you miss?" is up next. check out the major averages. this is bloomberg. ♪
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[bell] u.s. stocks closing higher and the s&p 500 on the longest winning streak in four months. the question is, "what'd you miss?" alix: is the s&p 500 party over? matt: we are looking at if there will be a correction in the equity market. joe: and our guest explains why we are not building more single family homes. >> and a chances of a said rate hike ahead ofrate the decision on wednesday. joe: we will kick it off with the market minutes. matt: looking at the dow jones average, looking at maintaining their longest average winning streak. newark are the again today -- new records again today. so those
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