"bloomberg daybreak." good morning to you. we count you down to janet yellen, future stable, dow futures up five points come as five points come s&p appeared wetoo trade at 220. a softer dollar session in the jew 10 space. david: two big stories today. a softer dollar session in the g 10 space. as donald trump narrows his cabinet picks, we speak with someone who has dealt with those decisions before. bill daley, a member of the transition team. it big story for markets, janet yellen's much anticipated testimony to congress.

the first time we hear from the fed chair since donald trump selection. solid -- trump will have all this fiscal stimulus and we will get a monetary policy offset. what will we hear from the fed chair if that is the basis for discussion right now? shannon: we've already heard some news -- lisa:we've already heard some noise from the fed. on how muchocus rates can rise, how much conditions can tighten before you slow growth and it is counterproductive. jon: we have a 1989 wide -- lisa: the other wrench in the

works is there is some noise out orthe trump administration potential advisors to him that there could be pressure on the fed to liquidate their balance sheet. that would certainly send some dramatic ripples through the market. some will be asking her about that. that is a huge wildcard. david: what was the bank of japan doing? they got just a smidge over zero and came crashing saying we will buy it all. in september, they said they would control the yield curve. they showed they were able to do that quite effectively. saying, look, we will buy as much as you offer us. we will peg rates at this level and it was more effective than many expected. looking forward to hearing what janet yellen has to say. that testimony begins at 10:00 a.m. eastern. those walmart earnings

have just come out. we want to turn to shannon pettypiece. how did the earnings look? shannon: they beat slightly what analysts were expecting. revenue was a little soft, but very close to what analysts were expecting. up 1.2%.e sales bit softer than what analysts were expecting, but pretty solid for walmart. it comes after another solid quarter of same-store sales. bit,merce was up quite a around 21%. compared to 12% the previous quarter. really getting that e-commerce growth. jet.com ined september. we have more than a month of sales from jet.com. they are buying their way towards online growth, but

still, that is finally the growth number that analysts had been waiting to see from them. david: $.98 per share -- that is the slight beat you referred to. trend line on revenue, they've been flat or even a little down. currencies have been a big drag outside the u.s. that has been dragging down their business outside the u.s. in the u.s., we are starting to see revenue -- walmart is a humongous company. 1%, 2%, it is on an annual base of almost half $1 trillion. investors are looking for, stability, solid, moving in the right direction. two years ago, there was a lot of volatility, a lot of uncertainty. it was unclear they were moving in a direction. now, it looks like they are a consistent, predictable result. david: the core question for

analysts and investors at this point, they are showing growth there, but are they keeping up with the amazons of this world? shannon: 21% growth sounds great -- amazon has been turning out those numbers quarter after quarter. target, 26% growth online. it will have to keep the momentum up. jon: best buy earnings, another beat. $.62 per share. the estimate, $.47. best buy, and upside surprise once again. get will the analysts groups of this? david: we've had quite a few beats now. game ord expectations is the business getting better? shannon: it shows where the consumer is. we have a decent consumer right now.

it's looking pretty good going into the holidays. some companies have said there was this election drag on the consumer. we've seen good consumer sales earlier this week. target was good, walmart looking good. the consumer is in a better place than many are expecting. the consumer can blow with the wind. it shows a good consumer victor going into christmas jon: walmart and best buy in focus. best buy trending much higher. let's get back to the bond market, two big voices sounding out about what they think is going to happen next. -- rayou know writing there are many market participants who have skewed their positions to be

south, making the move reinforcing until they are sticking out that shaken out. bill gross weighing in as well. -- reinforcing until they are shaken out. lisa: both calling for something of a bond selloff. the peripheral effects of that are different. saying we will finally get the inflation so many have been waiting for for so long. the question lies with, will we see wages increase at the same level or will that inflation eat into the consumer purchasing power? bill gross doesn't see it eating into the consumer purchasing power. as does jeff gundlach. that will slow growth and could lead to a more difficult environment even though inflation has been heralded as the holy grail of central banks around the world. david: he also warns of deficit

spending and corporate earnings. it might lead to inflation but not really growth. consumers are not able to spend or by as many goods because those prices are higher because their salaries are not raising -- rising at the same level, that slows corporate earnings. jon: great to have you with us on the program. 10:00 a.m. eastern, we will bring you pull coverage of janet yellen's testimony to congress -- full coverage. minister will be the first global leader to meet with donald trump since he was elected president. abe's stopping off in new york on his way to peru. he says he will try to work hand-in-hand with him.

iran expects donald trump to display more rationality once he becomes president. iranian economic official tells bloomberg that trump's comments before the election was a campaigning purpose -- he wants to renegotiate the deal. for the u.k.s good and the country should preserve so-called free movement of people come even if it leads to european single market. the report urged the government to allow foreigners of any skill level to work in the ok as long as they have been offered a job. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. david: coming up, markets transition to quiet as the president-elect transitions to choosing his cabinet. donald trump and his staff are whittling the ca candidates.

neel kashkari will join us. this is bloomberg. ♪

jon: from new york city, this is "bloomberg daybreak." dow futures positive 15 points. the seven-day winning streak that finished yesterday -- switch up the board quickly. yesterday, earlier this week, we printed a year-to-date high on ten-year treasury -- a weaker dollar story throughout much of the session begins to turn now with dollar-yen claiming a 109 handle. marketso much of the

fluctuations are trying to respond to what they anticipate from donald trump. -- of thetransition transition leads the news. is someone who knows the ins and outs of government and transitioning. he was the white house chees chf of staff. he joins us today from his headquarters in chicago. good to have you here. you do know this. give us a sense of the size and scope of the process going on right now at trump tower trying to put together this new administration. bill: it really is a massive undertaking. the honest truth is during a campaign, most people who are at the center of a campaign and therefore closest to the candidate don't focus on the transition and don't want to.

there is a concern that maybe they are arrogant and look like they will win. andof a sudden, you win here we are eight days later and you've got a massive undertaking of having to fill thousands of jobs, betting people -- of for cabinet jobs, doing background checks, having security clearances in a very short period. it is very early in this transition process. i think he made a smart move by picking the two top senior white house staff first. and then moves very cautiously to the secretaries in these departments. you have hundreds of people at the white house and thousands of jobs throughout the different departments and agencies. in order to take the reins of government on january 20 --

there could be a crisis that day or the next day. if you don't have a decent sized team in different agencies, that is quite an issue. david: you start at the top and you'veur way down -- seen it done well and you've seen it done not so well. transition,l done does the chief of staff play a critical role in trying to organize the process? bill: definitely. the president-elect picking reince priebus first and mr. ben and as a senior advisor, those two people will set the tone. -- mr. bannon. pence has his own transition he asked oversea as vice president. that he has to oversee as vice president. process comeve along with those who have to

plan the inauguration. gn: given the backdrop, iven the campaign trail, we've been told time and time again that we will see a different person than we saw on the campaign trail -- bill: that is a real dilemma because the truth of the matter is, lots of people believe politicians make pses d don't do anything. donald trump was so clear and so direct that it they get a sense wasy early on that he basically scamming them and was not serious about his promises, he has a big problem. for four years, the president must maintain that support of people wh went out -- who

went out and voted for them. if you lose that support commit you lose that base you came to , you lose your leadership position with the congress. just because you have the title of president does not mean you have the total power to move congress. they look at how their voters feel about the president. suddenlyesident-elect walks away from all the things that convince people to vote for , he can't walk away from those without looking like it was all a game or a scam. the voters walk away from him and he loses support. david: it is a big process and we are early going, but we'll leave have 60 days until they have to take office. give us a sense of where they

need to be in 30 days and 60 days or else they will be in trouble. he has to get the very senior cabinet spots filled. state, defense, attorney general and treasury. he has to get those. he has to get those announced by the 15th of december. he has some time. you have to do deep background checks on these people. you in the media will expose any flaws in these people and anything in their background. it is an in-depth vetting that has to be done quickly. at least one senior cabinet person gets targeted and has a very difficult time. that can set the tone for the presidency. you have to be careful. you have to get those four done quickly. you cannot take office without a secretary of state, defense

, treasurymaturity treasur secretary and attorney general. the next 30 days, he has to get those big four. at least have narrowed down the other cabinet spots and then move quickly to fill those white house bots. great to have you with us. bill daley sticking with us. coming up next, trade talks in new york city. japan's by minister the first to meet the president-elect since his victory. -- japan's prime minister. joins usel kashkari with his outlook on regulation

and the fed. ♪

jon: trade policy was at the epicenter of donald trump's campaign. renegotiating deals and putting america first was what he pledged to do. he said when he gets to the white house, he will call china a currency manipulator. what will that mean for the future of trade relations between the u.s. and the rest of the world? back with us is bill daley. it is great to have you with us. we were talking about the candidates for the cabinet. now, a discussion about trade. i want to put these two together. ,irculating in the press jpmorgan chief jamie dimon could be one of the front runners for the top job at treasury. given what he pledged to do on the campaign with trade and china, jamie, how conflicting with those two things be in your mind? would be a terrific

treasury secretary. it's unlikely, just because i think jamie understands the importance of the role he plays at jp. trade is a serious issue that come in a campaign come everyone gets heated. if the president-elect followthrough, you're in for a very to malta was 2017 -- to tumultuous 2017. his language was so aggressive. the president of china was rather aggressive back. watch whether he follows through on that and his tearing up nafta and renegotiating -- these have the potential to have an indoor impact on the u.s. economy.

on theenormous impact u.s. economy. if the president-elect does not follow through on these promises come of the people motivated ,round his rhetoric on trade who supported him and went with him begin to turn against him, he then has a serious problem with congress. he can kill tpp, but getting things done will become much more difficult. david: this is something the president can do on his own. he's been pretty clear and pretty consistent about what he things about trade. let's assume he wanted to climb back down off the -- how would you advise him to do that without losing faith? i wish i was that smart to figure that out. i would be very direct with the chinese.

i would try to do it quietly, not rhetorically. i would not do it using the bully pulpit as much as sending people who are close to him with the chinese to sit down and say here are the three areas that we must have somethg on these areas. -- coming toll now the u.s. and buying companies. they are very aggressive in the technology space. you will see those bills move forward. the question will be whether the president supports them and encourages them. which will go very far in this anti-china period we are in right now. jon: we appreciate your time. by minister -- prime minister abe will be meeting with donald trump. how difficult will it be to

repair relationships that in some ways were broken? david: what does he say to him, particularly as you have tpp, they appear to be walking away and china is in there with their own accord? jon: left a vacuum for china. he has a plan to eliminate too big to fail. we will talk regulation with minneapolis fed president neel kashkari. that is coming up next. from new york city, this is bloomberg. ♪

emma: it is 7:30 a.m. on wall street and 12:30 p.m. in london.

janet yellen heads to capitol hill today, testifying before congress. she is excited to be quizzed over how donald trump's fiscal policies might affect future rate increases. donald trump is expected to have several conversations with central cabinet picks. later this evening, he will have his first head of state meeting with japanese prime minister wal-mart topping helped bytimates that a gain by customer traffic and online shopping. that is what you need to know this hour. jon: coming up later, we are counting you down to janet yellen's testimony to the joint economic committee on the economy. that will come at 10:00 a.m. eastern. the prepared remarks will be released in 30 minutes time. by 11 points, the s&p

500 up by three points. dollar-yen trading water with a 109 handle. water with a 109 handle. -- trade atds at eigh 221. 1.45%.ositive by thes have rallied 12% since election, but some analysts say this has been an overreaction. spoke with scarlet fu and joe weisenthal yesterday to discuss his thoughts on donald trump and his administration's stance on the banking industry. >> that is the important thing interviews that circled with steve bannon

-- he talks about her capitalism. failure is failure, taxpayers should not be on the hook -- hard capitalism. you have success, you reward success, but penalize failure. we are getting back to things americans understand. heads i win, tails, the taxpayer loses. how does that square with speculation that jamie dimon could be the next treasury secretary? >> these are the crosscurrents that are evident in what appears trump cabinet -- i would put mike pence in that category. who is handling the transition, not chris christie.

and yet, you have much more traditional establishment wall street hedge fund private equity types as well. which is what they ran against. stay tuned. joe: in the early days of the obama administration, wall street thought he would be could it be a reverse image? appointments his of ben bernanke e, jason furman, you would have realized quickly on that the president was going to be more of the conservative que.crat, clinton-es that would have shaped your views. david: that was jim chanos. president-elect

trump, it is also the federal reserve. neel kashkari speaking yesterday at the economic club of new york laid out the plan he promised last february to address the issue of banks that are too big to fail. that gives us our morning must-read. he talked about the balance between safety and economic growth. he said "we cannot make the risk zero and safety is not free." neel kashkari joins us now. welcome back to the program. neel: thank you. great to be here. david: your plan for two big to -- a lot moree equity for banks. we've had an election. does the election of donald that make it more likely that approach could be pursued? neel: i think it might.

this is a nonpartisan issue. there are people on both sides of the aisle who think we need to address too big to fail. the biggest banks are bigger than they were before the crisis. there is a 67% chance of another crisis in the next century. administration, the new congress, there is a chance to take a fresh look. we need to go further. ,avid: is part of the deal here detail of back on the regulation in exchange for more -- he made aal similar proposal. neel: we have a lot more capital in the banks so they truly are safe, they don't need to turn to the taxpayers, we can relax some of the more micromanagement of what they are experiencing today. jon: what is big?

wells fargo is big, jpmorgan is big. they are very different banks. neel: $250 billion and above. all the capital requirements would go up to 23.5%. real equity. don't count that because i saw it first hand in 2008, this notion you will bail in these -- itors and convert never happens in real life. we need to stick with common equity. for the biggest institutions, the treasury secretary has to certify they are no longer too big to fail. people are she refuses, they will see higher capital requirements. the offset for growth, that will hurt growth. one of the big things this country did was something you

lead, the recapitalization of the banks and the banks moved on to refinance the economy. do you think the offset could be quite damaging? neel: we have seen the financial crises are so devastating, the bas estimated its 158% of gdp. $20 trillion hit to the u.s. economy. if we avoid one of those come our plan will have paid for itself many times. or, we can take another approach and say that's ok, we will have a financial crisis every 80 years. just get on with it. i for one don't accept that. david: two related questions. have you had any reaction from the big banks? they operate air nationally. -- internationally. this is a very different approach. doesn't that pose difficulties for them in trying to write the horse into different directions

-- ride the horse in two different directions? neel: it's in their interest from lipid taxpayers pick up the tab every 50 years when there is a mess. we cannot force the rest of the world to follow our regulations. show the world that you can have an economy that is vibrant, you don't have giant banks putting the economy at risk, other countries will follow. we need to leave. we cannot wait for europe to catch up. consequences,e the erosion of risk-taking capital. safer banks don't equal supermarkets, so to speak. you understand the markets. do you look at that kind of situation? -- safer banks don't equal safer markets, so to speak. neel: i don't find those arguments persuasive at all.

the idea that wall street dealers will be stepping in to re are bigts when they ar price moves, i don't buy that at all. look at where the s&p is now. stocks are high. it's not as though there's not capital to go into the equity market bause the banks are regulated. conversation in a couple minutes time -- you guys have $4.5 trillion balance sheet to put under there. once you pull that away, don't you do the guys to come back in and do their job? neel: if you're a black rock or fidelity, you are making investment decisions for the long term. the idea that they need a goldman or morgan stanley to make that market -- if vanguard and black rock want to trade with each other, they will find a way to trade securities with each other. they don't need these dealers

who are providing such great service to make markets work and absent that, the whole capital system would break down. that you need me to have multi-trillion dollar institutions for black rock to find somebody at vanguard to trade with? i don't find that compelling at all. david: the timing is striking. it comes out right during this transition right now. it matches up with some things we have heard from trump. backing off on the smaller banks, something you want to do. have you had any discussions with the transition team or people close to donald trump to get a sense of whether it might match with what they want to do? neel: we have not had any contact with any of the campaigns or transition team. members of congress on both sides of the aisle say we want to relax regulation on community banks. there is a possibility that there could be a compromise here. will beeel kashkari

remaining with us. , we will talk about fed chair janet yellen. how will the fiscal policy of donald trump affect the path rate increases? this is bloomberg. ♪

emma: full coverage of u.s. as sheir janet yellen testifies before congress at 10:00 a.m. eastern. jon: from new york city, this is "bloomberg daybreak." we are counting down to jenny owen's testimony. -- janet yellen's

testimony. a lot of your colleagues have gone out this week and made speeches on monetary policy. with the fiscal stimulus package looks like from the new administration. forecast through 2017 that's how complicated does your life get? neel: i focus on what i can control. i don't find it useful to make short-term predictions on when we will move and where we will move because people get upset when we are wrong. over the past four years, we've been wrong a lot more than we can write. i'm looking at the story of labor force participation. e u.s. economy has been creating a lot of jobs. it has not yet been inflationary. i don't know if that process can

go on for another month or another year. i want it to go on for as long as it can. i'm looking at core inflation come inflation expectations and watching that headline unemployment rate to see is this story continuing or running out of room? jon: a summary of economic projections -- your dot is there ,omewhere just looking at them you cannot make calls and you don't want to make speeches, why is this relevant and how is this helpful? developed ahe feds new communication tool, they developed a tool in that moment. that is not necessarily optimal for all sides of the economy. ot has not been helping us -- it is not clear to me that it has been providing much help in delivering our policy response. in december, you have to

sit there at the fed and every togle one of those dots has shift somewhere and you have to make a call on what fiscal stimulus will look like in 2017. neel: it is going to be very difficult. right now, the markets are hopeful there will be a lot of fiscal stimulus. i have no idea what the new president and what the new congress are ultimately going to pass and what that fiscal stimulus will look like. right now, i would say until we know more, assume the status quo. forcet's look at live or participation and inflation and build our model's office that. we need a lot more information before i can put a credible fiscal plan into the model. to makeithout trying monetary policy, you would be reactive rather than proactive. the markets are moving on the news. they have moved substantially. anticipating real inflation around the corner.

you have something approaching fullmployment. you would not anticipate that and provide for it in advance? neel: the markets have moved to the tent that inflation expectations have moved in a way that is sustainable and that could reverse themselves next week, who knows? that is something we would have to factor in. , then thatst noise seems premate to draw any conclusions. jon: do you look at the marke reaction, stronger dollar, orh-yield as a stabilizer financial conditions tighteng? neel: if it sustained, it would be making the fed's job easier. we've been coming up short on inflion. his might actually help us get towards our inflatn target. we have to see if it is sustnable orf it reverses itself. david:communications for the fe.

would you change their communications pattern? i don't think anybody can dictate what the rest of the fomc members do and i don't think anybody should dictate that. as i have observed the fed closely as an outsider and now intimately as an insider, we get ourselves in trouble when we make a bunch of short-term predictions. we should stay out of the prediction business and focus on the data and analytics business. jon: the market is also a data point. is that an unwarranted tightening of financial conditions? high yields, stronger dollar? neel: i don't know. the markets seem to be optimistic about the new

political environment we are in. we will see if they are right. i don't look at it as tightening of financial conditions. i look at it more optimistically. before i draw any firm conclusions, we will have to see if it stays. he's very good at this. david: very smooth. thank you for being with us. neel kashkari is president of the later today, we will bring u pull coverage of janet yellen's testimony to congress. time for other stories making headlines at this hour. a quick retail roundup for you -- signs that walmart's push to expand e-commerce is paying off. posting third-quarter earnings that beat estimates. walmart also raised its annual forecast. the ceo has been urging the change to take better care of

jet.coms -- they bought in september. amazon has found a cheaper way to expand inventory available for quick delivery. they are turning to merchants who sell on its marketplace for extra warehouse space. they cannot build facilities quick enough to meet demand. items readymillion to be delivered within two days. u.k.ncrease of 1.9% in the was more than analysts expected in september. clothing and shoe sales rose by the most in 2.5 years. this is bloomberg. jon: coming up, a slew of that we will preview the numbers and tell you what to look out for. that is coming up next. this is bloomberg. ♪

jon: time now for today's stocks,diary -- housing october cpi and jobless claims. simon forned by bloomberg first word. wasforefront is he inflation come of the cpi story that evolves from here is fascinating over the next year. you cannot get a handle on it. the base affects start to change. how does the inflation story inform the fixed income story in the months to come? mr. neel kashkari suggested, there is no predetermined direction in terms of rates and the market is trading up each data point. cpi later on this morning north of 1.1%, the fixed income market

will continue to trade around that. leading to a stronger dollar, greater expectations of the fed being able to go in december more easily. that will increase some yield allocation across the bond market. jon: cpi not the preferred gauge over the federal reserve, but i sit here and wonder what this means for the market and where treasuries move from here. does that put a natural lid on treasuries even if we do get inflation pressures? simon: you will see further downside to the yield -- the dramatic moves we've already had fromthe 30 basis points sub 180 down to 220, within the does putspace as well

something of a lid on u.s. at this point. thehave to assume against backdrop of improving macroeconomic numbers, if that is the case, there will be further upside to come. jon: we are seeing the movie and break evens and a steeper yield curve. what is the spillover from sovereign off the back of that? simon: you've been chasing in the low yield environment over the last couple of years as you get the backup and yields through the sovereign space, by definition, people have been forced to move down the quality curve to hit their yield. while high-yield has a shorter duration profile within the

,ndex than investment grade there's arguments to take a slightly defensive stance during the selloff. anticipate big data points in 30 minutes time. ballard coming up on jenny the by's -- simon ballard. coming up, jenny by's before congress. testifies before congress. futures positive. only marginally. from new york, this is bloomberg. ♪

a jonathan: from new york city,

good morning to "bloomberg daybreak" on this thursday, november 17. alix steel is on assignment today. we await are the remarks from janet yellen. 500. points on the s&p those prepared remarks across the bloomberg terminal now. janet yellen saying there appears to be scope for more liberal market gains. a rate hike could be appropriate relatively soon. stable jobless gives economy a waite more to run you growth has risen recently and inflation is to move to 2%. very subtle move lower on two-year yields. stranger treasuries. straight to

treasuries. no big moves on the back of this. it could be appropriate relatively soon to announce rate hikes. appears to be scope for more labor market days. david: it is striking there is not that big of a change. carl is the u.s. economic chief economist. i got it. i am not sure that looking at these headlines, it would have been any different befor donald trump was elected. >> we are hearing they are increasing expectations for fiscal stimulus but cannot change that outlook for the economy or monetary policy until they actually see what the plans are because we do not know if they will arrive in 2017 or 2018. the near to medium term outlook does not shift. david: in case people are

getting too excited about this, there is still room in the labor market. she does not feel too much weight pressure. some people are very concerned with fiscal stimulus to get overheated. >> this is a bit overheated in terms of her economic outlook. we have seen expectations for the fed not only in december but over the course of next year looking for a more aggressive normalization of policy. our remarks are throwing a bit of cold water on those expectations. waiting in december at this point but cautioning the markets do not get too bent out of shape for your outlook for next year. jonathan: the question for janet yellen today, how are you going to model the fiscal stimulus through 2017? we are over the december rate hike talk. we are done with that. what happens through 2017 based

on what we know at the moment? >> we don't know much of the moment so they pretty much have to stick to the same outlook they had back in september when they update their forecast at the december meeting and when more details become available. we don't know if the conservatives in congress will agree to deficit finance spending so we have no sense how big the program will be. the fed will retain caution until they have more details. talking about communication and how damaging it can be to start saying this is going to happen when it usually doesn't. in december, they will have to release a summary of economic projections" where they think rates will be through 2017, 2018. three months later, they may know what the fiscal package looks like. could we see it being move from december through the end of the first quarter on what the fed anticipates? sep will haveember

big asterisks next to it. it will be much more valuable than what we get in december when there are huge unknown from policymakers. david: it strikes me that janet yellen has been very consistent with respect to the market and her statement. the markets are saying you are not moving, she is not moving. now they are saying you are moving, she says not so fast. carl: absolutely. if we can invoke the description of margaret thatcher, the same thing is true for janet yellen. she has been an excellent forecaster at the fed and trying to hold a stable and steady course and we are seeing from a number of fed policymakers 5%.ering around fiv they are going to be very

reluctant to move the needle significantly until they start to see more signs of wage pressures in the economy. we are not ngthere is an upwardn average hourly earnings but not seeing it just yet. one key headline way she says nuclearis the only low, race, that means the fed does not consider themselves to be that far off sides when they consider the way pressures start to materialize. jonathan: great to have you with us. let's bring in ben. hard to get a meat on the market reaction. the dollar index for much unmoved. futures rollover only marginally the cut story has taken a backseat after the event of the last week or so for you? ben: i would say no actually. our concern has been growth and growth expectations too high. that has taken a backseat given this top of fiscal stimulus.

one thing that shines a light on now is the. traditionally if the fed will accelerate the hike, that compresses valuation multiples and those are really high here. fed, see a more hawkish you to be focused on being prepared to pay for the earnings. david: is janet yellen right if she says markets, do not get ahead of yourselves? is she right? ben: i actually think in fed policy, we are all on the same page for the first time in a long time and i am surprised to say that. the markets move quickly towards two next year, but i think that is the right debate, this debate between fiscal monetary policy has come back with a vengeance in the u.s. and japan last night . we saw it in europe.

this is debate around the world. to your earlier segment, this is generating volatility, and equity markets do not like that. jonathan: you run and equity strategy. a high rate strategy early in the year would have meant equities lower. now, not so much. having those two things collide in the months to come? ben: you will get high growth, 12% earnings expectations for next year. skeptical ofomfortabl right now. i think it was a lot to do with reducing the long duration trades and maybe looking at commodities at some of these other things. . jonathan: consists is scarcely and it seems to be a consensus in the market now with what the market expects the next year and

the federal reserve at a time when we have no clue what is coming down the fiscal pipe. is that not concern you will? there is a consensus in the direction we are going now and what the fed will be doing. we know when we get to the stage, that is not what we usually get, is it? ben: we are a little bit ahead of ourselves. we talk a lot about infrastructure spending as part of fiscal expansion. we have this plan we are getting excited about. china spent that year to date. u.s. companies have been a big part of that so just a little bit of perspective. we have not talked about timing or implication. it is very early. we have priced a lot in. we need to be cautious. david: there is a lot talk about handoff in monetary policy of fiscal policy.

we get into the halls of congress, and it gives a lot less certain. what are the risks of the handoff to the fiscal policy? ben: you are seeing levels of economic policy uncertainty which is the outcome of all of this at astronomy high-level. not just the u.s., but globally. that has real consequences. if you're a is looking at the plan for next year, those high levels of uncertainty, you will spend less. this is what the fiscal policy and monetary policy is pushing against, high levels of uncertainty. jonathan: to wrap this up, from the fed marks, a rate hike could be appropriate relatively soon on website but on the otr side, more skilled for labor market gains. let's just wrap all of this up. she is in no rush to steepen the rate is she? this has been a fed much

more focused on the transition mechanism from currency marketso u.s. manufacturing in factory activity in 2017. while overall financial conditions have not tightened was the legend, what we are seeing in the fx market is that a be a headwind brewing in the factory sector which could offset some of the fiscal stimulus that may be coming down the pike. david: thank you so much. thank you for joining us today. at 8:00 a.m. eastern time, we will beautiful coverage of janet yellen's testimony on bloomberg television. let's get another on what is making headlines outside of the business world. ma: the donald trump transition team is trying to bring down reports fighting in the transition team.

they aimed more than a dozen people who are candidates for jobs or are meeting with trump to offer advice. last week, trump named mike pence as the new head of the transition team, replacing chris christie. becomes the first global leader to meet with trump since he was elected president. he praised trump's excellent your talents and says he will work hand-in-hand with him. a new report says immigration is good for the u.k. and the country should preserve free movement of people, even if it leaves the european single market. it premarket legacy of margaret thatcher allowing foreigners of level as long as they have been offered a job. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. this is bloomberg.

abigail: this morning, we have lots of earnings movers in the premarket. almart shares are trading lower . what is disappointing investors here is the fact that they missed same-store sales slightly. ceo doug macmillan is vowing to do better. faring much better, best buy trading higher. best-of-five a $.62 per share in -- best earnings that bes buy made $.62 per share in adjusted earnings. the momentum is continuing. speaking of turnarounds, netapp are trading higher after it be earnings -- beat earnings by 10%.

green capital is saying the turnaround here may have legs. david: thank you so much. next, economic upside to trump. we take a look at what the president-elect's policies could mean for markets. bill will be here to talk about trump's infrastructure plans and what they mean for his business. this is bloomberg. ♪

jonathan: from new york, this is bloomberg. , aer president-elect trump tax cut is expected, but how bank and how will it be painful remains a big question. the author of this piece i am pleased to say has the train or first flight from d.c. to new

york along with carl. you write that republicans and the trump transition team are paying for the tax cuts using macroeconomic modeling. let's talk about the models. models.are the newer the dsge models. here is what they are doing. everything you have a piece of tax legislation, it has to be score. that has been on statute since 1974. what republicans have been pushing for is to score it dynamically, meaning you take the first year's revenues, figure out what they will do for gdp and feet that back into next year's model and repeat, repeat. the tax cuts create economic growth, the task is for themselves over time so the question is do you trust the models? david: traditionally, there is a

budget office that does this scoring. how does the fear about this way of approaching it? brendan: well, you know, they are cautious about it. says we should be modest about what we know. he prefers to give a range of estimates because every model gives you a range of possibilities so he prefers to say this is where we are looking. with budgeting, a lot of the stuff triggers elementary procedures see you cannot do it with a range. you have to do it with a point. if we are going to do this, we cannot score revenue bills this way. spending. taxes and it has to affect everything if we are going to build this model. carl: it boils down to the fiscal multipliers. does a $100 tax cut really cost $100? if there is some other payoff, it is less expensive.

economists have to make the best guess as to what the payoff is for a tax cut or things like infrastructure spending. you could drive a truck through the range of these multipliers. david: i am not an economist, but i have run a business and things like transfer pricing and things like that, allocation overhead. you know the economy grew x percent. how do you attribute that? that.elieve >> there you go. brendan: you don't have to look back and find the applicant sparrow. you look forwards and say -- david: but how do you know it happened? >> economy modeling. brendan: you look at income trends in the household sector and see how they respond to the tax-cut and make a best estimate of how that impacted things. if we look at the trump

proposals, the multiplier is higher when you give that to middle-income households than higher income households purely for the reason uer income households stash owing the savings. jonathan: i will simplify this if i may. are retaking the policy of finding the model to justify the policy or taking the model to shape a policy? because i back to the famous 1974 moment with the napkin that you know so well and the curve that looked something like that and say if you tax them too much, the will fall. brendan: i would say cautiously yes. the trump campaign has gone overboard in scoring everything. they are feeding regulatory changes into their model. confidentto be more in this than economists. no,ticians are saying modeling now for america.

jonathan: the beauty of this is you are finding a comment somewhere that agrees with you and put them on your team. [laughter] coming up on this program, the world's largest retailer gets a boost from e-commerce. shares of walmart still falling ahead of the u.s. open. , next. show you why our nex from new york, this is bloomberg. ♪

david: this is bloomberg. shares of walmart are following a little under 3% after the world's largest retailer missed on revenue and sales estimates, but it be earnings -- bea t earnings. joining us now is patrick. welcome to the program. what was your reaction to the announcement of earnings,

particularly as same-store sales are hurting the stock this morning? patrick: my reaction is certainly not a bad, but not great either. i think the overall theme is one of slight sequential slowing from the second quarter. they reported same-store sales increased at walmart u.s., the primary business, of 1.2%. that is a little light of my estimate of 1.5% and a slight tick down from the second quarter. david: one thing everyone is focused on, online sales. they made a big investment in jet.com. what was reported about how much progress they are making in online sales? patrick: certainly a big focus area for walmart. the e-commerce sales had been slowing until the acquisition in the third quarter so they ticked

up there. e-commerce sales accelerated and grew on a constant currency basis by a little more than 20% area it is a major focus for walmart. they are doing a lot more buy online, pick up in-store, home delivery of groceries, all kinds of things, and that is where the budget, the capital budget is shifting so they are spending. next year, they will spend about $11 billion in capital, but only 20% of that is for store growth in the u.s. it is shifting more toward e-commerce, and also to store renovations and whatnot but e-commerce a major focus for walmart they are being very proactive, but they face a formidable competitor with amazon. david: you mentioned groceries. that is a large portion of their

total revenue and they are trying to move to all my groceries. and we have any read yet or do we have to wait for the call to know how they are doing with all online groceries else? patrick: is going pretty well, but it is a start up so in his but itt -- it is new, was kind of flatish. one of the things they are facing right now is price deflation -- food price deflation. pointsurt by 150 basis so that is a link that i had 150 basishat hurt by point so that is a bit of a headwind. they are focused on having a better assortment of fresh fruit for example. they are holding their own in grocery, but you have some good competitors with kroger and whole foods and what amazon is

doing in grocery. david: thank you so much. this is a company that is investing in its core business. we keep asking about investment, and they are sacrificing the margin for it while i build up their stores and online business. jonathan: down 2.0% in the premarket. we will bring you that in the open. coming up, how investors will will play as -- boost. this is how we trade. futures negative on the dow will marginally up by 3% positive by a single digit on the snp. from new york, this is bloomberg. ♪

jonathan: from new york city, this is patrick:." this get a ticket that -- is "bloomberg daybreak."

treasuries and yields higher by two basis points. the dollar was a lot weaker earlier in the session now showing a little bit of renewed strength against the yen. janet yellen on the one side saying the school for more than market gains. speaking of the data, here it is. line at 0.4%. in cpi in energy month on month meeting estimate 0.2. now we moved to cpi excluding food and energy year on year, 2.1%. slight down. estimate of 2.2%. nothing dramatic here. 1.6 year on year for the headline number. 2.1 looking at core excluding

food and energy. around a ballpark figure the outlook for but not their preferred guage of course. david: a little more drama with housing starts. on housinge beat starts and month over month, up over 25% so important part of the u.s. economy. there is a nice beat there. jonathan: every time we get this data point, it is called initial jobless claims and can go lower? it does go lower. 235, just keeps going lower and lower. david: how much more room is there? jonathan: i sit here every week and look at this and it keeps going lower. maybe it can. david: thanks. ever since donald trump became president-elect trump, inflation expectations have been the top of the market somewhere for our

morning meeting, we thought we would check in to see what firms see at the market reaction of the inflation story. joining us today is martin. welcome, martin. i want to start with the market ps over the last year and a half. what is going on with tips an inflation. martin: we have a front row seat here in our etf business. there is a place for tips in your portfolios. we have our etf, a $20 billion etf. it has taken in $6 billion this year as investors position for inflation. it has increased by $1.5 billion. 75% of central banks globally everything inflation lower than target, and while mark engaged inflation index is are showing

increased inflation and expectations for inflation, the university of michigan, five-year u.s. bring humans are running below historical averages. there is still so sluggish economic growth in the world. a stronger dollar that is probably going to keep inflation good time to get inflation into the portfolio and that is why investors are doing it and doing it in a really efficient way. david: take us into this world of etf's. as you point out, it is efficient. you can move in and out quickly and have fund flow shifts. martin: the election unleashed animal spirits in the marketplace. .tf's have been at the center record blows him volumes with a --areas of the

economy are benefited by a have administration rotated out of treasuries and into things like inflation protected securities and investment grade credit. all of that has been done with seamless trading. at some point, we have had etf as 45% of the tape. they are sitting more with long-term averages at 30% of the tape for more than anything, the way investors move d the markets is changing. the moving increasingly with etf's. it is baskets of stocks and bonds that trade all day long on exchange. that 45% number was after the election but take us through a moment into some other categories of stocks with substantial flows into etf's. martin: is incredible.

these trump trades are creating excitement. defense funds have seen $500 million of flow, is 16 times five it is daily volume. ibb traded $3 billion on exchange as well but everything investors really believe this reflationary set of activities that may be brought on by a new administration is a catalyst for being in some sectors that will appreciate. david: thank you so much. jonathan: he called them trump trace. is that a new term we have to run with? david: #trumptrades. jonathan: volkswagen due to hold

a meeting tomorrow that will lay out the investment plan for five years. your income a great to have you with us. -- jurgen, great to have you with us. you run a very complex supply chain. donald trump was having dinner around the corner the other night. if i give you a seat at that table clothesling one, what would be your message for him as he looks to initiate some protectionist trade policies? >> the important information i would pass on that vw is a global company but a company that creates jobs in all markets so we are a strong part of the holding 20,000 employees and investing heavily here but also in the united states. i'm standing next to the car which will be the turning point in the americas.

believe in as a .rand it willour aspirations in this country. we are here to win. we are proud to introduce the most american car. jonathan: a large factory in mexico exports to the u.s.. i wonder if you expect any ramifications to vw from the new u.s. administration. juergen: we are seeing ourselves in a well functioning regional structure. we are investing in both sides of the country. this big car actually is meant to be the all american car. very proud to host and build that in america and create jobs for america in the countryside. tta looking to you to

be produced in the western operations but this can't is meant to go to global markets -- car is meant to go to global markets that we will be creating from chattanooga. it shows we are a part of the countryside and its operation, which is important for america for the future. jonathan: given the last 18 months, the you see the potential for diesel cars in the u.s. or is that story over? juergen: basically, we have not taken a final conclusion on that. a patrol car is the car america loves. car is meant to be the sweet spot of american households. .s a full-size seven seater

it is probably the first time which is known for small cars, will be known for big suvs comparatively priced in the sweet spot. jonathan: i am not the market for a car, but you are a very good salesman. gave to have you with us on the -- great to have you with us on the program. would you like to buy one? he was really pushing it. david: i would like to know the price and the fuel economy. jonathan: very american apparently. he hasn't always trump's value for helping. next, an important conversation. this is bloomberg. ♪

>> this is "bloomberg daybreak." today ont later bloomberg television, full coverage of the u.s. fed chair janet yellen as she testifies before congress. this is bloomberg. after the election of donald trump, everyone has been talking about infrastructure. just how he plans to invest and what the effect will be. rudin, vice chairman and ceo, with the importance of and the need for improving infrastructure. he is a major new york real estate developer. welcome to the program. bill: thank you, david. david: i want to talk about infrastructure specifically because you deal with it every single day. what is the best approach for

president-elect trump to take on infrastructure he plans to build? bill: i think he said at the night he plans to build that infrastructure investing in our roads, cities, hospitals, highways, airports is critical and a collaborative effort. we have collaborate with the public and private sector to get these projects done. new york, laguardia airport, the centerline to hudson yards, these are examples of a public sector working with the private sector and leveraging capital and expertise and bringing it together. bill bratton wrote a great book called collaborate or parish. that is a great primer for the president-elect and his cabinet .he is from the private sector so he truly understands the importance of that. david: everyone is for infrastructure.

but then you have to pay for it and now some people concerned congress may have a bit of a resistance to president-elect trump coming in a singly will spend hundred billion dollars or more than that. how can we pay for this as a country without huge deficit spending? bill: there was a quote this morning in your article about infrastructure, and he is a democrat talking about collaborating with the administration to come up with a plan so i think we have to be very careful. there is a broad spectrum of different ways of doing it. we have done a project in the brooklyn neighborhood where release the land from the city of new york so we are making the capital investment. they have given us a long-term lease. to can go grassroots creating a public-private partnership with people who live near a park and the public sector and private sector come together. we built that part that has huge

long-term benefits. there is a full range of different alternatives. 's son-in-law's last year working with my son and others came up with a plan which water nyc, incentivize owners to bring in broadband connectivity to their buildings, that was a simple thing. it rated that buildings as shown tenants who had a broadband connectivity and who did not. that is a very simple way of leveraging the public and private sector and working together. david: this is such a good idea. why hasn't it been done already? what prevented the obama administration from doing it? bill: i think the divided congress and a host of other reasons come to play, but it is being done here in new york in brooklyn and queens. the proposed in brooklyn and financed byctor incremental financing, no public money going in.

it will be the taxpayers who benefit with a huge long-term impact for queens and brooklyn along the waterfront. campaignrt of trump's for presidency is he is a successful businessman, not a politician. what expertise can he and his team bring to this to avoid the risk that this is a government boondoggle with payments and cost overruns and delays? a lot of americans say i am very worried about the government projects. bill: the project at laguardia is a good example. the private sector has taken priority of the financial so they are incentivized to work hard, bring it under budget because if they do not, it comes out of their pocket so the kinds of structures, and it is a business deal. the president-elect obviously has the experience negotiating those types of deals so it is applicable all over the country.

one of the things we have to be optimistic about is that congress will not be good luck and these issues will be able to move forward in context of moving the economy, creating demand, creating jobs, growing our economy. david: there are special challenges when trump the businessman became trump the president. we saw the name trump coming down off of some of the apartment buildings. what do you make of that? was that inevitable? the chairman of equity apartments who owns the buding on tv on a competing channel, and he explained this was something going on for over a year. donald trump does not own those buildings anymore. they had a contractor use his name, and it is being phased out. i am not sure if there is a political implication tied to that. david: the bill at this point, trump good for president? bill: as president obama said

the other night, if the president-elect succeeds, our country succeeds so stock market seems to be optimistic, and i think our business is only as good as our companies and tenants. we create demand and get the economy going, that is great for us. david: this from a democrat. bill: we are pragmatic, and our focus is moving the country forward whoever is in office. that has been our family philosophy and how we look at things what it is a republican or democrat we are looking forward to working with the new administration and seeing where we are. david: thank you so much, bill. timed out for other stories making headlines at this hour. here is emma with your bloomberg business flash. emma: a couple of signs that walmart pushed e-commerce is

paying off. they posted third-quarter earnings that beat estimates and raised his annual podcast. doug macmillan has been urging the chain to lower prices and take better care of customers fo. any transaction in the oil industry. at $6.4refining bought billion. it represents a 22% premium to western refining's close yesterday. it also operates a number of retail stations in the western u.s. a cheaper way to expand inventory available for quick delivery. amazon is turning to merchants who sell on its marketplace for extra warehouse space. a site and cannot build facilities quick enough to meet demands.it now has 6 million more items to the delivered within two days.

jonathan: thank you very much. coming up, we look at what is behind the russell index. we count you down to janet yellen's testimony and prepared remarks where she says a rate hike could be prepared relatively soon but the opposing force to that, there appears to be still for more labor market gains. how does the market capture that story? spiking a and yields little higher. up dollar against the yen .5%. from new york, this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg daybreak." coming up today, the main event. janet yellen's much-anticipated congressional testimony. we will be beautiful coverage

starting at 10:00 a.m. eastern time. we have her prepared remarks. she said a rate hike could be prepared relatively soon but there appears to be scope for labor market gains so maybe the short story is the rate hike and the long-term story is accommodated for more labor market gains. she will be questioned in one hour and seven minutes time. up one basisds point. we printed a 2003 high. the highest since 2003 on the dollar index a little earlier this week. the dollar index still above the 100 level. looking at futures very quickly, however only from catch up and, very much unchanged on the session. david: thanks. it is time for battle of the charts. we have a veteran battler and a rookie to our program. taylor, welcome to our battle of the charts. you get to go first. taylor: i am talking today about

the russell 2000. there has been a big move since the election. arguably a little bit better than the s&p. i wanted to take a look at three big fundamental moves that will possibly boost the russell 2000 before the technical factors. bank of america merrill lynch came out with their survey yesterday pointing to three fundamental things that could boost the russell. the rotation from boston stock has not yet hit, somebody just to increase allocations. for the personal installment some investors are expecting low dividends to outperform high dividends and for the lowest percent since march 2014, investors could think large cap outperform small cap. i started the 20 day moving average and the 50 day exponential moving average. when that 20 to a process the 50 day, it is a bullish indicator,

signaling that momentum is likely to continue. we will give him her on that to see if it continues. david: i like it. >> i got a lot of respect. i will talk about that and economic expectations versus what happened. the 2-10looking at me bond spread. below it, the blue line which is the december expectations for a friend move. this is showing the markets are expecting quite a bit of a move in the next couple months with race going up probably on the back of a fed hike in december, but there is one catch here. this is largely about what will happen with trump's inflationary policies but a look at bottom here, the economic surprise is down, down. inhas had a slight uptick weeks past, but often the high in july, the economic data is not doing well at the end of the day, not totally shocking if the fed wants to maybe take its time a little bit. the market is sure it is going to go.

i am saying the economic data is not much better than it has been. david: two great charts. i am going to get it all of her because he sets up janet yellen's testimony. well done. he wins on that. jonathan: taylor riggs comes on friday view and he doesn't give her the win. cisco ceo chuck robbins will be joining us on how economic uncertainty is laying on corporate -- weighing on corporate spending. this of course is bloomberg. ♪

jonathan: from new york city, good morning.

welcome to bloomberg daybreak. i am jonathan ferro alongside david weston. we are 30 minutes away from the cash open. futures very stable. 500, andw and the s&p we will get to other asset classes quickly. treasury yields just a little bit higher. capturing 1.09. at $40.19.rmer david: yellen sounds off. the fed chair signaled that the central bank is close to raising rates saying that a heightened program well become a was really soon. she tells us again that future increases will be gradual. it is a day of meetings for donald trump. he is expected to have several

conversations with cabinet picks including south carolina governor nikki haley. he will have his first state meeting with japanese prime minister shinzo abe. the world's largest retailer boosted its annual forecast to help a gain in consumer traffic and online shopping. comps slightly missed estimates. jonathan: some stocks to watch with abigail as we begin. futures largely stale. we are looking at an unchanged open. similar to what we saw yesterday, basically flat with mixed trading, perhaps uninspired as investors are taking a break after last week eight rally in u.s. stocks. we do have lots of movement in the retail space. we have the shares of walmart, best buy, staples all trading in pretty volatile fashions, with

walmart shares lower after the company missed third order sales. they also offered an uninspiring first quarter review but bloomberg intelligence analysts like this quarter. it is interesting to see if this can turn around on a day. best buy be in a big way. 32%.at the estimates by by as much as 10% and finally, staples both missed and guided down, missed third-quarter estimates and also lowered the third -- the fourth quarter view. the company is focused on cash flow and closing stores. we can see if that will turn investors views around. jonathan: thank you very much. aheaded remarks released

of her testimony before congress, janet yellen signals that the next rate hike could come relatively soon. of aproach 100% chance rate hike in december. joining us to discuss it is dan kelly, head of equity models and portfolios. great to have you with us around the table. it almost doesn't matter. in 2017, it is the big event, and 2018. the elephant in the room, the future of fed chair janet yellen, how is that going to be dealt with with a trump administration? >> as she is finishing up her turn, we will see but getting back to the rate hikes the major difference is the guidance related to the future path of rate hikes. along with saying there could be one soon she also cap he added -- caveated. think about what happened in december of 2015.

expect moreid we rate hikes for the rest of the year and we know what happens to the markets afterwards. the key difference is that the forward guidance is gradual. >> we did have an election. does that count at all in the fed's outlook? did they take that off the map altogether or did they taken into account as they look at the data? >> a lot of people have focused on what may or may not happen. there are a lot of unknowns right now. key to that is that while this is a republican sweep in name, they have different policies and backgrounds than donald trump but there are a lot of different variables out there. what you're going to hear from janet yellen throughout the rest of the day and later on. they will keep focused on jobs and wage growth and inflation. the key point as it relates to wage growth is that in the last

jobs data we saw 3% wage growth. when you look at the data, you have every reason in the world to start going on jonathan:. in 2017 it is not about realized data but whether we go from here. very often in december, they have to reproduce this. the summary of economic projections and each individual. is an official forecast. said.s exactly what neil quote -- the dow plot the dot plot. jonathan: markets seem to be like this right now but in december this is going to be even more useless than it ever has been. why? no one knows what is coming down the pipe from the government. how can we make any type of forecast about what the fed is going to do? i was interested in the

market movement after janet yellen's comments. you saw a dip down and yields since two year bond treasury. as you just showed, almost 100% chance of being priced at the end of a december rate hike. the more interesting thing is that yields on the tenure and 30 year treasuries rose. it has indicated to me that of viewing market the lack of change in janet yellen's rhetoric as some kind getignal, they are going to behind the ball and not hike quickly enough in light of the president-elect trump's new potential policies. that seems to be the implication of the market. it is very hard to know what the fed is going to do. the question is, how much will it matter? can they tighten it in a way hat will a rain inflation --

jonathan: will they react. ? maybe they will run things hot. maybe they just keep things on hold. she did say in these prepared remarks that it is going to be appropriate soon so she did not become entirely doveish. is she hoping donald trump will do what he wants to do by not being too aggressive? the natural reaction would be look at all the markets. with got to raise them. if she doesn't, does it help donald trump? >> it is hard to say. i don't know. i don't think so. jonathan: let's get to the markets and talk about two big titans. ray galeanoo -- one -- ray dalio, writing a phenomenal piece.

this is a significant likelihood that we have made a 30 year top in bond prices. when reversals of major booze happened, many skew their positions to be stunned or shaken up by making the move. a 30 year bond market with huge structural forces behind it. big call to say we may have broken it. what is the big why? >> inflation. a lot of time people were not understanding inflation or not seeing it passed to higher inflation rates. donald trumpen gets elected president and comes in with an infrastructure spending plan that people think will not only jerk up inflation be more expensive for the u.s. to import goods from overseas, thus making the -- making it harder for people, more expensive for consumers to buy goods.

>> have we ever seen markets move this fast>>, this large on so little information? "might." ant word is markets are really moving substantially. >> the overall market has not moved all that much. it is within the market, the sector rotations. the sector rotation has been really violent because when you look at the positioning on the part of institutions and retail investors, everyone was loaded up on the boat in terms of defensive sectors. so as that positioning continues to become unwound, we see more intermarket moves. jonathan: bloomberg gadfly's lisa abramowicz with asset management will be joining us. for outside the world, we go to emma chandra.

>> the transition team of president-elect donald trump is trying to knock down reports of infighting. in a conference call, his aides made more than a dozen people either candidates for jobs or meeting with trump to offer advice. he named mike pence as the new head of the transition team to replace chris christie. federal intelligence agency director michael flynn is the leading contender to be trumps national security advisor. he is a retired army lieutenant general and was top advisor to the campaign. a new report says immigration is good for the u.k. but the country should preserve free movement even if it means the european single market. the report comes from backs of free-market legacies of former prime minister margaret thatcher. as long as they have been offered a job. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.

david: thank you. coming up, the rally that could lead to nowhere. the industrials and financials saw a boost after the election but is the rally over? and continental resources ceo harold hamm is a leading candidate to become his energy secretary. we spoke to him about what he thought about being part of the administration. ♪

this is bloomberg. i am david westin. industrials may be running out of steam. this illustrates the ratio of financial stocks to the 12 month target price. we to did for the first time since 2009, the stocks are more

expensive than analysts say they will be in 12 months. dan, is this move towards financial -- >> as we all know, historically, analysts are slow to raise numbers. they have to play catch-up. westill don't know, as talked about earlier, some of the unknowns about the future agenda of the president-elect. could we see a rollback in regulation or m&a and ipo's? he may have an earnings impact that we still just haven't reacted to. you are playing a bit of catch-up. david: how does an investor know when financials are fully priced or where there is still room to go. >> you buy these names at book value and sell them at two times book value. i don't think that exists anymore given what has happened to leverage but when you look at these high-quality banks a lot

of them are actually trading below book value so i don't think we are there in terms of overvaluation. jonathan: we talked about the capital bill gross, i want to get to that quote. there is no trump hallmark in the offering. higher deficits result from lower taxes, raising interest rates and inflation which he could have the potential to produce as ratio. overwhelmingly, the bias towards the trump administration at this point is that just get spending positive for equities. what is the push back against that? >> you are dealing with the reality that for 6-7 years, monetary policy has been the only game in town. we have talked about it at nausea him. um.ad naus

a drag on the economy is very rare. thing i would say, it depends on the sequence of from's policies. if he leaves with infrastructure and deregulation, that is positive in the near-term. if he leads with tariffs and trade rhetoric, that to be very risky. the sequence of policies is important. david: the structural government may answer your question. the president has the authority to deal with trades. who doesn't have the authority to deal with infrastructure or taxes. >> but the republicans gained some ground, both in the senate and the house. my opinion is that they are going to work together and get the positive things they can done first. >> yes, we have a republican congress but do we have a real republican in the white house? the traditional ideology is

looking at the debt load and do something about it. maybe some people are not anticipating. >> that is a good question and could be a source of volatility how the road but given little fiscal spending and fiscal contributions we have to grow today, there is a little bit of a catch up that both parties can play together to get something done. seeing moves into industrial, but frankly, that was the case before the election. divided campaign season but one of the shared pieces of rhetoric was around infrastructure spending from clinton and trump. we think that continues. we will continue seeing construction and infrastructure, continuing to do well. economy continues to recover. jonathan: can you get a real recovery and multinational industrials without china?

we have not talked about industrials in a rally behind them discussing china for years now. that is exactly what we have done for the past two weeks. can we get that without china? >> probably not. the good news is that china has its own major political event next fall and when you look at their leadership they have every incentive in the world right now ahead of that very high profile event to keep the stimulus game going. for another 12 months you continue to have decent demand from china. jonathan: thank you very much. coming up, walmart earnings topped estimates with sales at brick and mortar stores falling short. the underlying trend, will it continue? we will discuss that next. bell 11 minutes and .3 seconds away, futures holding up 1/10 of 1%. this is bloomberg.

jonathan: from new york city, this is bloomberg. walmart stocks down after releasing earnings this morning that beat estimates. let's look at those closer in today's outlook. they need to do more to compete with amazon. annual revenue growth has been on a downward slide in fiscal year 2016. a big point of this morning's earnings release, walmart has been pouring money into its website and mobile app. walmart also looking to make shopping more convenient. drawing elements from its online grocery program. you might be surprised to learn that company is the largest u.s. broker in that category breaks

up 56% ofp -- takes the revenue. that is their big challenge. david: for more on walmart we are joined by raymond james senior analyst. a strong buy recommendation for stock. he joins us from florida. you saw the earnings. you know this company well. you have a strong buy. they had a slight miss on this tell youdoes about their overall strategy and transformation of the company. >> i think the quarter was an ok quarter. the strategy remains intact. from customer experience in --res, e-commerce platforms it tells you that that is, in fact, the numbers are a bit light.

that is where it is really going to take the stock to move. the only thing i would say on comps in the u.s. is we saw our eighth quarter positive traffic with those up 70 bits. look at food deflation, food deflation was 150 basis points and as you said, that is more than half of the business. the overall came in at about 1.2%. it probably gets closer to 2% and it will take something above 2% to really have the stock work over the near-term. walmart has said they want to grow revenue from three to 4% without much in the way of new footprint growth. workingwhere they are >>. part of the strategy is to improve the experience. what are the numbers you look at to tell you when it will work?

>> i think the numbers you have to look at are the numbers of the inventory. inventory was down, comp inventory was down and yet in stock was up. if youu have to see is look at the stores, a number of them still need some work. we gof the stores that into are improved, but we are seeing that and you can see that when you shop. >> that is the experience to look at. last year, they did do some work organizationally. one of the areas they look that was automotive and that was a positive and accomplished quarter. .etail retail is always detail. look inside the box and see what is going on item by item. david: the other part of this is online sales. they made the big decision to shut down. is it to early to tell whether

that deal is working? >> much too early. totally sure that i was excited about the acquisition. it does signal they are trying to improve the basket economics so that is a little bit of what was being done a number of years , orand jet.com strengths the strengths they were trying to develop was on delivering better basket economics for the customer and when they do that the baskets get larger. doug macmillan, the ceo refers to -- the underlying -- what underpinned the acquisition. from jet.como came is going to run walmart e-commerce. but it is much too early to know how that will play out. david: he is raymond james senior analyst. jonathan: the opening bell coming up next.

let's get straight to it. we are about four minutes and 15 seconds away. futures positive, up 14 points on the dow. if you switch of the board and get to the bond market, i will look through things for you very quickly. treasury yields unchanged, up about one basis point. crude up by 1.6% and that is the dollar firmer against the end. tear --get you a fed fed chair janet yellen testimony right here on bloomberg. ♪

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public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. jonathan: this is bloomberg daybreak. i am jonathan ferro. about 22 seconds away from the opening bell.

we close that seven-day winning streak yesterday, we are positive that the s&p 500's are up 1/10 of 1%. in the bond market, yields up about two basis points on the 10 year treasury. , 32 uplar is stronger 2/10 of 1%. the fed chair says we are moving towards a rate hike. at the same time, the scopes get some more labor market games. -- the market gains. we get across to abigail doolittle. abigail: we are looking at an unchanged open for u.s. stocks, including the dow and s&p 500 and nasdaq. the s&p 500 is slightly higher, ever so slightly higher, so it is a continuation of the higher trading we saw yesterday. investors taking a breather after last year's -- last week's collection valid -- election

rally. aree he do have movements in the homebuilding stocks after a surprising home-building number. up 25 .5% for the month of october, the best since 1982. the best in nine years, perhaps adjusting for the boom and the bus in the housing bubble being smoothed over. we also have toll brothers and such trading higher. the homebuilding etf yesterday on the close, that was down with rising interest rates and the fed hikes weighing on the sector but the strong housing start could perhaps turn the homebuilders around. david: we turn now to cisco systems. they reported their first quarter earnings yesterday. they beat analysts in earnings for sharon revenue.

revenue,lower in joining us now from headquarters in san jose, cisco ceo chuck robbins. a combat. -- welcome back. you are in the midst of transition from some hardware business into a new business, software and services. how can we tell from these earnings how we are doing from the transition? thanks for having me. if you look at where we have been focused in our business, we have been aligned -- trying to align with how our customers want to consume technology and they would like to as a service so we have been transitioning elements of our portfolio, our collaboration portfolio, even our cloud management of our networking devices tomorrow the cloud and subscription model. the deferred revenue associated with that was up 48% this quarter so we think that we have

made a great deal of progress. our security business continues to be strong. we also had 5% more growth in our enterprise business. we had a lot of bright spots as well. david: one thing you said was less than expected was your new product business down 12%. what could turn that around? was, was our global service provider business was down 12% and this business is made up of very large customers. when several of them pause, it results in a short-term challenge in the business. it doesn't mean there are long-term issues. there are really three or four different areas that could lead our customers to slow our capital to expand. you have certain service providers around the world that

are dealing with currency challenges, some better dealing with political uncertainty and regulatory uncertainty and if you look at the reports for spending through the first three calendar quarters this year, they have all been slightly lower than expected. in rfp business but we are very pleased with the balance for our business, and there are lots of good points in the report. david: when you talk about, companies don't like uncertainty , those policies could be good or bad for you. it is not too soon to start asking, what is that going to mean? you could have trade problems but also fiscal stimulus. your take about what a trump presidency could mean for business. >> it is never too early to be thinking about scenarios and we do that for a living. hearinghat you are

from president-elect trump is most of what he is saying is really about how do we drive the u.s. economy? his policies tend to be very pro-business because he believes business is strong and the economy will create jobs and that is being reflected through what you are hearing from him. i think that will come through in his policies. the things that we care about our patent reform, the h-1b immigration program, as well as tax reform. i think based on his desire to lift the u.s. economy, i think you will end up looking at these policies favorably and anytime the economy gets stronger that is good for cisco. jonathan: let's talk tax reform. -- if you've to got a repatriation tax holiday, would you do something of the and buyback stocks and dividends? thanks for all, allowing me to spend time with you this morning.

this has been a popular question for us and we have obviously still be moving in all of these areas with dividends and buybacks, we made 17 of those since i was named in this role and as we are allowed to bring more of that cash back at couldable rates you assume that we would use a combination of all three of those opportunities and our teams have been working on scenarios for years, as we have been big proponents -- of tax reform. we will be leveraging that cash for all three of those. david: 40% of your business is overseas. how concerned are you about the disruption of trade and also the strong u.s. dollar? >> i will get back to the other point i made earlier, that i ,hink president-elect trump everything he is talking about

is insuring we are driving growth in the economy to the extent that global tra is important. we live in a global economy and i think that ensuring that we have the appropriate trade agreements is important for the u.s. economy. i think we will land in a good place ultimately. up, interests go rates come down. we have dealt with this historically and our teams know how to navigate that. when the dollar is stronger it creates challenges in international markets what our teams are very accustomed to dealing with those types of changes and we will deal with them appropriately. story,n: on the dollar as to what will happen with x x markets, you have people trying to understand the various technology companies. how much of that 60 billion is dollar-denominated already?

>> our cash is sitting in very as places around the world and we do business mostly on u.s. dollars around the world so i think that what you see is less impact on that from us, or for us as interest rates rise and again as we are allowed to bring those funds back, you will see us use it for a combination of dividends, buybacks and strategic acquisitions. david: thank you for joining us. ceo.is chuck robbins, coming up, donald trumps energy secretary pick, harold hamm, is among those who said he was in the running for energy secretary. our exclusive interview is coming up next. this is bloomberg.

later, full coverage of janet yellen as she testifies before congress. jonathan: from new york, this is bloomberg. i am jonathan ferro. more throughout much of the morning, today so far, equities up about 1/10 of 1% on the dow. marching on the nasdaq, let's take a look at some stock movements. >> we are looking at a tale of two stories starting out with technology is the winner. we are looking at net, shares our nightly -- nicely higher.

it beat second-quarter estimates by 10% and our team did reach , he wasark kelleher bullish on shares earlier this year when the turnaround wasn't apparent. he says the turnaround is well on the way. the company is doing very well. he sees signs of an inflection point that could propel the shares higher in the future. faring less well, cisco systems. their worst day in about a year first-quarter estimates but guided the second quarter below what they were looking for by more than 5% at both the top and bottom lines. there are some macro headwinds and we are also looking at a situation where some of the percent killer -- the particular segments dropped off. they are making a transition toward software so it might not

be what is to come. david: more news on the trump transition. kellyanne conway out this morning defending his cabinet selection process. this as the president-elect's team is battling the forces of chaos and inviting. -- infighting. we looked at where passive ministrations have been. we felt we were on target. in 2000 the country went to thanksgiving without who the president was. schedule.ead of david: one of those decisions is who will be the energy secretary. one name, harold hamm, ceo of continental resources. him andel spoke to asked if he has spoken with the president-elect about the position.

>> i have not talked with him about that. still haven't. , he and it come up chat occasionally, so about important things. alix: so are you helping him -- is he asking your opinion about other cabinets and i ask because the secretary of the interior can be extraordinarily relevant for your business. have you offered some names and other positions? >> i have offered one. is at asomebody that very unique time in his career. from thed down position in the company, basically left his succession team to run it. that is larry nichols from oklahoma city. alix: have you talked to him about it? is he interested? >> he would. that is the unique part.

-- they wouldbody go to washington and do that. he felt like it is so important to america that he would do that and so, i have submitted his name and i am very glad to be a part of that. >> if he was the interior secretary and you are not energy secretary, who would you want to see? >> there is a couple of people that i think would be fantastic. somebody -- you need somebody that is regulated. that -- it isob not what you think as energy secretary. they are not regulating our industry so much. what they do a lot of is with

rods, wherent fuel are you going to put that? they deal with those type things. than regulating our industry. >> but there are some people you would like. >> one of those is somebody that has worked closely with the trump organization in the campaign and that is kevin cramer from north dakota. utilities, he was a time,tor there for a long and he was very well-qualified. he is somebody that could do that job. alix: he said the same thing about you. he said "you have the right of first refusal." do you want that?

>> as i have said, i think that i could be valuable to the matters, andenergy i think i have been. i think i could be. there is a lot of material that and you have to sit back and look. we have a great opportunity here and that is, how can we turn this into a good driver for this economy? that was the first thing he caught on to. alix: does it sound like you want to be part of that but you don't have to be secretary to do that? >> there are other avenues to do the work that needs to be done. david: that was harold hamm talking to alix steel.

jonathan: coming up at the top of the hour, it is bloomberg markets. good day to you, mark barton. you.ck to no. more detail. , feds the centerpiece chair janet yellen testifies before the joint section on the committees of congress. condon ineak to chris d.c. to preview it and the chief strategist at deutsche bank will preview fed chair yellen's testimony. she's got an end of your target by the way of 2300, which implies an upside of about 5.6%. but anyway, away from that, yellen, yellen, yellen. jonathan: mark barton, coming up with vonnie quinn as you count

you down to the fed chair's testimony in about 10 minutes. janet yellen testifying on capitol hill. the questions she will likely face from lawmakers. from new york city, 19 minutes into the session, the shape so far looks something like this. equities unchanged on the dow. 500.10 of 1% on the s&p in the treasury market, yields higher by two basis points. earlier today, the dollar showing a little bit of weakness. dollar-yen, 1.09. this is bloomberg.

david: breaking news right now about valeant. executives have been indicted on multiple counts in a federal court in manhattan for

wire fraud. there were allegations they defrauded shareholders. two executives are under. there are criminal investigations going on but there are at least two or three indicted on multiple counts. jonathan: the main event for the broader market, we are just minutes away from janet yellen. it will be the first time we hear from the fed chair since donald trump was elected president. earlier, we heard from neil cash carry on what he believed the fed should be focusing on. we get ourselves into trouble and make short-term predictions, people get upset when those don't come true. we should stay out of the prediction business and focus on data and analytics and everyone would be better off. jonathan: to get short-term predictions we bring in chief economist. the question, we have read the testimony. so far it says we are going to

get a rate hike. eyes on december. slack, though. they could be more job market gains. >> i think that she could have attten this testimony back the september meeting, possibly the june meeting and maybe even january as well. she has been a very steady hand at the helm of her tenure and she has taken this misery approach, the show me approach to labor pressure. the unemployment rate is telling us we are very close to full employment but there are some other metrics that suggest otherwise. unemployment in different demographic sectors, general lack of weight pressures and i think she convinced the share of the committee to take this wait and see approach. we heard as much from vice chair fisher at the economics club. jonathan: now just talk about the endurance.

every now and again, drug he has to go in the parliament. andrnor carney has to go in it is a real endurance. we are about to see that for janet yellen. the stuff she will be asked about, what is that? >> in terms of economic performance she is going to handle those in a manner consistent with her last press conference. i think there will be more questions about fiscal stimulus and deficits and tax cuts and all these rumors that we are hearing about a potential change s. trumpenomic her answer to that would be, wait till we have a solid proposal on the table where we can assess how the economy or the fed will respond. i will be listening to our inclinations about whether she

is going to stay on for an additional term. her term has not been early 2018 and the question remains, whether she was featured in from's campaign commercials and whatnot so the fed should be politically independent. they pride themselves on that fact so i would hope that she will signal that she intends to stay on the fed chair and also that maybe she would be willing to consider an additional term. i think she has done an excellent job so far and if she stays on she will have the accolade of presiding, potentially, over the longest economic expansion in post-world war ii america. david: in the not-too-distant past, questions of the independence of the fed were not on the table. there were few people. it is front and center now with this administration. how does she not go in and trigger a response that she doesn't want?

>> that is the challenge because president-elect trump said that the fed was helping the current administration by keeping rates so low and if the fed signaled they will start raising rates, they could be slamming the brakes on the trump administration as they try to embark on fiscal stimulus. so, it is going to continue to be a very tricky course for the fed to navigate. along with the rest of the bull markets, tension in this room right here. or minutes away from the testimony to congress. full coverage here on bloomberg. this is bloomberg daybreak. next is bloomberg markets and janet yellen.

vonnie: welcome to "bloomberg markets." , along with mark barton in

london. janet yellen is walking in right now to testify before the congressional joint economic committee. it is on the economic outlook for the united states. we already have prepared remarks. mark: we did. some headlines include yellen saying a rate hike will be appropriate relatively soon and there appears to be scope of more labor market gains. we will bring you yellen's remarks and questioning from 24 members of congress over the next two hours. vonnie: let's go to washington, where chris condon has more on chair yellen's remarks. she is keeping the federal reserve on track for a december rate increase, isn't she? chris: i think that is right. you can circle december 14 in your calendar if you have not already. the fed is likely to raise rates by a quarter percentage point. she used that term relatively soon in