interference, and questionable decisions by the fbi also played roles. during onstage interview for the women international's annual luncheon for new york, secretary clinton said she was on the way to winning. a combination of events in the letter to congress, resurrection -- resurrecting questions about imo passes and wikileaks repeated leaks, that she says scared off people. the bipartisan spending bill during a white house briefing, mulvaney said democrats were making false claims and saying the president looked -- making the president look bad. >> democrats have tried to claim victory on this, a strange way to look at a bipartisan discussion. in a bipartisan meeting, it is unusual for one group to walk out and spike the football and say hey, we have one. it does not bode well for future discussions. director mulvaney also

said he was not surprised president trump's frustration was manifested in tweets. and men have been detained weapons confiscated after counterterrorism sweeps and france. citing the paris prosecutor's office. the antiterrorism operations come five days before the french presidential runoff. officials say it is not clear whether the arrests had any link to the campaign. trying to stem his reach among macron macro and -- told marine le pen he understands their anger. polls indicate he has a double-digit lead over le pen. global news 24 hours a day powered by more than 600 journalists and analysts in one of 120 countries. this is bloomberg.

♪ >> live from bloomberg world headquarters in new york, i'm julia. on assignmentu is and we are 30 minutes from the close of trading here in the u.s. >> u.s. stocks edging higher as tech shares are leading the gains. joe: the question is what did you miss? earningswill report after the bell and investors will pay attention to how they can go beyond those products. those numbers when we cross. aetna pulling back from health exchanges. losses on the business continue to mount. the ceo joins us live later this hour. we will hear from the cio of the second-largest pension fund on infrastructure and the debate

over passive versus active investing. >> let's look at where the major averages stand as we head toward the close. abigail doolittle is standing by. >> we are looking at what we have been looking at all day. 500ad the dow s&p unchanged. the dow in the s&p 500 fractionally higher. the nasdaq lower, it is worth noting another record high. records on hold ahead of the big apple earnings report, plus facebook -- close tomorrow. stocks, weok at tech are looking at microsoft, which had then earlier after the company announced it had $999 laptop making a push into the hardware space.

the question is whether or not they could take on apple. intelligence analyst thinks that could be challenging to take on given consumer loyalty. we have those shares lower. now let's turn to apple. have shares trading higher into the report which may signify investors could the desk think it could be a good report hitting another record high. investors are looking at two dollars and two cents, $53 million in revenue, more than 5% growth on the top. investors are not only looking at what iphone sales did but also service the spirit some are looking at more than 20% growth there. team, helier told our said this is the big deal, it is expected to be around $250

billion or one quarter of $1 trillion, that perhaps it could be put toward dividends or buybacks. what david would like to see is for apple to acquire a company and he named both netflix and disney so we will see. of the last five quarters, apple has either moved down by six up 6%. this chart mesa just we could see big moves out of apple tomorrow. a top holding for each major average it could be a huge influence on trading action tomorrow. joe: thanks, abigail. second-quarter earnings after thebell, this year marks 10th anniversary of the release of the original iphone. americans have become glued to their phones and other tech services. of -- e on the rise

marketing at nyu's's stern school of business and offer of -- author of "irresistible", the business of keeping us hooked, professor, thank you for joining us. it is the dominant story and earnings and the markets. a few big tech giants demanding an extraordinary share of attention. where that goes, the dollar goes. >> that seems to be the way things are the moment. -- overnot look like the economy but also, they seem to know exactly what they're doing and they are directing us and doing exactly what they're hoping we will do. >> when we look at apple or facebook, and other platforms, is it the hardware or the software or various other programs? >> it can be used in any way you choose.

a perfect vehicle for software. the software is designed to be irresistible. >> 40% have some form of internet addiction. of the the whole member family, every single one of them on the phone not talking to each other. you can make a joke about it being lucrative, but it one point -- at what point does it bubble further? >> i do nothing it will burst anytime soon. we know in the last year, americans went from using phones from three hours to four hours a day. oft is massive and the space one year and it seems to be trending in that direction. >> i think what a lot of people have this feeling were years ago, they were checking facebook and now checking facebook feels like a chore or even worse, a completely miserable experience, but they don't stop. is there a nextwave to the

cycle? you do not see anything breaking it but you have done a lot of research on it. are there trends of people who have said no, i will not do it anymore? are there too few? >> there are very few, a small number of people. a lot of people are more mindful about the use of tech and they are trying to settle down but not much. and most people only succeed in an order of maybe 5% or 10%. >> what are companies doing to react? you get to the exhaustion point you are talking about, you really back in because that comes back to advertising as well. pretty droll. >> said is true. they basically have a toolbox, and they keep drawing on them again and again. it seems to be effective. uncertaining is the andds you get from media

you wonder whether people will engage, whether they will reply, humans find that absolutely addictive. we find -- we're fascinated by that more than anything else. >> i tweeted something a few minutes ago. i'm curious how many retweets we have gotten. >> yes. it is very powerful. if you have a phone in your pocket and you feel it vibrate, you know there is a message waiting for you. until you check that message, you will not be up to focus on anything else and they know this. they keep you on the hook. >> we talk about it with a negative connotation. drugs, alcohol, gambling. addiction orative a harmful addiction not only for individuals but for society? >> we feel our phones and other technology is getting in the way of interactions we are having

with other people and it is sometimes costing money. for a lot of people, it is an addiction in the sense of well-being -- ?> are they being irresponsible investors, duty to but are they on some level also being worse -- irresponsible? , republicans will demand these kinds of concerns for the companies. it is clear it is not a major factor. as we demanded environmentally friendly practices, we will start to demand consumer friendly practices. are there companies trying to buck that trend? capacity.t want that if you are not one of the companies that targets people, you will go out on business. >> i do not think there is any. it is very difficult to be that way. talking about any

other sort of addiction, probably some sort of call for a response to it, do you think that is something in the future at some point, that people will sort of freak out, while the rest of us stare at our phones? >> i do, you mentioned the first iphone is 10 years old, the 10.st born in this era are a generation that looks quite different than any generation before it. at that point, we will pay attention. >> a public policy response to rudeness, i love it. i love it. thank you. great to be here. author of "irresistible: the rise of addictive technology and the business of keeping the u.s. hooked." up, the company's first quarter results and the

landscape for health care reform. where does it go? this is bloomberg. ♪

>> at night is reporting healthier profits helped by cost-cutting measures and lucrative private health care plans for seniors. the company continues to face pressure in its obamacare business. health insurer expects to lose to a detroit $5 million on individual health plans this year for its participating in the aca. david gura is here with all the latest and will be talking to chairman and ceo. >> thank you. great to see you once again, mark. i will describe it to you.

uncle sam looking at your revenues, commercial revenues with government revenues. commercial revenue is an orange and government revenue and blue. we see in 2017, government revenues surpassing commercial revenues. what does this say about the direction being taken at this point? going to wear the market need is. government programs which the government is now funding a lot more products in medicare and medicaid. we need to provide that service. i remind you it was the first medicare financial intermediary back in 1965 when we actually paid the first medicare client. it is not a new business force, we have been in geisha in it for over 50 years. -- early lastyear month, you pull out of the financialk citing risk and uncertainty. how uncertain was the landscape and why did you decide to do that? >> it was a competitive

framework there that we were going to be the last full state plan in a lot of ways. probably more important way, each state has its own notification deadline and we need to get out in front of that are not everybody adheres to the guideline or updated to the june federal guideline. we need to notify them sooner rather than later and we did. >> on the issue of uncertainty, how do you read what is going on in washington, d.c.? house republicans this week, how does that advance progress this week on changing the affordable care act? do you see that as an important step in that action question mark -- action? mark: it is but a number of things in the republican bill in the house may not get through the senate here if that is the case, they will need 60 votes in the senate. sooner or later, we needed bipartisan solution to make it work for all americans. bipartisanat it was

before has made it the political for all it is in the aca. i would encourage everybody working on this to think about what we could do together to fix will need 60 votes sooner or later. >> i want a sense from you of who in the washington gets it. making steps in the right direction of fixing it. at the white house, the president tweeted this picture of you and other executives surrounding the oval office. you talked to the president. does he get it? i think the administration gets the difficulties associated with changing this. intents and purposes, unless you have 60 votes in the repeal you cannot really obamacare and the aca. we need to fix it or work around the edges. through the legislative process, it runs a big danger of being picked apart by various factions inside either party. people underestimated the

complex of the legislative process. >> so much of this conversation is focused on subsidies. i'm sure you have gained out what would happen to your company were to disappear pier 1 does that look like as you would -- gaze into the crystal ball? >> it is only been approved through september. does not even get you through the plan year and it says nothing about 2018. unless there are assurances around 2018, price impacts are substantial. it is billions of dollars across the industry. unless they figure that out and get to it soon, before june, they will have pricing issues paid for either through the or up untilidy september through the cautionary subsidy. creswell comes to leave for herbal care act, you are still in delaware and nebraska and virginia, should we take that as a sign you're in that marketplace for the time being,

for a while now? we are in as much on nationality as we earn more. as these deadlines come upon us and virginia soon, as the deadlines come upon us, we will have to make a decision based on the information that we know with a high degree of certainty at that point in time. >> there is a version of the future in which at the no longer participates? -- yes. is currently >> are you actively doing that ?r looking into that >> we're always looking into arets, whether they consistent with our strategy, whether there are things to invest in. the group is this has always been off to the side and runs separately on its own. there is some opportunity to mix care management programs. we have people approach us from time to time taking a look at

it. we have never been able to pull the trigger getting rid of it. >> you would not regret the overture you made trying to get the merger through. what did you learn from it as you look at growing your company going forward, what did you learn from the attempt to grow those companies? >> we learned a lot from each other. relationship is as harmonious as ours was, cohabitating for a year and a half, sharing plans and talking about the future shared -- on either side of the table. done we have loved to have it? yes. the fact that we have not done it is water under the bridge and time to move on. >> there is news about health care today. mario is out, john is out, the brothers running that company no longer in the business of ceo and cfo. is that a company you might be interested in acquiring? >> i will not say anything about m&a, but i'm currently occupied within a job. organic growth going

forward? what sort of growth do you see going forward? >> i think organic growth will be really important and i think it has to go down to the market level and into the community and we have to me more engaged at the community level if we will understand how we grow our products. on the upper west side, they are different stores. we will have to be that way in communities while addressing issues related to the social factors that affect people's lifestyle. in thoseires us to be communities. that will be an important part of how we move forward with organic growth. secondly, there will be vertical integration in the industry. they give us an opportunity to look at things like dialysis, as a way of providing services to those people at costs lower than now. will you tell lawmakers now

as they continue to wrestle with the affordable care act. what to keep in mind? solution.san they only get sicker. when they have insurance, they have wellness, the ability to do preventative business -- visits, and it is cheaper and better for individuals and the economy with more productive people. >> thank you. back to you. joh: up next, u.s. auto sales in 2017. this is bloomberg. ♪

joe: of course, we are starting

to get a lot of q2 data this week which will culminate friday with the jobs report. in the meantime, we have got automakers talking about u.s. sales and they were not that impressive. to 2011rt is going back of auto sales. you can see it rising and rising and then we get to this year, and there has been a drop off coming in short of expectations today. gm,the big names, ford, toyota, all behind estimates. just one industry but to the extent it says something about the health of the consumer, remember there are all those concerns about auto loans and auto delinquencies. keep an eye on this, perhaps the weakness in q1 may be bleeding into q2 a little bit. >> right. i want to show you the chart i am looking at today which picks up on stronger survey data we got out of europe this morning. we have been so fixated on the politics in europe that we have not been looking at fundamentals

and they have been surprising on the top side. it is exactly what you can see here on this chart. it is showing relative surprises on the top side versus what we have seen in the u.s., which has been disappointing. that is at the widest level positive to europe for two years. the question is, does that tie into the euro and will we see the euro rally as a result? the correlation from this chart is pretty much zero. do not get too excited on this point. a lot of traders out there are saying the euro is to rally short-term at the very least. >> i am zooming back in and looking at apple, which reports after the close trading. interestingly, very little bearish options activity going into this. if you look at the cost to buy bearish downside protection, it is the lowest versus upside protection in two years as the stock rockets to record high

ridges trading today going into earnings. it looks at least priced into the options market. curiously, very little hedging costs. at least it is not expensive to buy it. the market closes next. this is bloomberg. ♪

>> u.s. stocks -- the s&p 500

trading four points, of a new record, while tech shares led gains as we await earnings in a half an hours time. i am julie -- >> julie: i'm julie hyman. >> joe: i'm joe weisenthal. if you are live on twitter, we want to welcome you to our closing bell coverage. every weekday, 4:00-5:00 eastern. >> take a look at her stocks are settling as we close out the session. we have not seen that much movement today. we have seen bouncing around between gains and losses. mastech well almost -- nasdaq might get that record close. gains only four points into the close -- on the strengths us of some of these technology shares. it has been a day of earnings moves, not much move on the movemente, definitely

on individual stocks. coach, the best performer in the s&p 500 index today, huge gain their. 11%. coach has been discounting quite a bit. apparently cut back on that discounting a little but this court. profit estimates -- -- profit beats estimates. one company reported a its first decline in market -- advanced micro devices, tumbling by 24%. -- down 9% on the year. strengthen technology today, let's take a look. ofle shares up -- up 6/10 1%. facebook and alphabet up as well, all three trade at record highs. -- partof things, but of the things helping contribute -- saying thifangs. joe: government bond market fairly quiet, the claimant yields in the u.s.. two and 10 front, 10-year below

2.3%, greek 10-year -- assets rallying big-time. looks like greece is getting ,loser to another bail out deal getting more bailout money. we saw a huge rally in stocks. was take a look at currency markets. -- u.s. a problem for the dollar. it's a mixed bag. exceedinging risk -- what we are seeing an dollar-again. dollar-again at a six week -- dollar-yen at a six week high. a lot of traders out there saying we could see -- particularly if we do not see the dollar pickup steam. sterling, three-year high and manufacturing growth from the pmi's this morning, popping above 129. joe: on commodities, interesting moves.

,rude oil was the big story survey showing expected gains and inventory. oil down 2.5%, gold didn't do much. live cattle as where the action is. julie: i love when you bring in these commodities. joe: we don't talk about it enough. [laughter] cattle rallying 2%. yesterday -- turned a surge. they gave a little bit back today. i want to take a one-month look at crude oil. .e can see it tumbling couple weeks ago back in the low 50's. but selling again. keep an eye on that oil. and those are today's market minutes. -- let's take a deep dive into the bloomberg. you can find the following charts at the bottom of the screen. i'm so glad you talked about commodities, joe. that's what my chart is looking at today. watchof analysts saying

the brakes. we have taken that out today. opec meeting in a few weeks. going gang busters -- there are huge concerns. this chart is shown you liquid fuel -- the white line here. to the partccording -- department of energy -- been a look at the one here futures curb and oil. this is an extreme -- the yellow line. have never been flatter in that contango curve. if you go back to what we saw similar levels, the contango, was 2014. at the point where training round -- the 60 month average. 20% were higher today. -- way we see this reversion you would expect to see it steepen up. that means races on the front and --

joe: stakes to how much volume is coming out of the u.s.. julie: latest read on inventories tomorrow morning at 10:30 new york time. we haven't talked a lot about the fed but they are meeting this week. ahead of that, we see the first time since july that hedge funds and large speculators are bullish on treasuries across the yield. we are looking at this chart at this charter tenure futures, 10-year treasury futures. the longest here that these folks have been in quite some time. long positions are not as large as the bearish start to 2017 was. of theks to the duration ongoing treasury bowl markets, and how it looks like some folks are giving up on the idea that it is ending, even as the fed is predicted to raise rates a couple times this year.

get aow we are going to treasuries announcement. that will -- it will release its results of a survey on ultralong debt issuance. there was a big buzz recently when they asked traders about this. we will find out what they said tomorrow. coverage from annual milk and global institute conference in beverly hills continues. the cio ofis with the california state teachers retirement system. scarlet. scarlet: thanks, julie. i'm here with chris gelman. it is passive versus active. how do you think the debate has changed this year? >> i'm still shocked it's a debate. [laughter] good lord, we have been at this for 30 years. passive makes all sense, especially for large institutions. -- retail is realizing

401(k)s are the way to go. active management as of the risk of losing its social life. it is not -- active management outperforms the market. when you deduct the costs, they don't beat the market. you have to go passive. is to reduceanswer fees. how much traction do you see in the reduction of fees? >> we had of them all the time, pounding. scarlet: i know. make has to go so far to that -- typically are active managers make 20-30 basis points of alpha --i know i'm getting technical. scarlet: please. have to come down to half-two thirds to -- to be price competitive. i don't think they can operate without -- structure most active managers has. scarlet: they're not the same ballpark. christopher: not at all. i can hunt the u.s. stock market at no cost, it has an awesome index team on the desk in sacramento that is a great job and t-rex the market perfectly.

they added 10 basis points every year to active managers. torlet: there is an argument be made, a conviction that passive is doing well because you have this microenvironment with persistently low interest rates. you have a low volatility, and steady bull market for equities and bonds. those elements changes, then active will prevail again. what do you think? christopher: that implies that those conditions have been in place since the 1980's. wow. maybe they will change. scarlet: you can argue that the tenure christopher: has been steadily declining. christopher:it has since 82. but, come on. ofive management has 1/3 active managers beat the market in any time. those don't repeat consistently. active management has not been a hasable place to be -- it gotten worse because information flows faster. it is more priced into the market.

is u.s. market in particular more efficient than it was in the 80's. it makes sense now. pimco -- many room was saying that neutral funds and actively to just -- outperform withcts in contrast equities. you have non-economic players such as its central banks and suffered while funds. pimco has been in the game. super active. i know you are laughing at that but -- is there something to be said for that, when you look at the data? christopher: it's like me going out and saying i'm a big fan of baldheaded people. come on. umm, no, but to get technical the bond market -- the index construction methodology. the bond market index is all of the debt issued. the companies that issue more depth are bigger in the index. that's why, particularly in bonds, corporate credit decisions -- we have a great corporate team, we run almost all of our fixed income in our

desk -- they are able to make very smart credit decisions and outperform that index. duration does that make sense. even pimco doesn't want to play too much -- they will take the risk and credit. we call that smart indexing. you will not replicate the bloomberg -- you guys now on us so i can say that. why have to redo disclaimer? scarlet: no, you are good. christopher: you guys on that and you will not replicated. be cap you're trying to -- dedicated. passive management means different things in different marketplaces. scarlet: do you have any of your fixed income and active management? yes, particularly not u.s.. is non-us based. 20% is universal. it has the exposure to non-us markets. that's a good example. where currency and central banks have a powerful impact. you want active management of some decisions.

it -- in that segment of the market, active management again -- you compare fees that you pay in that part of fixed income to public equity. night and day difference. fixed income is cheap and they outperform, that index is easier to beat. scarlet: let's move on to the u.s., infrastructure. wonder what your thinking is, how it is changed over the past 100 plus days. christopher: 100 days not much, sadly. in this a long, long time. i have never seen a market where there was so much need in terms of u.s. infrastructure needing repair and so much money willing to go to work. and nothing is happening. scarlet: but, this is a transactional president. christopher: you still have changes -- we are blessed with a wonderful principle bond market, but it's the lowest cost of

finance and build infrastructure. it is lousy at maintaining it, that has to come out of the city or county's budget. you have to find a way to put equitye fiscal bond, an layer so we can own it maintained the asset for its life. i know congress has not been able to figure it out three different presidents haven't been able to come about canada, u.k., even france are figuring it out. the money is flowing into their infrastructure. we haven't built a new airport in 20 years. we're not repairing our roads. say it, but flying into new york like i do regularly scarlet: a bit of an embarrassment. christopher: laguardia has been an eyesore forever. we are involved in that transaction. it's a slow turnaround. are going toes figure it out. there's a lot of capital that wants to go to work from outside the u.s.. we need to capture that. scarlet: you recently said you

are considering joint ventures with other venture funds. is that to be able to direct and -- directly to infrastructure? christopher: absolutely, we teamed up with a pg, to own a money manager named, argo. particularly infrastructure were cost matter, it's a lot returning assets -- we want to team up with other people and take advantage of their direct investment teams. actual sponsors being very active. they had been asked them yesterday come along meeting weorrow, to talk about ways can team up together, not just infrastructure -- infrastructure, may be given, private equities. scarlet: we'll get you back on when you have something to announce. christopher: i'd be happy to. breaking news,

earnings and a biotech -- missing estimates by six cents a share. revenue falling 16.5% a year over year, missing estimates. product revenue from the ad sciences- gilde missed estimates for nine of their top 10 selling drugs. >> one of the world's article -- largest snack producers that generates most of its revenues outside of the united states. they are purported adjusted eps -- $.53. estimate $.50. that's a net revenues of $6.41 billion in gains, better-than-expected's of $6.37 billion, reform forecast for the year target. from new york, this is bloomberg. ♪

mark: i'm mark crumpton, it's time for first word news. president trump and russian president vladimir putin spoke iphone today. the cause is described as quote, a very good one about terrorism, north korea, and syria. as for the syrian civil war, the white house says -- both leaders agreed the suffering has gone on quote, for far too long, and the united states will send representatives to cease-fire talks and cousin start this week. president trump says the nation quote, needs a good shot-down in september to fix what he calls, a mess in the senate. the president said on twitter today, the country needs to

what, either elect more republican senators in 2018, or ,hange the rules now to 51% suggesting more rules changes ahead and and senate. president's comments come expected votes this week on a bipartisan budget deal to avoid a government shutdown and impossible vote in the house on a health care overhaul. british prime minister theresa may acknowledged the brexit will not be easy to master european union officials accused the u.k. of failing to grasp the complexity of the task. squarely at him britain, european parliament brexit coordinating keeper hofstadter tweeted, and -- any requires a stable understanding of the complex issues involved, it's time to get real. is primed stable minister may's campaign slogan as she seeks to what a bigger parliamentary at majority on june 8. what is twice -- footie four

hours a day powered by more than 2600 journalists and analysts in more than 100 20 countries. i'm mark crumpton, this is bloomberg. julie: breaking news on at sea, company's ceo departing. chad dickerson who is been there since 2008, ceo since 2014 will step down. just silverman will take over, a board member. fred wilson will be chairman of the board. at sea reporting this as revenue rises less than estimated, sending shares down sharply. over the pastup 12 months over a. erasing some gains, down 15%. apple second quarter matters but the intention should be on the iphone repressed. gurman,ing in mark bloomberg news tech reporter from our san francisco bureau. mark, griffey to join us. as old intention going to be on

this the radical iphone super-cycle coming? mark: absolutely. as you know, joe, covering the company in the stock market for so long, this happens every year. [laughter] when they started announcing new iphones are in september, october towards the q4 quarter, everyone paid attention, going from q2 to 23 on the phone. that will come up toward the end of the year. they whine about a lot of the anticipation for new products numbers. everyone's eyes on this q4 iphone, and the next q1. at some point, the company will have to break out of this cycle. that's what investors have been waiting for. just the next best iphone, but also the other stuff that hasn't materialized as much of apple. or going to get any news on that front today? mark: that's a good point, apple has become a q3-q1 company. in terms of new products.

they came out with a red version of the iphone and cheaper ipad during q2, but those don't move the needle on the product front or on financials. we will see if they start moving for products around -- once upon a time, apple would announce brand-new hardware with much success every january, march april, june, then up maybe once-twice, three times in the fall. they have moved away from that positioning ios and the products in that ecosystem. julia: are we going to hear more on the cash terms -- and what they could do with the cash if they do repatriated from elsewhere in the world? mark: i don't know, but apples -- believe -- i believe typically talks about their cash return program in the q2 annually. i'd be surprised if they didn't. joe: what else -- besides the obvious stuff, what will be the key thing they would be looking

for? isp, iphone sales and given that the iphone 7 plus is more expensive than previous iphones because of the dual camera system. the going to a 5.5 inch -- we will see if demand has picked up for those now that there are less supply constraints. great to speak to you, mark. up, beating the drum on apple second quarter earnings to out in less than 10 minutes. we will show you two different ways of looking at stocks. this is bloomberg. ♪

"what'd you miss?"stopher: you can find all the following charts using the function at the bottom of the screen. actually, i am not showing you the right chart, because that has just changed. give me two seconds. julie: i will jump in, then we will get to your chart. as we set up for apple earnings, i want to remind folks -- we talk about this recorder -- how reliant apple is on the iphone alone. theme we talkon freely about last year -- for the last fiscal year the company got more than 60% of its revenue, 63%, from the iron -- iphone. white line obviously is the iphone. you have services revenue and .lue that has been growing pretty

quickly here. ipod revenue and yellow, mac revenue and purple. growing as a faster clip than the other businesses. this is a small proportion of the business, still watching that number increasingly to see how it looks. joe: there's this arguments that bulls make that they don't get enough credit for the services business. oh it should be more like amazon web services. you see him this chart it's not the same level of number. this is unit sales, the same thing, just express a different way. as we set up, we are looking for 51.4 million iphones sold. tim cook said that services business will double over the next four years. now have my chart ready, i apologize guys. the share price of apple this year alone.

that significantly outstrip what we saw for the s&p 500 index. it's raising questions about the rally -- is there an overreliance on the broader rally for the s&p 500 index on tech stocks? this is 13 percent of the index points of the rally we have seen. saw ingo back to what we 2011, 2012 come the increase we have seen our's -- steeper than we had seen in 2017. apple was a far bigger share of the s&p 500 index them. index equate the s&p 500 rather than allowing for weightings to overplay the importance of tech stocks, we're at a record high. it argues against everyone here saying that the break -- this is.y is more narrow than it actually, apple continues to grow. joe: we will see if they can continue to plowed its outperformance shortly. apple earnings coming out imminently. stay tuned for all the action. >> so excited.

>> this is bloomberg. ♪

julia: julie chaplin. "what'd you miss?" apple second quarter earnings just broke. apple seeing third-quarter 43.5-45.5 billion dollars. estimates, 45.7. that's slightly less than we were expecting. they're boosting the dividend, which is something that there was a debate whether they would. increased dividends by 10.5%, to $63 per share. speculation they had try to boost that dividend ratio higher. they only have gone slightly above average, 10 .5% here. let's see if we can say anything us. iphones units --

julie: 50.8 million iphones sold in the second quarter, estimates were 51 point 4 million. average selling price lower than 666 --ed, $655, versus 600 60 six dollars estimated. this is pertinent to margins. haven't seen that cross -- across yet. apple had already guided margins of 38-39%. revenues- some quarter , a slight miss there. it does look slightly start overall. they are authorizing buyback here to $210 billion, slight rise there. capital return program expending to $300 billion for $16 billion increase. worth reiterating numbers quickly before we move on. 22 revenue coming in again --

iphone also slightly behind expectations. sold --lion iphones also slightly behind expectations. these are huge misses by any stretch. we see this slightly negative thetion to corporate's to numbers. not big misses, but not hitting the cover. relative to expectations. services is something we beat the drum and quite a bit. tim cook sang in a statement, there is the highest revenue ever for a 13 week quarter in the services business, specifically the number i see thus far on services looks like $7.04 billion if i am mistaken, i want to verify that. that is something cook has touted. up, amazingpen it roundtable of guests. we have cory johnson, howard linson, cory, what is your big takeaway? cory: we saw a decline in

revenue for apple, seems amazing. revenue, last in quarter, the just announced here, looks like numbers -- as they get toward a new iphone launch in the fall, there's concern that the information about that comes out -- consumers with slowdown in sales. we've this happen a little bit not as much. howard, slight misses, slight declines. still this company is a juggernaut outperforming once again. does this change the story? howard: i voted forever. it is an amazing run. if you look like 3-4 years, prior to that. stock but them in the 90's by your tim cook peak on -- google trend. concoct hit all-time low on google trends. is a humongous company. they're too big to stop.

i am not ceo stock -- in will kill me. julia: we will correct your title. atie: when you are looking these numbers, i'm also seeing gross margin between -- corey, traditionally, one of the attractive things about apple has been high gross margin. if that story changing at all? cory: interesting is the business move towards services. that announces, the future of this company will be in services. whether it will be apple music -- videos, phone, or it will be there streaming services. them marchingge here -- we don't know how it will change margin structure. companyhink about it, a like apple or google, or microsoft, or amazon, has a similar physical structure, they run data centers all over the world. move crossing oceans to

something around -- they're able to get into similar businesses. apple is very much aware that for them, they have growth going forward, they just explore smartphones as large as they can, that computer sales -- other sales -- all much longer replacement cycle. >> apple has missed out on the apple bank. i do not still use apple pay, but i know a lot of people do. but it is 90 milligrams of their, that'll of people using apple pay. papal, square, all-time highs. apple should be a bank. maybe not a lender. >> should buy one of those? >> it's not their style. it would be bigger than anything they've done, thanks seem unhappy. apple is a country. apple is a planet. they have to try this stuff themselves.

knowing some companies will go up there besides facebook and make one of these acquisitions that makes people's heads spin. renounce my facebook taking this bets and chinese companies. one day apple no make a benefits not now. julie: bigger than ecosystem. [laughter] howard: many are planets. like amazon, too big to stop. the big winners and technology are 2-3 times bigger than the number two. 10 times bigger. you see that google, ships with intel, manufacturing smartphones and apple. >> the kipnis that apple stock is trading at a record high. we are reading from it they can come up -- to expand the universe. they're still putting cash out to shareholders. what do you think has been different, 10.5%? enoughare saying we have from here given the balance sheet to make this more 15-20%.

it's enough. what's the -- the numbers? cory: it's a week --dividend for a julia: company that generates as much cash julia: it is! >> you can't underestimate the nuclear winter that this and all technologies companies go through. julia: so you buy back shares in their money at it in terms of dividends? howard: perhaps. cory: perhaps. i look at the focus. -- startup. we're still talking about it, the ones at the theory -- i ceos are happening. ored on the nuclear winter secret message that steve jobs might have left for tim cook, i think storing cash is not a ad thing. when does cash become a problem? why pay taxes and something, if people are going to pass it away, -- joe: $2.9 billion for other

products. this includes the apple watch, apple tv. --e of these devices see more and more people wearing them. >> racing that -- some people think it will be bigger than the apple watch. >> of the biggest next platform. them, i don't have they're back to being classic. opinion question -- everybody says good things about them. as a apple fanatic i haven't gotten my. . >> is in danger of losing -- over?, lexus, is that quick they're clearly behind on that. clearly the doing as well and on the views. >> i've never seen a person -- except people i don't want to talk to. anytime i see here -- no one here use. [laughter] do you use siri? julie: my kids use it for fun, that's about it.

people use alexa. joe: margaret stats, $10.7 billion in china revenue, down from the center last year, when it was $12.5 billion. what happened? this was the story. cory: still of the china story. in a trailing basis that will put china revenues of 22% overall. it's a huge business for apple. placely most important for apple after the u.s., maybe more important -- >> in the u.s. the iphone is much more dominant than samsung. it remains so. china concert to see -- >> three three quarters down potentially five, -- is that just a headline? >> we will see how it goes. i think the next iphone will be a defining product. the last big change in the iphone of the six plus -- this large-format size that was

focused on china, and the chinese market, you can have the top of the line. he'll me the cheapest. they give them an entree the chinese market come a lot more stores in china. we'll see what the design is like in the new phone and how much it's focused on the chinese market in particular. fore: away from phones moment and onto the financial structure of the company, the cfo is saying, it's too early to tell the impact of tax reform. obviously apple, massive company, so much revenue. any kind of tax reform repatriation legislation will be a big deal. howard: over my pay grade. [laughter] only because you ask me, no one knows. we are talking about someone who wakes up and changes his mind every day. say thatt is smart to nothing will happen, versus trump can do something. we are seeing the market say, wait a minute, tim cook knows more than donald trump.

i am cautious to worry about things that are not there. the market is not pricing in his panic everybody seems -- markets ,un here, or the markets saying much trump says doesn't matter. up there inou are silicon valley, some of these companies cash and internationally more than anyone else. is this a big topic of conversation, the idea of taxes? cory: definitely. i will also say, the tax break last year -- 26% for apple. there are paying the full -- they couldn't be paying more than that. formsw the file different a different than the fcc, which is a longer story. to important to recognize companies at intel and apple and others have already created a financial structure such that they are using the paris trade or whatever the funny names are, they have artie found ways to pay less than the effective --

joe: double irish with the dutch sandwich. cory: exactly. howard: what they bring it back then? than the incentive is less it would be if they were paying the full rate. a lot of these companies found ways to do things differently. what will the rules be around that? use it to higher historically, don't use it to spend -- do use it for buybacks, dividends, special payments to shareholders in wall street, but not to do the things the president trump has said he wants to do for workers and people. how will that affect if they do it, what the technology companies want? julie: howard, do you buy apple? if you do come are you buying it for next quarter, or the end of the year? are you buying it for the next three years? howard: i sold some today, but it still my biggest position. it's a buying morris. [laughter]

you can see mars, apple at least two can see it. apple is still a retail store. americans still -- they are now the cornerstone of every mall. it's untouchable. the question is, what do competitors do? this kayak open a store in empty malls, does google finally got retail? service matters, apple owns that. who knows what they will do. i like to say, apple owns tech or hardware at least, and fashion. what does the retail store look like? a big can apple stores get? i think they're still just scratching the surface. i'm long-term bullish. if apple dropped 10% tomorrow maybe it would buy back the shares i sold today, but i wouldn't go all in. there's a lot of goodness priced into this market. effective -- empress working together is working. mac sales up 4% year-over-year dividend results, people buying

macs because they are buying phones, vice versa, services because they're buying all of it. julie: cory johnson come thanks so much. linson, sticking around. i should mention, apple shares down 1.5% in the after hours. up a little bit off of lows. coming up, emily chang spoke with apple cfo luca maestri about the company's latest earning results. we'll get the highlight from here. this is bloomberg. ♪

julie: "what'd you miss?" emily chang just got off the phone with apple cfo look of my street. she joins us now with highlights. we're just talking about tax reform repatriation. what did he tell you? $257: apple now has

billion in cash, 93% is overseas. thought aboute this -- have i thought of this, laid the groundwork? he told us it's not something we will be expect -- speculating on because it will depend on the details of what might get connected. we do a lot of scenario planning, but there's nothing to announce today. of course tim cook has suggested he is open to this, would go there -- but wouldn't go there in terms of doing -- giving us details on what would happen if the legislation changed. julia: what did he say about basic numbers? seems like they sold fewer iphones yet revenues were higher. the iphone 7 plus is doing much better than expected. they're saying shift -- a shift of customers going from the iphone 7 to the iphone 7 plus. good news, average selling race of an iphone goes up.

sold slightly fewer iphones than expected. he said though that inventory makes up for it. 1.2 million iphones in channel inventory that they get to the 52 million overall. julie: what does that mean? emily: channel inventory builds up in the store, they haven't sold it yet. this accounted for less corner rather than this quarter. julia: did they talk about shortages? emily: they'll was run out. julie: let's talk about he thinks that is why he thinks more countries moving towards the seven plus. they think unique features the camera. obviously different than smaller -- the smaller iphone, that's the first time they made a feature on the phone different than smaller phone. -- think customers are interested in that new camera and a general they are seeing interest for a larger sized phone the market. julia: they're keeping the products longer. emily: and, there hasn't been a

major design upgrade and a couple years. people are waiting. joe: who buys the old small iphone? julia: that's not the point here. emily: i'm thinking of the square iphone. [laughter] joe: china, we are talking about that in the last block. the best fast of a growing market as it once was. how do they feel about the market? emily: he said the decline was bigger and the second half of last year than they have seen so far this year. he said we see positive signs in china, issa -- iphone 7 was the best smelling test selling iphone in china. he mentioned the services business hitting an all-time record in china. mac business group double-digit's, and they are expecting performance china to improve over the year. julie: we talking today about hints about what it would be

like. emily: didn't give us any hate dachshunds, but mark gurman had given us plenty. a curved screen potentially, there's speculation about the glass back. 10th anniversary of the iphone this year, we are expecting an iphone eight to come out in september. in june, also talking about -- rumor mill talking about potential apple home device where you could talk to siri on your kitchen counter. that could be something to look forward to in june. joe: emily chang, take you very much. coming up, facebook reports first-quarter earnings tomorrow. we take a look at what to expect from facebook. this is bloomberg. ♪

joe: "what'd you miss?" apple earnings, but more tech to come including giants of social networking, facebook, which is out tomorrow. we're still with some which chairman. they see a grand. and techthat will companies, too big to stop. in the category? >> yeah. they got me. if you don't of facebook and try to figure how bad they got you -- you realize how deep they know stuff about you in your profile. instagram gets better and better. i was putting a post together about my son. month or five years of photos in 10 minutes, pulled up my five favorite pictures, created about -- blog post. the memories -- the winston works, the more you use is, the better it gets. the more you use it -- it's a gram really is magical.

vacation -- they got the trifecta going on. daughter, who is 20 or 19 going into college says cannot hit facebook. she is a facebook message group for floor on her door. people who hated, what they don't use -- they turn facebook into utility. but they don't uses the mainstream, where my wife is where the adults are. but the you you -- you. >> living in snapchat, my son and daughter, 18, 19. i own two millennials. meaning, in snapchat that is their operating system. it's crazy. staff isn't going anywhere. cutera this, smart people saying it's a disaster. overvalued, undervalued, we argue all day great is up to them to screw it up? yes. joe: here's my big question.

we see the turnover growth of these large companies. big companies should be able to grow -- this fast but they do, the outperformance crushing the overall -- what would change this? >> that the -- two big to fail thing is. it looked that banks. during the have this pair of financial leverage, layer and player package, repackaging. it was imploding underneath the service, took a few people. now we have to be to stop trade -- apple looks unstoppable, facebook. even alibaba. through --ago you jackman in june china. alibaba goes away. today you put them in jail and there can be a revolution. they jumped the shark. i don't know what stops it but it will have to do with these companies creating such torment for the other companies in the world, that's you will have this friction that eventually plays out. i do know how though, joe: fascinating to watch.

coming up, what you need to get for tomorrow. this is bloomberg. ♪

julia: "what'd you miss?"

we just had apple's earnings, strauch -- stock trading down 2% under hours. we will talk about that in the show tomorrow. don't miss this, president trump -- posted someone at the white house tomorrow. julie: also earnings will aag, tesla,cebook, reporting first-quarter earnings after the bell tomorrow. joe: for member the fed? they have another interest rate that comes up tomorrow -- decision. tune in at 2:00 new york time, 7:00 london, for special coverage. julia: that's it for "what'd you miss?"

alisa: i'm a alisa parenti in washington. you are watching "bloomberg technology." president trump says the nation "need a good shutdown," to fix the method and it.

he tweeted that you country needs to on the more republican senators or change the rules to 51%. a vote is expected this week on a bipartisan budget deal. meantime, house speaker paul ryan says he understands the disappointment behind the and he didn'teet, sabotage gop efforts to repeal obamacare. ryan also endorsed the potential $1 trillion spending bill, saying the budget increases border security and makes the usa for. hillary clinton says she is taking responsibility for her last, but believes that misogyny, russian interference, and questionable decisions by the fbi played a role. she spoke at an event today saying she was on the way to winning until a combination of days. in the final screenwriters in hollywood have averted a strike that could have cost billions. the writers guild