the s&p closes between key support levels. goldman says it's time to hedge. the white house pushes for pulmonary nafta deal next week while president trump says the nafta cash cow still in play. launches its direct listing in the midst of this tech route. david: welcome to bloomberg daybreak. i'm david westin along with alix steel. yesterday we had a route. worst start of the second quarter since 1929. david: you're talking about equities. i was talking about michigan villanova. did something to on with equities yesterday? alix: you didn't watch it though. david: i did not stay up that late. alix: did you want to cry? it still looks like a beautiful day out. upid: the sun will come tomorrow. alix: in the equity market it

looks like we are trying to get to a risk on day. are off theities lows of their session. mixed dollar story but it does appear the dollar is on the back slope when it comes to the risk on currencies. not reflective of any kind of panic. did not necessarily see the strong buying we would have expected during yesterday's rout. i have to wonder if a lot of it is technical. we are joined by tina martin .dams and caroline gage let's get to the chart i showed in the open. another 2% move to the s&p. what was your explanation for yesterday? not that many people around yesterday so it was a fairly low volume day. we were definitely subject to the lack ofsidering

upside push at the end of last week and a test and break of the moving average seems to be really consequential for technicals in the short term. it has been this area of major support for the index. we broke it yesterday. there's just not a lot to be tremendously optimistic about in the short run. 200 day moving average breaks historically has resulted in upside for stocks. unless we are falling into recession. does seem to be pretty technically oriented. it doesn't seem to be affecting a lot of asset classes. the ten-year treasury has rallied but not substantially. the economic data yesterday was actually quite good. i think this is a lot of technicals. broader market certainly is .ubject to moves in technology

this does look like some degree of capitulation which comes at the tail end. we are having capitulation in some of the markets biggest winners and momentum shares. it is still a technically driven connection that doesn't appear to be feeding into the fundamentals. david: look at the other asset classes, there wasn't a flight to safety. .ou could also look at gold the 10 year came up some but not as much as you could expect. >> there was a little bleeding there. this was very located around technology stocks. musk fake tweeting yesterday about potentially going bankrupt. a lot of concerns about self driving cars.

the whole issue about the new economy and concerns about regulation and whether the stocks were overbought and overly bullish. that has been driving route. you saw that continue into yesterday. david: we had the president weighing in as well. came out ofay word the white house that they want to try to announce a new nafta deal. the peso just climbed immediately. you can see the really vertical line that they will try to get a deal done this week. in this morning the president came back into the marketplace and tweets, the big caravan of people from honduras coming across mexico had better be stopped. cash cow nafta is in play. , maybe not so fast. maybe we don't have a deal. >> this is going to be an ongoing risk. are we going to do about trade, where his trade with

china going. where is trade with nafta going. certainly nafta is a huge risk in the short term. it's being reflected in stocks that are most correlated with the mexican peso. it's being overwhelmed for the s&p 500 now i the tech specific risk. you can't exactly detach attack risk because it's a very internationally oriented sector. any risk of trade with asia is going to manifest itself in tech shares as well. unfortunately this is this year's risk. last year's risk was that we were going to get tax reform and that was helping to keep shares afloat. is trade policy may create some inflation and that unfortunately is producing some downside for shares. alix: you have a weaker dollar which would imply that's good for growth stocks. forreates a real dynamic those who are expecting that

rotation. >> absolutely. that's one of the reasons people expect volatility to continue. we have a white house that is very unpredictable. you have the fight with china going on and maybe some progress in terms of nafta. will likelydowns continue. alix: in the midst of all of this, what do we get? semi ipo. the market value is expected to be about 25 billion dollars. public share price will be determined at the open. 90% of the shares can be floated .nd there is no lockup period walk us through why this is so unusual for ipos. >> they basically cut ipo out of the wall street process. it's a listing of shares that already exist with investors and principles of the company. they are offering the shares to

the public having sort of bypassed the whole roadshow process, cutting wall street out of a whole bunch of fees. it also frees up employees to trade sooner. everybody is watching this to see how it does. a lot of questions about how it will actually perform in the market. it could be a very interesting model for other unicorns and other tech companies. david: putting aside the question of fees i really do wonder whether this could be calm her in some ways. day one.sell from alix: they don't want the big pop on the first day. >> it's going to be really interesting to see because a lot of wall street banks would be advised to hold off considering how much investors are willing to take on new risks right now. this is a tech company playing the finance game without a financier. world franklynew

and is really interesting to see this come in the midst of all this volatility in the equity market. how will this be absorbed in general without the support of .he general financial community it's going to be really fascinating to see the stock prices. thanks very much. david: we have to turn to a very sad story. 79-62.va beat michigan we all were crying those of us from michigan. it was not a good evening for me. joining us now on the telephone is somebody who is a winner, tim armstrong, whose charity is children of fallen patriots. haveunderstand, you would won even if michigan had won. you are doing so well. >> i know you are a big blue

guy. unbelievably great night for our sports team. brent evans who helped me do the bracket up front. huge thanks to mayor bloomberg and you folks at bloomberg. my cause is children of fallen patriots which my wife and i are super passionate about. it made watching the game a lot of fun last night. david: it's a great cause. you know how much you are actually contributing to this cause? corrects we are trying to get the final numbers down. it sounds like it will be roughly $300,000. it helps about a thousand kids the ultimate pay sacrifice serving the country and they need educational help

and help getting through college and that's what this organization does. and you are a debt sustaining that. it's terrific. i looked at the graphic on bloomberg is it right that you actually picked umb yes to beat virginia? i try to be a leader and putting your best people out on the field of play. playve millions of people our yahoo! sports bracket. brad was the one who came up with that take. today not only children of fallen patriots are a big winner but the work you did was really amazing. huge kudos and really happy we have such a talented team. don't want to let you go without getting your thoughts on what's happening between d.c. and tack and all of the issues with facebook. how do you think this winds up

playing out? >> i think it's a natural .ccurrence tech and the growth of mobile consumers has really stunned the global economies and now you're seeing people taking a step back to see how these companies interact and how we as consumers interact with them. our strategy has been to be the trusted brand company. i still think there will be a period of time where things have to get sorted out. the spotify ipo is another major opportunity for investors to take advantage of the tech brand and trusted service. spotify is another trusted service. i think we will see a continued focus on this and really push towards quality and trusted brands overtime.

alix: tim armstrong, thank you. coming up, u.s. majors dropping across the board yesterday. more on how much the fang stocks really got hit. this is bloomberg. ♪

alix: it was the worst start to second quarter since 1929. nasdaq dropped by 2.7%. joining us now is chad morganlander. let me show you the charred everyone's going to be talking about this morning. this is the s&p closing below its 200 day moving average. we haven't seen that in a very long time. the bottom panel is the percent

of members above their 200 day moving average. how much more weaknesses there in stocks? >> you can see considerable downside shift within the financial markets on the equity side. what's odd is that you are not seeing this translate into the credit markets or the long end of the yield curve that much. you would expect with this type of selling pressure of the 10 year to be closer to a 250 handle, not to 75. 275. every time i am on i have been saying we want to be more balanced and keep our duration shorter in relationship to our benchmark. why? that would imply its fundamental unit it feels like it's a technical, not fundamental story. >> it is sort of both.

let's go through this a bit. for 10 years we have had monetary policy here in the united states and across the globe below the rate of inflation. that has been such an extraordinary impulse into the system with asset inflation that now you've gotten to a point where banks are indicating they're going to be lifting rates, reducing their balance sheet. that's one aspect that that's not the fundamental economic backdrop. quite vibranteen based off of credit growth. that you are starting to see somewhat of a modification. i'm not talking about china going into a recession. but a deceleration. we are starting to see high-frequency data points that are somewhat less robust. alix: the fundamental backdrop is earnings growth is actually very high for this quarter.

earnings revisions continue to climb higher for all of this year versus the beginning of the year. tech in particular could see almost 30% earnings growth. how do you square that with the down drop? >> that's a wonderful question and you are 100% right. hence the reason the market moved over 20% last year. the market moves with a forward-looking view on earnings and you have seen not only that epstech is expected to earn of over 10%. revenues over 8%. this is about a valuation perspective and you are starting to see the yield curve move higher in the u.s. which is becoming a more competitive asset class. what'shelp us sort out going on with the stock market as opposed to the economy. the earnings really going up in 2018 and coming down in 2019. how much of that is just the tax cuts? >> a lot of it is.

that's why we have been encouraging investors as well as clients of hours to look at revenue growth overall. the united states -- here in the united states. but it's not as if we are in a full-fledged galloping economy that's going to go into 2021. david: let's take a look at financial conditions. shows the libor rate and 10 year u.s. treasury's going up. tighteningally financial conditions. how concerned should we be? >> that's the green light. that's the indicator we would keep a careful eye on. alix: we all know the rise and libor should go away. i would look at credit spreads. look at high-yield spreads. your starting to see that widen

subtly. it's not blowing out and that's surprising the market the bit because you are not seeing the long and yield curve. you are not seeing the spread with high-yield gap higher. has been isolated to the equity markets for the time being. we are a low return requirement -- environment. quiteions here are frothy. again advising investors to be careful on the risks that they are taking at this point in time there's going to be a better entry point. alix: where do you go for safety? how do you hedge? >> we have a couple ways we hedge. we have one where we can go to capital's strategies -- capital equities strategy. i know yesterday the consumer staples got hit hard. at rising dividend

companies where the intrinsic value of these companies can continue to go hire regardless of if you're are in a recession or not. david: what would you expect for the rest of the quarter and for the rest of the year? increased volatility i would assume. >> overall you can see the equity markets still get a positive return. it's just going to be subpar 5.5%.n 4% and we would stay away from emerging markets and we think on the short end of the yield curve the fed will move rates at couple more times this year. in 2019 perhaps several more times. that's going to be conditional. the u.s. economy is going to grow between 2% and 3%. it's not going to be as robust as everyone is thinking. david: a lot of people are not going to be patient. markets?t emerging they have held up better than

the u.s. stock exchange over the last few weeks. >> absolutely you have seen that happen. we think there's going to be a subtle shift of policy over the course of the next 18 months within china to deliberately decelerate the rate of growth within the credit system. that's going to have negative implications on growth expectations within the em side and that also could have watched back affect having deflationary ondisinflationary pressures the overall system. that's where we are coming out. we would be much more cautious within the em side. we all blame the selloff on tech. if you take a look at this great chart you have the whole s&p off here. overall it was down 4%. how much do we credit the

rollover in tech and what a danger that is. versus other sectors also need to come down? >> there's a lot of lazy longs. just tech that rolled over. many of the companies we know have also gotten hit quite hard. we just think there's going to be multiple compression within the overall markets and they are going to scotch some of the more frothy sectors like tech. earnings growth within tech is going to be quite vibrant. we still believe that's going to continue to follow through into 2019. david: one of the things we have been told by the administration is that we will get morning's growth because of capital investment. to --w changes will lead is not a basis for an investment decision? >> yes if you have a longer-term thattment -- indication

capital investment is going to kick in and you will have this wonderful type of life over the next several years. we don't believe that to be the case. we think this is going to be initial impulse for 18 to 24 months. after that you will have to revise your expectations down. you also haveon the federal reserve with their expectations for gdp growth inflation at such a low level in the outer years. we are going to continue to believe that's not going to be a major changer -- game changer. not a game changer. david: chad morganlander is going to be staying with us. right now we will go across to london because disney has made an offer to buy sky news. disney is interested in the news unit regardless of whether it's billion deal does or

doesn't go through. up a fullg to put screen we talked about illustrating what the three proposals are that fox has made to the regulators over there. take us through -- they said we will guarantee -- they've come up with two alternatives. take us through them. >> fox has offered a full array of options for regulators to look at. the first one is editorial independence for sky news. the editorial board is insulated from rupert murdoch's influence. one is to legally separate sky company oreparate disney could acquire sky news itself which would be the most romantic of these proposals and one that most insulated the channel from murdoch's influence. david: take us back through the rivals.

who is benefited by this deal if it goes through? >> if the deal goes through if thely disney would -- disney fox deal goes through and fox acquires sky been sky would end up in disney's hands and that would be significant platform for disney to acquire in europe. the 20 million customers that sky has. technology is highly valued by comcast. there could be synergies on the pay-tv side. there is a time deadline for the regulators to decide whether they can buy the rest of sky. when is it? >> the regulators have until may 1 and then the u.k. government will decide in about june time whether it wants to allow fox to acquire sky and we are also still waiting for comcast.

it all comes to a crunch i imagine around june or july. david: what is going on with the author -- offer to shareholders? >> comcast is still working with european regulators trying to get its ducks in line. that regulatory process will start and comcast hopes that can get done quickly. david: thanks for a much, joe mays. spotify makes its trading debut after opting for an unusual direct listing. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alix: this is bloomberg daybreak. it feels like markets want to pretend yesterday never happened. secondst start for the

quarter since 1929. european stocks lower but also their lows for the session. european equities don't really have that many tech stocks. classes, it is a story similar to what we saw yesterday. yields up by two basis points. you wouldn't have thought you would see yields at 2.7%. you would've thought we would have had the much lower -- had them much lower. the vix a little calmer, but is this the new normal? second day into the quarter and it is already so exciting. here with our

"first word news." kailey: president trump threatening to pull out of nafta. according to people familiar with the matter, the white house wants canada and mexico to join a summit in peru. technical talks to hammer out the details will continue. china is warning able to if the u.s. imposes tariffs. become administration plans to impose additional duties on chinese products. china's ambassador says that beijing will respond with quote, the same intensity. france is being hit by another round of strikes over president macron's labor reform plans. -- proposals global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries.

this is bloomberg. alix: on a day where tech stocks have been rattled, spotify is going to test how it's music service plays out on wall street. the service will trade under the ticker symbol spot. the company share price is unknown as it begins trading. here is what we do know. about 90% of shares could be floating. there is no lockup period. we are joined now by the senior analyst for internet and consumer electronics, jitendra waral. what is the best case for spotify? jitendra: the best case is a goes smoothly in terms of volatility. they have the opportunity to sell. if you look at the strategic

investors, they hold a big chunk of the company, so it is all about a supply and demand of stock and volatility. alix: walk us through what we can expect on the exchange floor. if i want to go out today and buy shares. jintendra: they will be price discovery in terms of what is supply and demand. because the volatility is unknown in terms of how much supply will come online, and we know spotify is a well-known brand, so there could be retail interest as well. hopefully they are able to pull it off. david: jitendra, as far as we know, why are they doing it? they are not raising any moneys -- any money

themselves. this is a describe her goods story. -- disk -- this is a subscriber good story -- goods story. they have some momentum in terms -- this is not about profit, this is about subscriber growth. planned,this goes as how many other kinds of companies will want to do something like this? direct listing and bypass wall street. one of the things that spot if was because they positive, they don't really need the money. companies that are similar in terms of profile, it could be an avenue. david: jitendra waral, at

bloomberg intelligence, thank you for being here. for more on spotify, we welcome prabhat agarwal, director of optics as well as chad morganlander. you have done research in terms of where spotify sits right now. prabhat: about a month ago, we started looking at spotify and how it stacks up against its main competitors in the android space, namely pandora, amazon music and google music. we gauge did on how often the users actually use the on howtion -- gauged it often the users actually use the application. they are far ahead of their

competitors. daily, about 22%. really solid numbers in terms of engagement. track a who we also daily number is 51% and that is on the high end of the spectrum. spotify is pretty solid. david: we put up your chart that shows exactly what you are saying, the level of engagement and it is very impressive for spotify. at the same time, they don't have as many people who download their apps as much as say, google. prabhat: you are right. there are certainly some challenges ahead. one of the metrics we will be looking at is how they are stacking up against the competitors.

spotify and in the age group, the engagement levels are very high. ofx: that led me to my point then is the dominance we have seen in spotify sustainable? prabhat: that is exactly what we are tracking over the next coming quarters. when i talk to folks, it is always about how they are able to innovate. we will be looking at metrics around these levels of engagement and how they are engaging in their key categories and key demographic areas. david: the question with these companies is where is the -- so, and as you look at much is dependent on growing the number of users. prabhat: absolutely. they are dependent on that and

that is going to be across the spectrum, it could be in different groups and also different categories. they have to work on some of these areas in the coming quarter. alix: chad, when you look at the spotify -- we look at spotify, what does it tell you? chad: there is demand for the ipo market. with all the volatility over the last three months, there is still investor demand for a concept company like spotify. a concept company with all due respect because there are no earnings there. this is not like colgate or walmart. we're talking about future revenue growth. kidcus group of 13-year-old said their new app was annoying. .hat is what happened

david: you don't want to hear annoying. chad: and that is what we are trading on, annoying. david: prabhat, let's come back to you because i am a subscriber, i pay some money to spotify. where are they on monetization? prabhat: that is a great question. ,hen we look at the engagement we don't the surly look at what they are doing internally because that crosses some privacy lines francaise a research house. we were very -- policy lines for us as a research house. we were very careful. we look at how people are engaging, when they are engaging, frequency of use.

one of the interesting attributes of our research is wet we are finding that think it has a direct correlation to audio and video use. alix: i want to get your take because you tracked that ipo as well, you can see the quarterly value of u.s. tech ipos has been moving higher. it means that tech is able to raise a lot of money right now. what do you think stops that? i think it is a function of the times. it is a volatile market. as we go forward, long-term, i believe these companies need to think long-term and grow long-term. there is plenty of opportunity but keep in mind, they're up against some heavy competitors.

amazon, pandora and google are strong. apple music is fierce. time will tell whether they are able to sustain the competition but we will be looking at the metrics of the quarter report. overvalued? still was it overvalued? chad: it depends on what slice of the tech market we are talking about. these outer into that are trading based on subscriber growth. ism not saying that spotify entity, butmate that is where you get into

trouble if you are a long only retail investor. if you are a hedge fund, go for it. david: trading versus investing. thank you so much, chad morganlander of washington crossing advisors and prabhat agarwal. coming up, reshaping ge. company begins the process of shedding off different businesses. we explore that next in wall street beat. you can listen to tom keene and jonathan ferro. bloomberg surveillance can be heard in new york, boston, the bay area, washington, d.c. and all across the united states of america on sirius xm satellite radio. ♪

kailey: this is bloomberg daybreak. coming up in the next hour, mike holland, holland and company founder and chairman. and now to your bloomberg business flash. apple is considering a move that could be a big load to the world's largest maker of computer chips. apple plans to use its own chips in mac computers as early as 2020. apple accounts for about 5% of intel's revenue. a rareone has provided glimpse into the gender pay gap in the financial business. women earn an average of 30% less than male colleagues in the u.k.

general motors says that when it comes to sales figures, less frequent information is more. gm will stop reporting monthly vehicle sales information. instead, the company will report every quarter. gm says 30 days is not enough time. that is your bloomberg business flash. david: we turn now to wall street eight will recover three things wall street is covered -- is buzzing about. first up, ge junk sale. trade, 1 wall st veteran's plan to make credit suisse a top player. jpmorgan accused of wrongful death by the estate of a deceased employee. alix: we want to start with ge. what is interesting to me, one billion in cash -- $1 billion in cash because ge needs that cash.

>> a little bit underwhelming. the shares slid yesterday and what is interesting and a take away from this is that it may be that ge is announcing that it is going to shave down some of its assets to bring it out of this slump. grind of selling these assets. are we surprised they started with health care? people thought that was a potential growth area. peggy: i was surprised about that, too because they talked about refocusing on their jet aircraft and medical imaging which are some of their strongest business lines. john flannery did work in the health care side of the business for a long time, so it is possible that he knows that unit really well and understands they could do without it while they focus on the health care side when it comes to enterprise imaging.

alix: jpmorgan is the biggest bear on ge and as don't worry about the sale, you still don't want to buy it. even when they do something right, they still don't like it. david: at least john flannery is doing what he said he would do. peggy: hopefully. david: we will see if the plan works. let's turn now to credit suisse. -- said he is going to really take their equities trading up to be a top-five competitor. i don't think of credit suisse as a big player and it is interesting. that: one of the things struck me about the story is we have been talking about how the financials have really seemed to come out of the financial crisis and stabilized.

,he banks have reconciled a lot so it is going to be interesting to see where banks decide they're going to go full throttle. it seems like credit suisse has decided they're going to pick equities as the place they're going to ramp up. david: why would they think that is an opportunity? peggy: i think it is the volatility they expect to come back. david: which seems to be coming back. that was a good call. peggy: i think they are really betting on volatility coming back and there being a lot more churn in trading revenue. banks -- alix: also, our looking -- are banks looking to take on more risk? are they able to handle more? david: the administration to a message, take more risk. is sendingnistration a message, take more risk. alix: a much dimmer outlook.

you have a lawsuit from an estate of a broker that is suing jpmorgan, a wrongful death suit. peggy: i was surprised. one of the things it made me think of is in this era of many #metoo cases coming of the darkness, we are finding that a lot of things are settled by banks and corporations in arbitration with many nda agreements. this is a full on lawsuit where the estate is accusing the bank of basically firing or forcing him to retire because of the fact that he was unable to work and had depression. david: this is a tragic story no matter how this plays out. at the same time, he had troubles for a long time. it looks like jpmorgan trying to work with him and he wanted to

come back and they did not have a job for him. he had been there, forever. peggy: at the same time, you still need to have a job as well. you cannot be on extended leave forever. david: none this context, but i have had people with physical problems we put them on medical leave, but at some point, you have to manager business. the fact that you are sick does not mean you have a job in perpetuity. the individuals in the family believe they should have tenure if they are sick but if you are a manager, you do not have that option. you have to handle it with some care and tact but at some point, the business needs to move on. alix: unless you are in congress. david: thanks very much to bloomberg peggy collins. coming up, america's replacement for libor debuts today. more on what i am watching, next. alix: and check out tv .

you can watch us live and interact with us directly. this is bloomberg. ♪

david: this is what i am watching. this stands for secured overnight financing rate. the u.s. candidate to replace libor.

toturns out libor is tied $375 trillion. everybody agrees it is going away. this is what roger cohen said. >> there is a real effort underway to cure the libor problem, to create a substitute. as you point out, it is not going to be totally effective because you have contracts, whether they are loans or swaps or derivatives that go out way past 2021, based on libor and don't provide will happen if libor disappears. david: as he says, there are contracts that are tied for long periods of time for libor -- of time, to libor. alix: they're going to take years to transition from libor into sofr. what does that mean if you want to take out a car loan? david: it would take years if there were a clear alternative.

the u.s. has their candidate and europe is going to come up with their own europe -- their own candidate. we talked about libor going up. what happens to the rate? we are going to delve deeper into this, especially as it comes out at 8:00. mikeg up, libor and holland, holland and company founder and chairman. he owns a lot of large-cap equity stocks. what does he think of the tech rout yesterday and is it over? ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ alix: technical test. the s&p closes below levels.

goldman says it is time to hedge. the white house pushes through for a pulmonary nafta deal while president trump says the nafta cash cow is still in play. spotify launching its direct bid on nyse. david: good morning. another exciting day, looking forward to the marketplace. alix: i am sorry. david: i'm sorry, too about michigan. alix: you called it, villanova was really good on offense. david: the question was whether michigan defense could slow them down and we couldn't. it is a beautiful day in new york. the snow littering some of the building tops. routs,was all about the

and tuesday seems to be about the recovery. equities in europe off the lows of the session. risk on currencies taking front and center. yields are very stable. from a terrible slide yesterday, catching up to technical selling. david: let's find out what is going on outside of the business world. kailey leinz is here with the "first word news." mike: -- kailey: president wants to outline the broad details of the nafta plan next week. technical talks on the finer points of the trade deal and the legal text would continue. china is warning it will retaliate if the u.s. imposes tariffs because of alleged violations of intellectual property rights.

the trump administration plans to impose duties on chinese products. china's ambassador to the u.s. says beijing will respond with quote, the same intensity. number -- hit by more strikes. macron's proposals will deny newer higher job security and pensions of existing workers. global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. worst start to a second quarter since 1929. the s&p breaking through the 200 day moving average, closing below that. how much technical damage was done? -- ing us now is

a tough call over the last couple of days. what do you see now in the markets? think they significant technical damage has been done -- of the significant technical damage has been done. the s&p 500 down about 11%. this is consistent with your mac's annual draw down for every given year. now that we have reached those thresholds, we are on the lookout for a bottom. starters, why we are -- well we are hitting these new lows, we dropped very briefly below 200 yesterday. now than there were in february. we are encouraged that selling

has become more selective. we see that as a bullish diversion's. a lot of -- as a bullish divergence. we are seeing more pessimistic levels comparable to what we saw at the november 2016 u.s. election from that contrarian viewpoint. we are looking for some sort of a key reversal day. we think we are looking for a bottom. alix: what about tech? the nasdaq seeing volume rise, selloff continue. tech onu be a buyer of this dip? ari this is our favorite area to ari: this isip -- our favorite area to buy on this dip. taking a step back, we have seen this before.

we have seen these corrections in the nasdaq. both in absolute terms and relative to the market as well. we were making the case that the nasdaq relative uptrend is still intact. tech, a lot of the key points along with higher trend is that it is a sector that has been resilient to oscillating interest rates and more importantly, how broadly strong it has been. justll 2000 tech center into its january high, showing how strong small-cap tech has been. that is what we like to see, broad-based strength. of oppenheimer, looking for a base. thanks for the perspective. david: that is what technical sell us and now let's look at what investors tell us.

we are joined by mike holland, holland and company founder. what are you looking at? mike: earnings. it is such a tough job ari wald has. you can be wrong in an instant. we have been in this incredible move upward in tech for so long that it was inevitable. we have gone through some numbers this morning and yesterday. be a hiatus. if it is more than that, jpmorgan will not be right and goldman sachs will be right. david: about to go into earnings season once again. what are you looking for, because we have seen predictions that are very bullish. mike: they have only caught up with changes in the real world.

when they caught up, we had this decline. we have a situation where if we of with a- you and pretty benign outlook -- end up with a pretty benign outlook. this is a place to buy. alix: this is showing the earnings estimate we have seen in the last couple of days. for you, after the last few weeks, what is on sale that you want to be buying and what do you need to stay away from? david: that is a good question. the one area rate today that i am focused on is money center banks. they have a lot of pieces in place, including where interest rates are going, valuations, big

fat yields in case we should be hedging a little bit. all kinds of things going for them. david: over what period of time do you look at them? mike: forever. i want the company to continue to perform. i want the valuation not to get crazy to the upside. if it gets crazy, i sell it. ibm would have been in that category for me. ge would have been. great companies by their history, but they fail to complete the mission. what i am selling something, it is for a good reason. it is up to high or they are not -- up too high or they are not the company i bought. alix: the correlation has been

quite high and it feels like a lot when into it passively and wanted to keep up with it. what do you do with the faang stocks that were out performers in the first quarter? mike: those are playthings. i known -- i own a number of things. i don't consider them investments, but they made a lot of money for me. alix: would you be selling? mike: no, because i have learned to build the -- i have learned humility over the decades. andow what i don't know what i don't know is the next few quarters will be -- avid: how do you figure out valuation on a new sector that we don't know about? at jpmorgan, you have a sense of what a bank does. how do you figure out, looking at spotify --

how are you going to analyze it? mike: music streaming? the guy created a new business. i don't know the answer to that. i own amazon because i see crazy good things happening with this guy over the last several years. despite the president, he is going to continue to do very well. with spotify, i cannot analyze that at all. alix: mike holland of holland and company is going to be sticking with us. spotify making its trading debut today after opting for an unusual direct listing. ♪

kailey: this is bloomberg daybreak. help 20thwilling to century fox win british regulator approval to buy sky. like at ease regular concern. the company is interested in the news unit. energy is taking on the third-largest energy producer. harbor ticky ceo said to expand the company's operations in asia and africa. shares rose as much as 22%.

general motors says when it comes to sales figures, less frequent information is more. gm will stop reporting monthly vehicle sales. instead, the company will issue reports every quarter. gm says 30 days assigned of time to separate real sales trends from fluctuations. music streaming service spotify making its public debut today but the share price is still a mystery. many analysts jumping in with buy recommendations. the market value should be expected at $25 billion in the public share price will be determined at the open. isning us now to discuss mike holland of holland and company and drew singer of bloomberg news. walk us through the next three hours if i want to buy spotify shares. drew: you need to go on your broker exchange in place an

order like you would for any other stock. you might have to wait longer than three hours. into thed take afternoon to match up buyers and sellers. david: how do i pick a price? drew: that is the $25 billion question. people don't know where this is going to trade, other than it is going to trade independently from its fundamentals. alix: is it going to be the volume? drew: advisors for spotify have been working for weeks to try to gather up those sellers and build that volume to prevent some type of liquidation squeeze. alix: what is interesting about spotify is that they are not going through a big bank. they are redirect listing. you like -- they are a direct listing. you like the banks. stanleyldman and morgan , it looks like they are doing a lot of work and have been for a

few months. they had to go out there and talk to all of the owners of spotify stock. drew: absolutely. one difference is all of this is being done behind closed doors. mike: doing more work. getting paid a lot less. model not a good business -- that is not a good business model. jpmorgan has a lot of other businesses. this is a disruptor. david: if i am mike and i want to invest, how do i do research? how many analysts are covering it? what do i look at the figure out what this company is and what it is likely to make? drew: spotify has filed a

registration, so you can look at user data and risk factors. there have been a few researchers who have released coverage. there are about 4 buy ratings right now. going't know where it is to trade, even if you follow the advice of the bowls. -- of the bulls. alix: how much the spotify impact this market? -- how much does spotify impact this market? how much risk are investors willing to take on, given recent market for tuitions -- market fluctuations? this was not the market conditions that spotify was

maybe expecting. it will be interesting to see how those market conditions impact the stock. mike: when will they show some serious earnings? alix: real money? come on. mike: what would you guess? drew: we are still years away. mike: how do you value that? david: at the same time, you have heard warren buffett say one of his biggest regrets was not putting money in amazon because they were not making money at the time. how do you know this is not amazon? mike: it may well be. the difference is if they are in an effervescent visit -- business which is streaming. is this -- i presume they have to reinvent themselves because the technology will change. is that likely? drew: it is going to be interesting to watch where this goes because people don't know

what direction spotify is going to head in. are they going to try to take more control over the own content and pricing or are they going anymore like a pandora. mike: you had a whole different thing. how do you listen to music? mike: on pandora. alix: interesting. david: mike holland of holland and company will stick with us. coming up, the mexican peso rebounded off news that the white house is pushing for a nafta resolution. this is bloomberg. ♪

david: yesterday, we heard that the administration is pushing hard to come up with a nafta deal. that all moved the pay so strongly higher against the u.s. dollar. this morning, the president tweeted that he may just pull -- of the deal altogether, mckee,ome now michael our international policy correspondent who has been following nafta all along and mike holland is still with us. i am still -- are we still making progress about nafta? i am getting dizzy. michael: the negotiators are making progress. trump's supporters are saying he is crazy like a fox. other people are saying he has no idea what is going on and he is just talking crazy and we just ignore him and work around

him. the trade negotiations between the three countries have been going on at a fairly steady pace , not in a formal round but informally and they have made some progress. thing that rang true to me is the notion that the president might like to have a big announcement at this summit down in peru. that sounds like donald trump. at the same time, there are some real issues that are hard to get past. michael: the first is the rules of origin on automobiles. the president has demanded that instead of 65% of the content being made in the u.s., 85 present needs to be witches difficult for companies. the u.s. has also demanded half of all cars be made in the united states, that is a nonstarter for the -- for canada and mexico.

the idea is that a company can sue a state if they are treated unfairly or if the laws are unfairly applied. it has been in a lot of trade treaties. procurement, dollar for dollar, they say we should -- the other countries should be allowed to bid for u.s. contracts at the same rate as other countries. democrats on capitol hill want labor standards. they want mexicans to be paid more for the work they are doing. and then we run up against the mexicanl calendar, the election and the u.s. midterms. the way michael described it is as good as it gets. it is craziness. sure who wilbur ross is anymore.

michael: he is not directly part of it although he is a traitor adviser to the president. -- he is a trade advisor to the president. mike: and we know peter navarro sits in on all of this. they are not competing anymore. gary cohn is gone. these are more protectionist voices the president is hearing. he represented the steel .ndustry david: he knows how to negotiate. mike: one of the few adults left their. -- left there. they talked about a formal round next week, but they may skip that and keep it between the three and keep going. david: it sounds pretty tricky

to me. alix: it sounds like brexit. michael: if the markets are falling because we are -- because mike holland is worried about a trade war and president trump can come out and say we solved nafta, even if they haven't, they can put it to the side. david: how do you factor this into valuation? you can't. alix: michael mckee, thank you very much. mike holland of holland and company a sticking with us. the u.s. replacement candidate for libor making its official debut. what happens to the loans tied up in it? more on that next. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ alix: this is "bloomberg daybreak." th the session up 149 points.

features up by 0.7%. trying to climb its way off of the 200 day average. european stocks in the session. dollar ist class, the broadly weaker with the exception of dollar-yen yen and euro dollar yen moving lower as a safe haven feel comes out of the market. yields on the tenure up by three basis points selling on the margin. the fix is calm at 22. oil terrible selloff -- the vix is calm at 22. oil a terrible selloff and can we sustain the momentum? david: we turn to kailey leinz with "first word news." scott pruitt is now hanging on, according to politico, because chief of staff

john kelly is waiting for a report on his travels. pruitt has come under fire for his expensive travel habits. says palestinians have a right to own their land. he also said there are a lot of interests the saudi share with israel. a peace agreement is needed to ensure stability in the region. on the electronic communications used by a major u.s. pipeline network. energy transfer partners says it is confident the system is working properly again. the company said the impact -- the attack had no impact on the flow of gas. u.s. officials warned russian hackers are targeting the electric grid. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. leinz.ley this is bloomberg. america's replacement is here. a new sheriff is in town.

the solution to phasing out leiber. it is based on real overnight secured transactions. the eight volume of the transactions is $700 billion a day. libor can be anywhere from one day to one year. one of the repercussions in the market as well as in the economy . if you come into the bloomberg, this chart shows a big rise that we saw in libor. how do you understand the shift we are seeing, and will this stop hurting? silver isn't doing anything to this. that is reflecting economic forces.

the sulfur is something we should be pleased about. while this looks to be working ok right now, in libor, they said it is a sham mechanism. most of the time it worked, luckily. it is a guy sitting in a room in london and putting sometimes 10 and they thought they should ask opinions. they came up with a number. and they paid more, right? [laughter] david: and some went to jail. a -- going tois take a wild to transpire. it is a move in the right direction. .avid: you are absolutely right it wasn't based in the real marketplace. a lot of transactions were tied to libor.

michael: a lot of it was. people don't understand that a lot of it is. have $370 trillion linked, is it important that we have one thing like libor that replaces it? is this where the possibilities? michael: you have traditions and thinks that work. having a single thing has made it easier to do transactions when you are replacing things. will beuture, it confusing for business people to do it that way. it is a better transaction. alix: ira, who follows everything, what do you think the repercussions are going to be from sos far to libor? fr, at first you

might need someone like banks to issue bonds based on sofr. this process will take several years. i do think that assuming there people have much of a choice. it will have to choose a reference rate other than libor. had he do with the bases of overnight between one or two months? ira: that is why you will need futures and other derivatives like overnight index swaps that will trade on this. that way, you would know what the market thinks sofr will be.

there are three months contracts . whether it is a one-month future that will trade three months from now, or it is overnight index swap which says, here is what we think it will average over the next three months. that is exactly the same thing that sofr will trade on. alix: my college of a question? future: do you think the markets have the opportunity to make a ton of money with inefficiencies? ira: it is possible. liquidity is likely to be poor until there is more take up. the fact that you have many dealers that are part of the alternative rate reference committee are participating. i think the take-up might be fast. the one nice thing about the rate is that we know what it is overnight. every day, the fed will be issuing this similar to how they do the fed funds rate and how libor used to be. that is a very manageable issue.

the question is, what will the users do? when will asset managers, when will insurance companies, and issuers start to use this as a reference rate? once they do, that is when you see more efficiency. i think dealers can make money early on, but they also have to remember you might be high to -- hard to get out of. david: what a things that was illustrated in the chart that alix just puts -- up was that libor was unsecured. difference practical ? one has credit risk and one does not. ira: there is a little credit risk in repo. rate is youhe repo have collateral backing it and

collateral is treasury risk. there is a difference between this and libor in that libor is a rate like commercial paper. where can banks issue unsecured debt? this is, secured debt and secured by an treasuries that use as collateral. there will be a basis between the two. that is why it is important for futures to start trading. we will want to see what the credit risk component to libor compared to secured funding rate is. i think that becomes ubiquitous, and people start trading all the time. the: if you come inside bloomberg, this is looking at the short term for libor and two-year yield. it has an impact on financial conditions. conventional -- financial

conditions are now tightening. what happens as we transition? ira: what is interesting is that repo rates have gone up. not only because the fed was hiking. repo rates have gone up because of the issuance of treasury bills on the front end. all of the front end rates are tight. is not like sofr is going to be immune to technical commissions -- conditions that were impacted over the last couple of months. because libor is an unsecured ray, and because there is more rate, and because there is more credit risk, it would react more than sofr would. thelators were nudging market to go toward a secured rate because during the crisis, repo stayed reasonably tight, where is libor became several hundred basis points. that was a problem for the fed because the fed was using

policy. in reality, because libor was high and spreads on a lot of products want up wider, it was harder for them to conduct monetary policy. that is a reason why they had to go to the zero interest rate policy. if they wouldn't have gotten quite so low had they had a different rate that impacted most of the economy. david: ira, thank you for being with us. mike holland of holland company, thanks a lot for your time today. michael: this is a much better situation. the fact that it is basically risk-free and rate of returns before people in 2008. libor just extended that. david: thank you so much for being here. coming up, automakers will release march sales figures this morning can we will bring you a preview of the numbers very as you are leaving today, turn on your radio and listen to tom keene and jonathan ferro.

bloomberg surveillance can be heard in new york, austin, the bay area, washington, d.c., and across the united states on sirius xm radio. live from new york, this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak." kailey: this is "bloomberg speaking", up next,

with a managing director. not to "bloomberg business flash." walmart is in it works -- deal that will increase its takeover of a company. for those whos take multiple drugs. a rare glimpse into the gender pay gap in the private equity business. a firm says the female employees in the u.k. earn an average of 30% less than male colleagues. new rules require companies with more than 250 employees in the u.k. to disclose gender pay caps -- gaps by tomorrow. hershey's spending a half billion dollars in hopes of making chocolate kisses from more sustainable cocoa. the goal includes production for as much as 15 years longer than plants grown in full sun to her

she wants to eliminate child labor. bloomberg business flash." david: united states auto sales for the month of march expected to stay unchanged from last year. speak about tesla, struggling to meet production targets as it burned through cash. joining us is david welch, bloomberg's detroit cheat -- chief, and george galliers, from global automotive research. welcome to both of you. we could put up a chart that shows a u.s. auto sales and where they have been after a record year. they have come down son, but they have not fallen off the cliff. >> we are sick -- expecting unchanged, and people buying more suvs and fewer passenger cars. not quite at the level we have

seen for the past couple of years. still very profitable. david: we care a lot about these numbers, but i must note that gm says it won't do it every month anymore. how much of the auto companies care. they want to make money and some they are selling have higher profit margins. .: auto prices have been creeping up for a long time. we are talking about new cars. outt of capacity was taken so car companies don't have to bribe people to take all the vehicles they overproduce and they are more in line with the market. the second part is a wave of an suv crave. they are more expensive vehicles. companieslip, the car are happy because they make more money. what will be interesting is that

as the market sinks lower, assuming it does, will they maintain discipline and sell what they can at solid prices, or do they get to a point where they have to discount to keep i am going? david: george, let's get your perspective. what is going on with u.s. auto manufacturers? are they in a late cycle as people are less likely to borrow and are we shifting to china for growth? george: we are clearly in the second half of the cycle with respect to the u.s. market. this as a multiyear phenomenon, where we will tracking at a 16.8 range. growth, youearnings make a good point. if the volumes are flat, where does that come from? we think from higher transaction prices and a function of the u.s. markets. , the clear and

obvious place is south america, where there is big recovery, particularly in his ill. -- brazil. growths.een volume it is a fight to keep equity income earnings flat in a tough environment. david: george, one of the big stories has been tesla. you cover tesla. what do you expect for the model 3 production models? george: i am looking at the model 3, production is expected to be 11.5 thousand units. what will be critical is a weekly production run rate. aty guided to put 5000 units the end of q1.

elon musk suggested they scraped over 2000 units. that will be the number investors focus on. how does tesla have a target for 5000 weekly run rate at the end of q2 -- r is that short? david: david, i want to come back to you. i want to put up a chart. andhe time tesla past ford gm, there was much news. there is not much news when it is reversed. this shows white being tesla and it is below gm and ford. is tesla in trouble, david? expect a investors fairmont of volatility. last month was difficult for tesla. you get the sense that investors are getting -- investors' patience is growing thin.

it shows whether or not this company can become a mass manufacturer, and that is an open question. this vehicle is supposed to bring cash in the door. tesla has been growing over the past four quarters on an average of 800 to 900 million for quarter in negative free cash flow. there are estimates out there that they only to raise $2 billion by the end of the year. very few people believe they can up in terms of production and generate enough cash to having to go back to the markets. the shares are down and bonds are not doing well. george, bu those george, put together paid what do they have to do to get enough cash to keep the company going despite elon funny tweet on april

fools' day? model 3,t is about the and it is critical in terms of volume and revenues. ,t today's production run rate the views are negative, and they need to wrap that run rate so they get a positive growth margin and hopefully a working -- asl tailwind of production reaches 5000 units a week plus. from a cash perspective, we would concur that in a best case scenario, we seek tesla having thethe market -- tapped market to fund the growth we have seen. i think the market is prepared for that. the question is -- what price would be in the market and can they get it done? david: thank you very much, george galliers, and david welch from detroit. alix: the end gets relief. more on what i am watching.

whatr-yen and we will have was said on qe. you can watch us online and click on charts and graphics. put tv on your terminal. also, send us a question or reach us on twitter. this is bloomberg. ♪

♪ alix: what i am watching is the

dollar. it rallied yesterday. overnight, you wound up having exitament and it eventual from its monetary policy. they are talking about the details. they said it is too early. they will commit to stimulus. the yen strengthened again. then it reversed as the risk on cam on. -- came on. david: my question is -- what was he thinking? alix: we have not discussed it, i am not answering it. nothing. david: why did you volunteer? alix: this is from last market -- month when they said they were considering posing an issue. how do you get out of that? david: the one thing you get is volatility with all this talk. why do want to do that? alix: morgan stanley had an

interesting note, they said they see a strong yen for the year. but short-term you could seek lower as money flows out of japan and into u.s. bond markets. we will be dealing with a stronger yen for the rest of the year. david: given what is going on in the market. alix: just not today. belski andext, brian julian emanuel on a recovery day . you take a look at the equity market, and dow jones are up triple digits. other asset classes are broadly weaker dollar, selling on the margin and treasuries recovery and commodities. this is bloomberg. ♪

♪ jonathan: from new york city, i'm jonathan ferro. 30 minutes to opening. this is the countdown to the open. ♪

coming up, a welcome to the second quarter with tech spreading and the s&p plunging. looking to calm global trade war, the white house is set to push for a nafta deal next week. tesla's production continue to leave musk on the floor. investors are waiting numbers. 30 minutes from the opening. equities, futures up 20 on the s&p. up a tense of 1%. other numbers -- 0.8%. 13.6% sales. estimate at 1.9%. the story elsewhere in the fx market and looking at the bond market. 10 year yields a little higher by three basis points at 276 on a tenure. the fx going