mark: while senate republicans in fbi report on supreme court said the fbi investigation was thorough and turned up no hint of misconduct, they're slamming democrats for what they believe is an exercise in character assassination. toldman chuck grassley reporters that minority leader chuck schumer should be blamed for what happened. started downhill on july

we will doumer said everything we can to stop this nomination. -- you could look back if everythinge has been brought up. >> in the meantime, heidi is one of the few democratic senators who said today she will vote no on kavanaugh. he said in a statement that there are many qualified , -- serving a lifetime appointment.

the pleased permit said it won't investigate -- investigate him due to a conflict of interest. vice president pence today accused china of underlying president trump. as well as beijing's economic policies. a week after the president told the un security council meeting china is interfering in american elections to help democrats. >> isn't political, economic, and military tools as well as propaganda to advance influence and benefit its influences in the united states. mark: markets to modify behavior

to their liking. they stalled since the two leaders first met eight months ago. the summit begins november 30. global news 24 hours a day on air and on tick tock on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ >> from bloomberg world headquarters in new york. this is bloomberg markets p or i am scarlet fu. caroline: it has been a down day.

the selloff in nasdaq, tech stocks getting a beating. potential hacks have been occurring. with china infiltrating significant u.s. companies. the vix 24%. we are higher on volatility. we're seeing the dow -- the u.s. dollar. u.k. intentionally thinking about further sanctions. up one point 9%. >> if you take a broader look at falling fromow is its record high, financials are the best performer here. they are getting a lift from rising rates. now 3.19%. markets, we have to keep a close eye, off by the most in months. >> timeout for the top calls. if you look at some of the big movers on recommendations, the

price target cut to seven dollars from nine. irreversibly reducing the ability to deliver on expectations. declining ratings for amc networks, blocking debt has are the company a sell rating. -- 66.at 63 and 6 there is an ibm campaign, initiating coverage with a sell the $150 price target. the analysts say the turnaround is still protracted and uncertain. the $150 price target. this has to do a souring sentiment on industrial autos.

>> that is a global view included even for it -- from a macro perspective. in particular within semiconductors. the call we made this week, is the first time we cut numbers in three years. it has been a strong up cycle in the last three years. we start to see signs of slowing in the market as well as initial signs of emerging weakness in china with an industrial. season, we seegs the company will take the guidance. >> they said there was a healthy debate between all of you between how much of the risk is already priced in. where do you stand in that debate? >> a great question. it shows you that the stock -- stop to start discount some of the weakness. we are at the peak of the cycle.

we see some softening now. you think about the semiconductor cycle, there can be extreme spirit stocks run, semiconductor stocks of had a great five-year run the they outperformed by over 100%. they are starting to de-risk a little bit because of some of these concerns. our message was it was too early. there could be value in the group but there could be numbers that come down. >> technology is the worst performer on the day. if you click on technology, here.is a lot of red software services off even more by 2.4%. traced ont can be china planting a chip and servers made in the united states and what that means for

our technology sector. >> led by the likes of michael o'rielly, with a scoop in the business week. can we get your perspective on how much this highlights a concerned? you might have already been looking at it in your perspective, but china is very much controlling of supply chain to some extent and there are risks such as hardware hacks. >> sure. i will not comment specifically on that but i will take it to a bigger picture of what is going on between the china and the u.s. trade tensions are an issue and tariffs are an issue. that filters through two fundamentals with an m&a perspective. you recall the called -- the qualcomm deal was approved in every other region. this is starting to boil up in terms of trade tensions. fromisk, bringing it back a semiconductor perspective is we think some might be built up ahead of tariffs. that is something that might need to be worked down. point, whent what

do you actually see that. q4 based on the data points, 10 late sometimes, they will have to reflect this in the foreign outlooks. >> we will wait for the moment. it has been wonderful having if here is ahead of equity strategy at morgan stanley talking about the downgrade. let's look at the majors now. all eyes are on the impact of the 10 year yield. u.s. treasuries are going unchanged at 3.19%. the cost of borrowing has been -- has been hitting the nasdaq.

pointing out that tech is a big laggard today. by more tech is -- down than 2%. the s&p 500 in the red. exceptions are financials which benefit from higher rates it also, utilities are up to one third of 1%. a gift back of after yesterday's selloff in utilities. >> this is bloomberg. ♪

>> our top story today is a massive theft according to the investigation, microchips hasten the u.s. have been used in an attack to steal intellectual property from almost 30 u.s. companies including apple and amazon. for more, i want to bring in bloomberg's executive editor for technology, tom. congratulations on this scoop. an incredible effort from all of

bloomberg technology's's team members. i want to get from you first of all what it is that china is reported he asked her with a chip. data.not consumer >> right or it talked about major hacks in the past. equifax and yahoo!. what seems to have been the consumer let's get data and figure out, let's get critical -- credit card numbers and things along those lines. these are too big, the companies we have written about, toocritis and things along those big consumer companies. what sources told us is what the hackers were after in this case was intellectual property. in some cases, they wanted sensitive government data that would have been traveling across the networks. it seems to have been what they attackers -- attackers were after in this case. in the story was so long making. you have gone out with all of the companies involved we have have to do is from amazon and apple.

taken those responses and how much heavy focused on making sure that they have their say? >> we published their denials in full in the magazine and on the terminal. we take them very seriously. we had to weigh that against what we heard from our reporting. in the story, the reporters conducted more than 100 interviews and spoke directly to 17 people who had direct knowledge of specifically the interference that the hackers had of the chips and how fore were put into networks these big companies. >> you mentioned that this took a year to report. this has been going on for even longer than that. a couple of years now. do we know what kind of damage has resulted from these? >> yes. coveredifics, the time in our story dates back to 2014

and 2015 and 2016. what happened of was gaining access to the networks. obviously, according to our sources, the companies took various steps to ameliorate the , severing relationships with micro in one instance. so, these are companies we know of objectively, regardless of what we have in our story, they are companies that take threats to their networks very seriously. they have the resources to do do children's to acquisition, do when theyligence on do acquire servers and other equipment that go into their networks. they are companies that take us seriously and we think something like this will show the larger the larger tech ecosystem, that the supply chain does have vulnerability. you have to be vigilant. >> certainly.

tom, thank you for more on this story, you will want to check out the latest issue of bloomberg businessweek. we are watching the markets as well. tech weakness across equities including markets as well. this is bloomberg. ♪

caroline: this is bloomberg markets and i am caroline hyde. joe: we're seeing reds across but the bigger theme where there is a lot of risk, there is a lot of pain. e.m. underperforming small caps underperforming, tech's underperforming, and basically come investors are punishing the riskiest part of the markets wh,

there is a lot, where ever you want to look at them the hardest. it is important to understand the action today. >> there is also no a chip scoop going on with bloomberg making the -- hitting the technology stocks even higher -- harder. joe: news like that exacerbates all kinds of concerns about and some of the best performance companies that rely in a globalized system of manufacturing and reject -- logistics. all kinds of reasons for winners today. >> the story hit the tape lets a week ago it perhaps would not have done as much damage. kind of edgy. joe: right. it would be interesting to see what happens tomorrow with the jobs report to see if it's sort of wars some gasoline on these concerns so to speak. >> to that end, we are looking at a selloff here with the nasdaq off 1.8%. can see this in the nasdaq,

down throughout the day and off the lows of the session. when you look at industry groups, tech, worst performers, the new communication services off by 1.5%. financials of the best performers, higher rates, and utilities, which should get punished with higher rates, are actually the second best performers. >> a little bit off of yesterday's is selloff, 331 billion. >> great stat. we are moments away from the close. dive with a deeper all of the action covering equities bonds and commodities. are you watching? if let's look at live nation, the parent company of ticketmaster. a report earlier today that the federal trade commission would look at picketing practices, particularly a lot of resell type of ticketing practices. it didn't mention ticketmaster droppedbut the company

as much as 7%, down as much as 4% heading to the close. live nation 15 minutes ago came thatth a statement basically says the workshop on online ticketing is an industrywide workshop and it is not a probe. that is the statement from ticketmaster. there was a report earlier this year in march or april saying they were state and local officials looking into some of ticketmaster with regards to have a resell tickets or allow for some sort of buying by some of these and other electronic mechanisms that's great tickets off of their sites. they say it is not a probe in just a workshop. >> the mover i am watching is dick's sporting goods. down about it percent over the last seven days, 1.5% just today. it is on the seven-day losing streak in the shares are currently at their lowest since late july, backed up by a bevy

of bad news in the last few days . at least that amazon is introducing $15 and our minimum wage for its workers. also from credit suisse, analysts saying they suffered the most from nike's partnership with jet.com. that is aimed at the coastal customer and its going to be available on jet.com, some of the top sellers. the company is really under some pressure expanding distribution channels. challenges a same lot of additional retailers have but it has been looking to turn itself around in the last year before the seven-day losing 14%ak, now down to under gain on the year. >> thanks. i am looking at costco, set to report earnings at 415. we are seeing some pre-earnings jitters. down about .5 percentage points.

what is really going to matter? is it going to be new membership numbers as well as renewable data? people are sticking around for costco? we're getting comparable sales numbers. that has surprised on the upside over the past four months. we will see if costco can continue the upward trajectory. you can see us having a good year up about 23% as of now. we get the numbers after the market close, we will see of they continue upwards. caroline: we will watch it as it breaks. thank you. the selloff in global bonds with other asset classes, 10 year yields hitting another multiyear high breaking through 3.2% for the first time in seven years. basis now trading one point up pyramid while, jay powell adding to the pressure saying the central bank could boost its benchmark past the all-important will rate. more, this has sparked a

significant selloff around the world. how much do you think this is late there by what jay powell is adding to? >> yesterday there was deftly a followthrough after his comments. saw a lot of movement yesterday. the 10 basis point move because andhe strong economic data we breached key technical levels that forced future -- futures and things compounded. jay powell's comments solidified that this range is where we should be now. think about the timing? we are at the start of the fourth quarter and a lot of fund managers are looking for a trend they could hop onto. this is something cameron crise has written -- has been writing about. >> there is momentum chasing here and the position has been so bearish for so long, there were a lot of new shorts established as well as the futures data sort of indicated today. not have the pension funds coming in and back in the

market any time there was a big market in the yield. we are finally starting to see may a little bit of the effects of that. jayow do you square powell's comments, the rate selloff, and the fact that we're seeing steepening? market isot that the pricing in many more rate hikes in the short-term but that cannot be the entire story otherwise we would see yields higher. >> it is interesting. a little bit of it is you look at real rates and you see have a top 1% for the first time in the 10 year space. similar to nominee up -- yields. it is not necessarily an inflation story being priced in yet. we are not thinking inflation will get too hot. it is more about seeing underlying growth and we see jay powell following through on his comments to continue to push the rate out. we're not even close to neutral. >> bonds around the rest of the world are following the u.s.

lower and yields higher in this case. requested is a natural sort of progression. bill gross yesterday made the comment that hedging costs were preventing japanese and european buyers from chappy -- checking in. moveee the 10 year yield a up a lot of basis points yesterday like you did and it is natural for this to go up even if it is just a couple of basis points. it is a crucial level but how low is that, you know? it makes sense so we will see i guess today given the fact that the yield have only moved up a basis point now. world willt of the follow. >> stick with us. as we head toward the close with just a minute and a half, let's bring in barry, head of equity strategy and he joins us from baltimore. much of the selloff do you contribute to the move back of the yield yesterday and today? >> we get used to having a negative real rate and fed funds

below neutral for 10 consecutive years. the punch bowl is being taken away. at the same time, the fed is essentially exporting shockwaves , difficulty abroad. we're hyper stimulating domestic demand with the fiscal bill we had this year on taxes. i think shortly after the midterms, we get a highway bill. helping the u.s. grow, exporting problems abroad, you could see how the u.s. yield is rising above foreign yields, though it is a bit limited. as the discount rate caroline: where do you sit in terms of the financial form -- a form -- out form. utilities are in the green. couple of big a rotations from growth to value in the last 30 years. we rustled5 recall

1000 indices. we had a bear market every time that happened. it's hard to imagine going to value leadership without a bear market. i have been negative on the market. the nasdaq is significantly underperforming overall. by 1.8% overall. we saw worldwide selloff. the whole country world index. scarlet: a lot of red whether you are looking at average these -- equities or the bond. the dow is coming off of a record high. let's keep it all in context. joe: how will stocks have been doing is an important perspective. you don't want to go overboard. all that being said, when you seat red everywhere, it

underscores how much the jobs report tomorrow is going to be watched even more. scarlet: we will get to that later on. , financialsowth's and utilities, the owner gainers among the 11 industry groups. consumer discretionary is off by 1.6%. the vix is up to 14, caroline. it had gone higher earlier up to 15.8 so it has backed off a little bit. caroline: the biggest push since february. scarlet: at what point do things overshoot here? we got to 15 in chains on the change on the vix, but we are complacent. are there signs of panic? >> there are a few signs of panic. i wouldn't overrated. however, he pointed out earlier, the defenses, all telecom mostly

, they are not selling off despite the backup in yields. that tells you there might be having hit the same low the hit 2000 in the last years in and 19 to 80 -- 1980. i don't see a lot of upside to the 10 year yield because the foreign yields will stay low. i understand hedging cost issue. one more thing to point out, i am convinced after the midterms the administration has more incentive to go big on risk. if they will do something on trade and oil with iran and venezuela, do it then. not immediately before the 2020 election. do it immediately because all of the barriers are removed and you have the power to do it. market risk goes way up after the midterms. i have been fairly cautious. joe: just to clarify, a lot of the discussion when people talk about midterm risk for the theree just saying

may be things we're not talking about now that the administration will feel free to do and maybe that is something should be more on the investor radar than most? >> i think people have underappreciated the machiavelli the --e of machiavellian nature of the company. why not take a high risk after november of 2018? caroline: it is interesting we talk about trade tensions. these have big ramifications for china. i think the interesting thing here going forward is the tunnel

the riskg-of-war on assets. vixenought up the february and that is where we saw yields increased to a larger percent and we saw huge volatility. to joe's point, it has not ifn a huge carnage day, but stocks and bonds playoff one another, that will be interesting. board,oking at that last i thought about the german u.s. spread which you have written about. we talk about divergence in stocks all the time, when are we going to see convergence in international rate between safety in europe and safety in[over talk] >> that is the big question. it has been a one-way street. it will have to come from the ecb stepping up and doing more as far as tightening goes.

the fed has been going at alone and that is why you see treasury yields go up 3.2% whereas the german bond is hovering at its range. scarlet: barry, what do you think? andy: you mentioned earlier i think something that has not gotten enough attention is a neutral rate concept. even though the fed does not know where the neutral is, the market share notes. -- knows. if you look at the neutral rate, it is down trending for 25 years. each of the highs was right at a bear market starting and we are there if you connect the tops. each of the lows is extreme policy easing to restart the credit engine and whatnot. 2014last low was may of which was the shadow reflow -- rate low. we have already done too much. the market is starting to break.

the fed is realizing that after the fact. barry bannister, thank you so much and brian of bloomberg opinions. the jobs report is due tomorrow. labor market is expected to have added 185,000 jobs. the unemployment rate is expected to take down to 3.8%. even as the labor market tightens, gauges and wages remain moderate. joining us now is the senior u.s. economist from bloomberg. joe was saying the jobs report will be so critical especially with the bond market looking closely at which direction to move in. will it just be those numbers we are looking at gekko -- at? >> we had a hurricane and it might not look like we will have a big impact compared to the previous hurricanes, but it

might still show up in the data. made 15,000 to 20,000 impacts from florence and that is why we are slightly below consensus. we are expecting 175,000 tomorrow. what about the wage number? that could be influenced by the impacts. yelena: absolutely. you have a lower denominator which give you slightly higher average earnings. joe: so we could see an anti-goldilocks number where it looks like the pace of job creation is slowing down, wages are picking up considering what we have seen with wage, that could be volatile. we have amazon starting to raise the minimum wage, talk of trade tensions,

will that affect inflation? yelena: absolutely. we will see some pickup and we have already seen a little. maybe next year we will see pickup and that's, but not now and not in this particular report. i think this will be a little signal rather than a trend because these numbers could be distorted by the storm. joe: one job number is going to have a huge impact on fed policy one way or another, especially given the potential of it to be hurricane distorted, but if we got a string of numbers in which wage gains were not taken off -- taking off, and we kept adding 200 k new jobs, could that tell the fed maybe we should revisit some of our assumptions on how tight the labor market is? yelena: sure.

they are already telling us they would continue to raise rates gradually and they are watching it. mr. powell was speaking at the business conference and he was talking about managing risks so that goes both to the down and upside. watching the inflation numbers in there, which numbers closely, and they are even counting the words in the beige book that indicates labor. they are watching it closely and will react. it is easier for them to react when inflation numbers are rising rather than when things are not looking great. caroline: when we have a day , how much do we anticipate the fed does look at market? yelena: the fed does look at market, of course. they are looking at different things.

from economic data to the markets. will they overreact? i don't think so. they are just watching the trend. scarlet: watching the trend and tomorrow's jobs report, yelena, thank you. it for the closing bell and for me. romaine bostick is stepping in and we will be taking a deeper look at the chinese market. this is bloomberg. ♪

caroline: live from bloomberg's world headquarters in new york. here's a check on the snapshot of the u.s. stocks. it was a down day with tech really feeling the pain. joe: the question is "what'd you miss?" caroline: assets spread across continents. a broad selloff in u.s. treasury stocks. infiltratese -- to top u.s. companies. the exclusive reporting ahead. lessons from oregon, what one of the largest legal cannabis markets in the u.s. could you just about the pot industry's wrote to mr. already -- road to maturity.- romaine: we back now with tom ryan caliber.

tom, can you give us insight into what led you and the reporter to look into this issue? what to do office was going on? tom: we have a couple of very talented and well sourced security reporters here. they got a tip a while back and carefully over a long. -- long period of time. well over a year spent reporting this out. they talked to more and more people to the point where they talked to more than 100 people including 17 people who had direct knowledge of ways the attackers used manipulated chips implanted on motherboards. these were a key component of computers. they were then put in servers and the servers found their way into the network of some of the

worlds biggest companies. that is the short version of how this came together. joe: what are the processes that most companies currently have to ensure the integrity of their supply chains, specifically when they are cross-border like this? ryan: there is a wide range of possible things you can do, but supply chain security is one of the hardest challenges in all of cybersecurity. resourced government agency, it is difficult to have tabs on everything going into every box installed on your networks. most places don't validate your supply chain on the software or hardware side. caroline: the piece highlights the relationship disintegrating between china and the u.s. and how important china is from a supply chain perspective. will it remain so? it is essential to the

supply chain. so many of our computer electronics are made and assembled and shipped to the u.s. from china. we have heard before the story as the trade tensions between the u.s. and china increased, if they stay in traveling was just through asia a few weeks ago -- the speculation is that we will see more and more productions outside of china, maybe some going to taiwan or southeast asia. remember, it is very difficult. you do not just set up production overnight. you cannot create a factory youright in the snap of fingers so you have to believe the trade war will stay in place longer. if these questions about the supply chain do persist, that will give a manufacturer one more reason to seriously consider where might -- where in

my sourcing my electronics? romaine: what measures can these companies take that would be toble or cost-efficient change their manufacturing or supply processes where you do not have this risk or minimize it? ryan: there are very few of them. the u.s. and australians government on the decision on five g networks to prevent chinese governments from doing various processes. if you are an individual manufacturer, you are reengineering your entire supply chain getting chinese contractors out of that. joe: tell us what companies are doing these days to scam the hardware -- scan the hardware they are doing. how have these practices changed before this story?

people have been concerned about this threat. ryan: they have been deeply concerned but we have mostly seen software vulnerabilities. that relied on a compromised update server to accounting software. hardware, mosto of the time, we trust the manufacturer a great deal. it is extraordinarily difficult to have the text for 2 -- technical expertise and figure out where a problem might be. some of the details of the story toa matter of luck -- point a matter of luck for some of these companies. joe: tom, we were talking about the tech stocks eating big losers, and there are probably a

lot of reasons for this, but one source of concern is how integrated or global they are. this will be pretty expensive for them if they have to increasing their surveillance and changing their practices. tom: this is not the thing you can switch things off overnight. some of the big companies are well resourced and have the means to buy the equipment or invest in the equipment or ship their service off to researchers elsewhere. sente instance, amazon things the canada as they were assessing a potential acquisition. you can bring in big machinery. there is no real commercially viable, easy to obtain set of instruments you can invest in. ryan was making this point. kind ofe not thae things you can snap your fingers and bring in this equipment. it is expensive and an

investment. moving or supply chain does not happen on a dime. stories like this will help companies become more and more vigilant. caroline: fascinating. we thank you for the expertise. courselember and of congratulations to tom giles. for more on the story, check out the cover of bloomberg businessweek. breaking news from costco. their earnings, we shot revenue up, but what is interesting, going into their statement, the company is completing an assessment of their internal control. that in the areas of user access, a program change management over certain i.d. systems. they say this has not affected

any misstatements identified but processes remain. romaine: that's interesting. offline: we see after hours by 3.2%. this is bloomberg. ♪

joe: so much news today, rate selloff, jobs report tomorrow, but the biggest story is this tweet that just got tweeted by elon musk. i think you meant to say -- pretty aggressive. sec so hard. the

romaine: i thought we were in this new era of elon. caroline: what to do you put out recently? the not to my nature hip-hop number. joe: he is who he is -- romaine: he is who he is. joe: he already settled so you can do whatever he wants. romaine: we will see what investors do. they're down 2% after hours. caroline: you can't stop him. meanwhile, turning to another market selloff. the treasury route is deepening with the 10 year yield hitting its highs level in seven years. for more, let's bring in luke to talk about elon musk and -- luke, we can talk about elon musk in a little bit. this has hit across continent. luke: i think you have to talk it up to four factors. the good data yesterday plays a good role.

much larger now that we are responding to data again. is a mooring the neutral rate. they are saying the neutral rate is uncertain but rates are going higher. the risks are playing on the selloff of core bonds. why is r-star perceived as hawkish? luke: because wall street definitely had this idea becton -- baked in that we would get to neutral and we had an idea of what neutral was an pause. -- and pause. the brain trust at the fed, the governors, they have no intention of doing so. long-term.ght of the

is a loose proxy for what the 10 year yield should be overtime. is saying maybe it is not that good of a guide to anything. romaine: when we talk about the yield rising and the neutral rate, and by powell, without the spike in yields was before the comments were made. to five different people and ask them what was behind the spike and i got five different answers. luke: you need to decompose the move to look at it. when you have it actually happen, yesterday the spike -- at the same time, oil is moving. move, real rates moved. that would suggest really rates rise because of a good news a story of stronger real growth. caroline: and maybe also on the good news front of it, italy. it is interesting you are seeing germany pick up in yields.

the spread between germany and the u.s. remains incredibly painful. it's interesting that we see bill fighting back and saying it is the hedging costs going on in terms of the move out of the u.s.. i think the scramble for year-end funding across the currency basis is exacerbating the costs recently. it does not help. caroline: luke, thank you. bringing us the five key points and romaine has been asking five key questions. coming up, constellation reports earnings and leaves the s&p 500 in a broad market slump. why the beer brand is being cheered on by analysts and pot, next. this is bloomberg. ♪

mark: i am mark crumpton with first word news. as expected, the partisan battle lines are even more defined following the release of the fbi's report into allegations that brett kavanaugh sexually abused women decades ago. said the report did not corroborate any of the allegations. he said the senate is now on trial. scared of all these people rampaging through the member's going to homes? they are trying to intimidate the senate into defeating a good man.

are we going to allow this to happen? in this country? the senate judiciary committee stopped dianne feinstein -- committee dianne feinstein said the senate had blocked the fbi from doing its job. copy foronly a single 100 senators to share of the report. ended uptors ended up listening to staffers read aloud . >> the fact that there is only one document in their four 100 ofators is another example constraining the ability of all senators and the american public to see the whole truth and

nothing but. ark: the senate plans to hold procedural vote on kavanaugh's nomination on friday. chuck grassley said he expected judge kavanaugh to be confirmed on saturday. it also appears increasingly unlikely that the public will get to see the fbi's report. the pentagon is considering using insects to make certain plants more resilient. bugs carrying genetically engineered viruses could be deployed rapidly should critical crops become vulnerable to disease. critics of the scientific community said the whole insect allies program could be seen as a potential biological weapon if the u.s. cannot provide better justification for its use during peacetime. the turkish president says his country's forces will not withdraw from syria until his people hold an election. the president made the comment

in istanbul today at the closing of an international forum. turkey sent troops into syria to clear a border area from exotic -- islamic state the litan's -- militants. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. romaine: the number one stock today in the s&p 500 is constellation brands. the shares up as much as 7.1% today. some of that had to do with what was going on in the beverage area. everyone wanted to know what is going on with cannabis and the most recent assessment in canada. start with everyone wants to know about. what do they say about cannabis? >> there was an interesting

discussion, not a ton about the business of kennedy, what you are the ceo of constellation -- , but you hear the ceo of constellation talking saying this is not the case. this is us playing offense. joe: so constellation makes liquor and beer? >> and wine. joe: i thought they were just cannabis. how is their business doing? are people drinking beer? >> they raised their forecast, beat on earnings. modelo has been on tv quite a bit if you watch the nfl. there are a lot of ads there. they are spending more on marketing, raising prices, so they made the case that the beer business is strong. caroline: there's no campbell is

him in terms of the booze part of the equation but they are talking up how much money they have made off just the sheer investment in canopy. they are $1 billion or so higher? >> yeah. back in october 2017, it was very unusual. even in august when they put the $3.8 billion in, that is when this started. constellation has been a first mover. the interest in the company stems from cannabis. romaine: and they have a history of being a first mover in a lot of ways. craig: that's right. they are benefiting from taking the risk. their lawyers and advisers got comfortable with this in a way other companies have not. pepsi said the federal ban is too much for them. canopy is making a new wants point saying we did not do this thinking about the u.s.

they said the u.s. will be a gigantic market though and legalization is coming faster than expected. they are trying to play both sides of the fence. joe: great stuff. craig, think you much. sticking-- thank you much. sticking with the theme, pot stocks are rising. i want to bring in a senior analyst from portland oregon. us.k you for joining we speculate about what the legal market will look at, but there are multiple legal markets in the u.s.. from oregon, what do we see about the potential for this market? >> the potential of the organ market is tremendous. -- oregon market is tremendous. the data shows it is a markets billion. about 725 billion of that is supported through adult use or medical market so the

opportunity is ripe for the picking. caroline: you also noted there is plenty of competition. applications flooding the market to an extent that regulators are not accepting new ones. how are certain company standing out? that is the key. the key is differentiation at this point. it is hypercompetitive in the oregon market due to saturation cole spader'snd -- wholesalers. there are some investors from the canadian market that are already investing the space. see 21 is one making headways. golden leaf holdings is another.

right now, it has been difficult for those folks to identify the key players. romaine: when you look at some of the businesses applying to expand into your state specifically, are these mostly smaller players? are you starting to see larger companies trying to take a stake in the market? is occurring now is, given the fact prices are declining due to saturation of supply, there is a stress in the market. people are looking to consolidate. some are getting out of the market and some are teaming up. those coalitions are being invested in by outside providers. joe: let's talk about the margin situation. when it is fully legalized everywhere, and i say when but it never may have been in the u.s., but suppose it will, would

we be looking at margins equivalent to tobacco, how call, where are they going to settle? alcohol, where are they going to settle? beau: it's a plans on the supply in market because that will drive down prices and margins. it is tough to say, looking at the data, where the margins will settle. we know they will be lower than they are today. joe: what has been the biggest surprise for you monitoring the oregon market as it developed? beau: there has been a couple of surprises. the marketrapidly has consolidated. one year ago, there would not be this level of consolidation going on. steep drops in prices as well.

the commoditization of prices has been very striking and surprising. romaine: what you seeing in terms of tax revenue for the state so far? beau: that is a highlight for the state. there has been over $199 million in state tax revenue, either at .etail levels or local 100 $99 billion over the course of the last two and have years -- $199 billion -- $199 million over the course of the last two and a half years. beau, thank you. ge has a new ceo. we get details on his pay. pay will be tied to performance but the able base salary will be $2.5 million.

the overall target bonus is set at 150% of that base salary. getting a payout if they hit 150% of the stock price. coming up, jay powell says slow and steady is the right path when it comes to timing, but we talked to one economist saying the fed went too far. this is bloomberg. ♪

joe: here is what i am watching, the euro-dollar spread is pointing to the fastest pace of fed hikes in a long time. i stole this chart from luke who was on earlier. the bottom chart shows the spread between further out euro-dollar and current.

you can see it shooting up. to some extent, it is not all fed. disparity you hear from ecb officials saying we are only going to go very gradually. joe: and we are not going to get to the bill gross trade until some of that changes. meanwhile, jay powell is saying while interest rates may eventually raised to levels where they restrain growth, that is still some ways off. stillerest rates are accommodative but we are gradually moving to a place where they will be neutral, not restraining the economy. we make a pass neutral, but we are a long way from neutral, probably. joe: our next guest crunched the numbers and concluded the fed raised to quickly when it tightened in 2015. he joins us from pennsylvania. adam, is the fed making a mistake here?

a seem eager to hike several more times over the next year or so. if you say it was a mistake in 2015, is there a similar mistake being made now? adam: i think they continue to make this a mistake which is underestimating the amount of labor market slack that is out there. a good step one would be for them to recognize the mistakes they have made so far. that should influence their thinking going forward. romaine: what is the proper way to measure the slack in the labor market? you can start with the unemployment rate because even with the rate, the fed made a mistake. when they started raising rates, they believed that the unappointed rate was 4.9%. now they have lower that estimate to 4.5%. my guess is that they will keep lowering that estimate. even if you focus on the unemployment rate, they have clearly been an error.

look to the employment to population ratio which suggests there is considerable agreement. caroline: what has been the negative impact of getting the state to wrong? -- this data wrong? adam: the negative impact is that the fed has not been nearly as accommodative abs they want to be -- as they want to be. their plan in december of 2015 was to start raising rates when unemployment -- the unappointed was-- the unemployment gap .1%. have revised down there estimate of the long run unappointed rate since then. if they do now -- if they knew then what they know now, they would not start raising rates until march of 2017 when the gap

was at that level. joe: are there people today looking for a job that would have found a job if the fed had already hiked -- had not hiked so early? adam: my estimates are that somewhere between 500,000 and one million workers would be employed today if the fed had started raising rates later. earlier,point you made that even with everything aside, the fact that the unappointed rate is slicing through the estimates, that should cause themto assess what caused together estimates wrong. what do you think the reluctance stems to do that? is it ideological or something about the institutional makeup of the fed? why have we not seen them become for the fact that there estimates were way too high? adam: that is a great question.

i think it is only a matter of time. my position is not the consensus position among economists. it is not even the position here at moody's analytics. time people are going to accept this as correct especially if the unemployment rate continues to fall. part of it is that people do not want to criticize the fed too much because they have had a hard job in their recovery in the recession. i want to give them a lot of praise for their performance over the recession. they have prevented another great depression and i do not want to take too much away from them, but that should not prevent us from criticizing the mistake that they did. romaine: we are pretty much in the middle of the mistake now based on the comments we have gotten from fed officials and we will continue down the path for the near future. is there any corrective measures

, in your mind, that could be taken to stem some of the fallout from the mistake? we are going to get to full employment if we can avoid economic shock. it is a matter of how long it takes to get there. they are slowing the recovery down and raising risk that some other shock will disrupt the economy and prevent us from getting there. the only thing they can do is recognize their mistake and stop raising rates. caroline: have you had any comments from the fed to your research? adam: no. i have not had the fed reach out to me, but i hope they are reading. joe: maybe they are watching this segment and will reach out. hopefully. caroline: thank you adam -- you, adam. check in with us if any of the fed picks up your work.

a quick check of the business flash headlines. says amazon made the right step and a boost their minimum wage to $15. american express is redoing its gold card rewards in the fight for premium credit card customers. holders were now get four points per dollar. now is twice offered from -- that is twice what is offered now. u.s. outlines are planning ways to find more money. economy seats have been one of the most lucrative innovations. they usually have slightly more leg room and better food. sometimes people are willing to pay twice or three times the normal business fair. romaine: is that really and

innovation? caroline: it is twice or three times? i would never pay that to go premium economy. romaine: so you only fly first class, right? backi've heard it is bad there in economy. caroline: we will remind you of it [laughter] chinese consumers may have to ase up their life of luxury shelter media warns of custom crackdown. that a straight ahead -- social media warns of custom crackdown. that is straight ahead. this is bloomberg. ♪ s is bloomberg. ♪

caroline: now to asia ahead. bad news for chinese travelers heading home with luxurious souvenirs. a public crackdown on the chinese border. here with more is shery ahn. if you are piling up on gucci, you might not be allowed to bring in all of your goods? the duty-free allowance is 5000 yuan.

usually they would not crackdown so hard. you always see in japan and south korea is huge lines of chinese consumers trying to buy their louis vuitton. caroline: you cannot really get anything for 700 bucks. shery: that you can't. but take it inside of china sometimes there is this practice where you taken all of these products were cheaper and sell it at a profit. jpmorgan is saying they are trying to crackdown on this aspect of the business. joe: explain this, who is doing the buying and who is selling at a profit? and, why are they trying to crackdown? shery: there are so many brokers in china. there is a huge gray market. you see all of the tariffs on chinese luxury imports which are about 20 or 30%, or higher. in china cost 30% more than the item in france.

that's great market is huge. the news started circulating that they were cracking down, nothing official, but as the news and speculation sword, you saw all of these soared, you saw all of these companies take a beating. the retail sector is outpacing losses on the broader topix. also -- topics. also, when chinese people travel, more than 50% by these products. romaine: and this is a huge market for the luxury brands. they are setting up shop either in hong kong or other. shery: they are. hong kong does not matter that much. this is a huge market. ubs group is saying if there was

a trade war between china and the u.s. and they started cracking down on these imports from overseas, especially in the u.s., you can see european stocks in the luxury sector falling 30% under the worst case scenario. caroline: that is amazing. we saw the share price reaction that you outlined for us. shery ahn, do not miss her on "bloomberg daybreak: australia" and "daybreak, asia." the atlanta fed president gives at the financial literacy and education conference in atlanta. joe: and i'm excited for jobs day. i can't wait. it comes out at 8:30 a.m. romaine: there is also other economic data for august coming out at 8:30 a.m. eastern. caroline: so much to get the market excited about. that is all for "what'd you miss?" romaine: "bloomberg technology" is next. joe: have a great evening. this is bloomberg.

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150 dollars off and free shipping too. sale prices are available right now. go to buyleesa.com today. you need emily: i'm emily chang in san francisco. coming up, in the next hour, the big chinese hack. a bloomberg investigation revealed hackers implanted tiny microchips in servers that infiltrated centers of almost 30 u.s. companies including apple and amazon. plus, new rules for testing self driving cars are out. drivers no longer need to be human. we get the action from the hill.