survey, all of the forward-looking sentiment have clearly come out. that certainty alone allows plan for the lan future. that uncertainty is keeping business hands tied. >> one pronouncement from investors is down, down, down. the nasdaq lost in 1.9%. the dow losing 300 points. 500'slows the s&p second-best day of the year. now a gift back. out of the 24 groups, utilities made it into the green. >> what, pg&e?

>> it is green, what can i say? let's take a look at the action. what were you watching? >> the technicals. this is a six-month chart showing the downtrend, sellers in control. in october.d the momentum of the sellers taking it away from the buyers. then that brutal month last week. chartg above it, but this could suggest a downside ahead. >> i am looking at home sales. the data this morning was the weakest in three years. 4.99%erage annual rate at , below estimates of 5.2 4 million. valuations was about

and the fed raising rates, but economists were expecting weak sales in december, and they are expecting a rebound in january. rates have been falling. the fed said they would slow the pace in 2019. we will see what that does to affordability. that is the key. >> i'm focusing on the action in the credit markets. , peoplele b sector saying this will be the area downgraded. this area has been outperforming. withinlook at this chart the investment grade credit universe. that purple line is your triple b, total return, coming out on top with a .1% gain this year. see such a resurgence

after all that talk. >> it is still early. great job. let's rejoin our conversation with rbc and bloomberg intelligence. we are waiting for ibm to come out with results. you are underweight and technology. tech has software, services, hardware, apple. is there pessimism on technology or caution across the different groups? >> we think semiconductors are looking interesting from a valuation perspective. i think you need this earnings reset. it is also trade sensitive. you need progress there. the area within tech that i worry about is software and services, the domino that has not fallen yet, violations high, sentiment bullish.

that was true for hardware into we got bad news in that space. we are still underweight. but youcome off of it, have not seen an f dominoes fall yet. >> one of the big discussions is cloud and the corporate i.t. spending. it could affect the broader sector. >> it could. we have been having this debate this year. is technology secular or cyclical? names, i-related perceive don't think it is purely secular, so i think we will put that to a test. >> a lot of people dismissed apple's earnings, their downgrades and forecasts, saying this is china, luxury. do you buy that? will we find out if that is truly the case and part of a

broader slow down today? >> we have already priced in a broader slow down. apple, the out in semiconductors, through much of the supply chain related to china, so it is not an apple-specific story. it is a weakness story centered on china. the area where we have not seen capitulation is companies exposed to the rest of the economy, europe in particular. the valuation gap in tech is as much an industry gap as a country-specific gap. most stocks close to china are trading it a terminus discount to a 10 year average. those stocks exposed to europe are trading at a premium. there are pockets of risk we have yet to fully price, but we have gone a long wait to pricing in a lot of economic risk in

china. of the the center argument and a giant economy that has been slowing. europe is also slowing down too. >> some headlines crossing, mitch mcconnell will allow a senate vote on a democratic bill to open the government. perhaps we are seeing the end of the logjam, something opening up here. mitch mcconnell will allow the senate to vote on a bill to reopen the government. my guess is this just kicks the can down the road. as we wait for ibm to report earnings, to what extent does the government shutdown bother investors out there? >> it is coming up more in conversation than it was. a broaderpart of conversation about the threats to the market emanating out of washington. while we were getting progress on trade, this was stepping up

to add to that policy headwind. today, we have bad news on both fronts that weighed on markets. >> i want to pick up on what gina said. we are forgetting europe, at a time when the imf is warning about europe. they downgraded their expectations more in germany than anywhere else. we are getting some ibm headlines crossing. fourth-quarter revenue, $21.8 looking forlysts $21.7 billion. $4.87 operating eps, five cents higher than the estimate. fourth-quarter revenue beats, shares are rising. let's get you the forecast for 2019. 2019 operating eps will be at least $13.90. the consensus estimate was $13.80. that is at the bottom end.

ibm shares climbing 2% right now. the annual cloud revenue of 12%. ibm is betting big on the cloud. does thistent foretell what amazon or microsoft will say when they give their results? >> probably not a lot. ibm operates fairly independently from the rest of the tech sector. amazon and microsoft have a tie to ibm, but they operate with their own product and individualized environments, so i'm not sure you want to read a lot into the rest of the sector, but if you get followthrough confirmation of this positive result from amazon and microsoft , it could go a long way to improving sentiment towards the sector, which has been beaten down over the last three months. >> when you look at the , theyions on these stocks

are providing an attractive entry point. some of this is the ratio of p e not being as attractive as you would like, but does that make it a market that brings more people back to the table? .> for certain segments within tech, that is semiconductors. is not consistent across the entire sector or the index. the areas that are extremely cheap are the financials, energy, and industrials. we saw that play out during the earnings season. financials did not necessarily beat. the stocks rallied heavily because the fire way shin -- valuation suggested tremendous discounts. it is a story of case-by-case rather than the whole market. >> you said you think markets

haven't priced in the potential downside to services, and yet we saw cloud revenue up 12%, and a run rate for cloud revenue is up 18%, so services be dramatically. what does that tell you? >> i can't comment on ibm specifically. i think this one is an outlier. it has not been in the highly loved area of tech. >> your s&p target is 2900. you reiterated it on january 7. what kind of assumptions are baked in there. >> we set let's look at the christmas eve lows. a think the market priced in fence carefully at that point. we think we got a lot of that bad news out of the way. one stats we have been talking about is if you get a garden-variety recession, your

median drop in the s&p going back to the 1930's is 24%. on december 24, we lost 24%. if you assume there is a mild economic downturn coming, we did most of that damage. >> is there any catalysts on the monetary policy side? the fed can't get any more dovish, well, it could, but realistically, we have gotten the best out of them so far, right? >> i don't know if were looking to the fed to be a catalyst, but the fed has given investors comfort they are taking their concerns seriously. there are some lingering questions over quantitative tightening. those andn address convince investors they are not on autopilot, but i'm not looking for the fed to be the big source of upside here. >> perhaps we will get some upside from the government shutdown ending. thank you so much.

mitch mcconnell has scheduled a vote now for thursday that would reopen the government and fund it through february 8. that is something. had been firm on not voting on any government funding legislation unless the president had agreed to it, so presumably this is something the president can live with. for now, senator mcconnell will allow the senate vote to real in the government and fund it through february 8. next, we will be looking at how president trump's immigration policies are taking a toll on higher education in the u.s. and what that means for one of the u.s.'s most vital exports. this is bloomberg. ♪

♪ >> live from bloomberg's world headquarters, i am scarlet fu. here is the snapshot of how u.s. stocks ended the day, the first drop in five days. now that it has breached the 50 day moving average, people were looking at 2700, but certainly a gift back. >> the question is, "what'd you miss?" >> a path to end the shutdown. mitch mcconnell to allow a senate vote to open the government.

trade tensions cast a cloud over davos. business leaders ring the alarm over uncertainty in u.s.-china trade talks. trump'sin drain, why policies are hurting higher education and sending talent to other countries. mcconnell,p, mitch who had said the senate would not vote on any government funding legislation unless the , appears agreed to it to have changed his strategy and has scheduled a vote on thursday for democratic-backed legislation that would fund the government through february 8. marty schenker joins us now. this is coming from the new york times. we have got more detail. what is your read? has saidmcconnell repeatedly that he will not bring this bill to the floor of the senate that the president

won't sign. now that he has reached an agreement with chuck schumer to have a bill voted on that would fund the government, re-open the ,overnment, until february 8 seemed to contradict that. chuck schumer has repeatedly said the senate would pass a now,ghtforward bill, and apparently, we will test that theory. >> why now? this has been going on for 32 days. we are dealing with a lot of angry people. on mainnk the pain street is beginning to filter into congressional offices and senate office buildings. now, they be a way -- vote on donald trump's compromise he put forth to the democrats. i personally have the believe that bill will not get as many

votes as the schumer bill. perhaps it is mitch mcconnell's idea that he can then show the results to donald trump and say, this is what would pass. >> i want you to elaborate. there was some concern that if there was a significant loss and a lot of republican senators did not vote for it, that would send a negative signal trumps way -- trump's way. is this a way of blunting the impact? >> it may be. the more interesting prospect, should the bill get more than 67 votes, that is an override margin. that would send a very strong signal to the white house that ,hey could take a vote that despite a veto, would get passed into law. long just got off a

weekend and people are complaining about long lines at the airports and delays because tsa employees were calling out. could that have played a part? >> of course. they all play a part putting pressure on congress to get the government reopened. this may be mitch mcconnell strategy. he is a master tactician. he may be trying to convince president trump this is a way out. >> the master tactician did not do anything for one month. if he allows this vote to go forward come of that would give him two weeks to get something done before the next deadline? republicans, if indeed there is a two-week reprieve, they can cut a deal. >> thank you so much. >> he has some faith. >> i am going to hold you to that. coming up, markets have

recovered from december lows. volatilitycreate new -- could ipo's create new volatility? we will have more on that. this is bloomberg. ♪

>> time for a look at the stories trending. about thesers reading impact of the government shutdown on airport wait times. some u.s. airports are experiencing longer than usual wait times as the tsa struggles to find new workers. those with the longest wait times over the weekend. a new online shopping service has everything britain's need to survive a no deal brexit. onomberg.com has the story

personalized shopping orders to stock called food and drink. the vatican is going high-tech. tictoc is reporting pope francis is launching a website in mobile app for prayers and messages in six different languages. you can follow all these stories on your terminal, bloomberg.com, and tictoc on twitter. >> thank you. ibm earnings are out. the total revenue did fall 3%. that is the worst drop since third-quarter 2017. they did see cloud revenue grow 12%. some comments from the cfo saying he is confident i.t. spending will grow faster than a lownd that china is single digit percentage of revenue and they are not that concerned about it. , bigll stick with tech

tech unicorns are preparing for but it couldr, create stress and pose new threats to markets according to bloomberg. have over $100 billion worth of valuation that could come into this market this year. are we talking about a situation where we have a dilutive effect? >> this has not been a question for a long time. can be seen asit a drop in the bucket when you think about share buybacks and other ways the market could be diluted, but goldman sachs total dealhat the value of ipo's in the u.s. this year will be $80 billion. say you take six unicorns, $120 billion, that's $30 billion

alone for the six companies, and ipos elevated at the end of a cycle. the last five years have been muted. as au look at ipo value share of s&p 500 market cap and make that even waited, it is a 70% jump from the five-year average. and howuch is dilution, much is a matter of unicorns overvalued cashing in while they can, racing to do so come and a prelude to the crash? >> it is a great question. it is different now. are companies like uber staying private for longer because there is so much funding in venture capital. they have the means to stay private. why didn't said these companies come out in

2017? now you have volatility in the markets. the question of whether there will be enough demand to absorb the supply is a question in and of itself, but if the demand is ,aning, when they do come in this could weigh on prices in the market at large. >> the market structure is completely different than it was five to 10 years ago. we talked about etf's taking a lot of market share. it is different, right? you don't have individual investors subscribing to ipo's the way they once did. , spotifyowth of active is a great example. they went public in april. if you look at the etf universe, spotify, where as when active management was larger, you would have had more individual investors willing to

take risk on these newly public theanies, but now it breaks question, is there a enough demand for these companies when a lot are owned by passive? >> have you heard that some of these companies might not come into the market? to milke other ways some cash out of it without going public. >> not yet. optimistic are still , saying these companies will probably still come out this year. that can change. also, the government is closed, so because you can't really -- because of it, you can't get ipos the right now. maybeeople are saying december was a turnaround. >> thank you for being with us. coming up, we hear from the citigroup ceo next. this is bloomberg. ♪

>> this is first word news. senate majority leader mitch mcconnell has scheduled a vote for thursday on democratic-backed legislation that would reopen the government and funded through february 8. he previously said the senate would not vote on government funding legislation unless president trump had agreed to it. senate minority leader chuck schumer slammed the proposal to end the shutdown. protectthe offer to some immigrants for deportation in exchange for $5.7 billion to build the border war with mexico is one-sided, partially partisan, and made in bad faith.

800 thousand federal workers are expected to miss another paycheck on friday. a high level chinese delegation is due to arrive in washington on january 30 has the two sides try to reach an accord to into their trade conflict. pompeo wasf state asked about the upcoming meeting. willam optimistic that we receive them well and will have a good outcome from those conversations, but the relationship will be determined seas, thed open capacity for nations to take the goods around the world, fair and reciprocal trade arrangements where everybody has an opportunity to compete. >> if beijing adopts such policies, secretary pompeo said our two nations can thrive and

prosper together. has beenve deal reached between los angeles school officials and the teachers union that will allow educators to return to classrooms after a six-day strike against the nation's second-largest district. the agreement was announced at city hall a few hours after a 21-our bargaining session ended before dawn. over the lastn few weeks the way this city has rallied around public education. it has been breathtaking, a cityng to see, and for that embrace the idea that public education matters, children matter, that teachers matter, today is a day full of good news. clashes over pay, class sizes, and support level in a district with 640,000 students led to its first strike and 30 prompted staffing of

classrooms with substitute teachers and administrators. 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. >> michael corbat sat down with john micklethwait in davos to talk about the evolution of the company and the banking industry. we went into the crisis operating in 100 countries. this morning, we open in one countries -- 100 countries. comfortablere quite and like the business model we have. aroundits challenges globalization or anti-globalization, around trade, but i think we are quite comfortable with where we are and the things we are doing. it is to make sure that in these

challenging times as we go ahead and that we conserve serve and provide value to our clients. graduation expanding. >> we talked about trade wars, nationalism, banks, that that era is coming to an end. it is hard to put the genie back in the bottle. we've talked about the world being flat, globalization digitization, the speed of information flow, the fact that not all natural resources exist everywhere. have the expectation around access to the free movement of goods and services. the politics and other things will try to put some barriers along the way, but i don't think we can go backwards. coming out ofgine china and places like that?

there are big banks in china the tend to be domestic. context, thet into 10 largest banks in the world, the first four are chinese banks. >> they do not have your reach? >> they don't have our reach. we know around belt and road initiative, chinese champions moving around the globe, it is likely they will follow them to those places, and i'm sure they will be good competition. >> will there be a bank that emerges to set alongside the big american banks? >> i never would discount the european banks. they are in a different phase of recovery than the u.s. banks, so don't overestimate the u.s. bank position and don't underestimate the european banks. what we have seen is a refinement of strategy, not just europe, but around the globe.

it is not the days of be all to everyone, but a refinement of strategy in being in the areas where you can compete and provide real value add, and i think you have seen all institutions around the globe pulling back the strategies that encompass and embolden that objective. >> would you advise younger people to go into banking? >> absolutely. there has never been a more exciting time. ofare really at the point writing the next chapter of banking. this move to digital and information flow and data, client privacy, and all the pieces is really exciting, and i think you will see banking evolved quickly as part of that. you have seen it happen to other people as well, do you think that will change as technology becomes more important. nothis sense of finances

being enormously popular. is there a way it changes in the way you have described, that it will become more love? >> coming out of the crisis, banking became the headline or the go to industry for the crisis, and, again, we certainly did things that we should not have in hindsight, and as we go forward, we are mindful, not just in terms of what we come to do as work as part of our base function, but the broader things we do. if you think about history and society over time, i challenge anybody to go back and find a society that operated at its full capacity and ability when its financial system and banking system was not in a place of being supportive and being embraced by broader society. >> that was the citigroup ceo

michael corbat in davos. coming up, the sector being let out -- left out of the immigration debate. how american universities are getting caught in the crossfire. we will speak to and krueger next about higher education as a critical u.s. export. this is bloomberg. ♪

>> one crucial economic driver is getting left out of the political conversation, higher education. it could hurt president trump's own trade goals. rights that trump is shooting himself in the foot

by ordering his administration to tighten these requirements. welcome anne krueger from john hopkins schools of advanced studies. thank you for taking the time to meet with us. you write that higher education is not counted in the economic data and treated as such by policymakers. why is that? >> i am not sure. we have a lot of foreign students who come to this , many paying full tuition at american universities. it should be counted, but it isn't. has the same economic effects as do other exports. the you have any sense of how much of a detrimental impact the

immigration policies of the u.s. education andd on the desire for foreigners to come here and receive their degrees? >> it is hard to say. know three years ago that the number of foreign students in general coming to this country began dropping. it looks like they are dropping again. with immigration started, but having said that, other countries are recognizing it is a good thing for them to do. universities are trying to upgrade. there is simply more competition from other countries. can you give us more

perspective on how steep that competition was prior to the changes in the u.s.? getting anecdotal information that a lot of other nations are now vying for that talent. >> there is no doubt about that. it has been an enormous asset for us. many of the best and brightest have become people who stay in the u.s. and do wonderful work, or they go back to their own countries. competing,umber of clearly more of going abroad, but i can't give you the numbers. >> u.s. universities need these foreign students to pay these international tuitions to make education more affordable for students in the u.s.

what does the brain drain mean for domestic financial aid? >> it is not that they pay more, there is the sticker price, but then a lot of financial aid is given to students whose parents would have difficulty affording it. percentage of foreign students paying the higher price is higher than domestic students. not only are we exporting , it is going to finance american students. >> the u.s. has gotten less hospitable to foreigners in some of its policies, but what other countries can compete, especially when china is cracking down on academics? >> first off, some people are coming who might otherwise come.

some of the chinese universities are pretty good. even if they don't go somewhere else, they don't come here either. australia, canadian numbers are up, probably some european ones are up. i just don't know that. >> in terms of innovation we talk about how higher education creates a soft power by hosting foreign students. talk about how that contributes to innovation. >> graduate students are important because they learn, but also because of the research. waysparticipate in viable in much of the research that faculty members are doing. ,aving fewer of those people

wherehas been a tradition those with phd's in technical fields could stay and get work experience under three to five years. the trump administration has been cutting down on those, and that means the likelihood someone can stay here is smaller , and fewer people will stay here. companies are reporting shortages. some of those people are going elsewhere. thank you for being with us. very important points. a really important point to highlight here as a consequence of the ongoing immigration discussions. time now for our smart charts. >> thanks.

we have the big downdraft for the major averages. the first big day since january. let's put it into the context of the weekly chart. also today's chart of the day of the s&p 500. the action around the different weekly moving averages. whenever it has gone below, it has gone down, then rebounded, then back down to the 200 week moving average in yellow, or back below that average. very strongwas support. the question is whether or not this is a rebound rally and whether we will see the move back down, and to what degree. to talk about this more and put it into perspective as a monthly

chart, i like to bring in our guest from fidelity. this is a fantastic chart. us about your monthly chart of the s&p 500. >> the s&p is not the holy grail. it is a great place to start. 70's, weok back at the are in a sideways bear market, and once we break out, we get these pullbacks, like the crash of 1987. we were in a us secular bull market then. it is no different now. >> you're looking at that strong test of the 50-month moving average, the fact it has held more often than not of the last 50 years. >> yes, this goes back 100 years. , the movingat it

average work then, and it is working today. >> let's look at the pink circles. how do you tell whether or not this will be a whipsaw? >> we don't know. imagine thee don't right of the chart. take it for what it is. when we do cross this line and you see a huge spike in volume, then we know were heading into a secular bear. be the time to reduce equity exposure. 2008, other than that 30 years. be watching this closely. thank you for joining us for smart charts. back to you. get you now to check of

the latest business flash headlines. is finding mastercard for ramping up credit card fees. they say the company unfairly prevented retailers from seeking cheaper rates outside the countries where they are based. got a 10% discount on the fine because it cooperated with the eu. netflix executives will have a with the feel nervous hasrs because "roma" received 10 nominations overall. that tied with the most nominations. that is your business flash update. i know that you have not watched it. >> you have to watch it. it is amazing. actress was nominated for an oscar herself.

she is the first indigenous anican to be nominated for academy award. she is fantastic. >> it did really well at the golden globes. >> this has to be casting fear into the others out there. >> did you watch it at the movie theater? this in theased theater exclusively, then put it on netflix a couple of weeks later. i watched it from the safety of my couch at home. >> i'm sure that made those movie theater companies angry. they don't want to compete with netflix. >> it is an interesting dynamic. >> to say the least. coming up, the trade war reaches names ofre the biggest business are talking about the risks to the global economy. this is bloomberg. ♪

>> the trade war tops the agenda for businesses and lawmakers at the world economic forum. bloomberg spoke to the deputy chairman of huawei. damage toseen the many companies, including huawei , from the trade war. highly reliant on the global supply chain and global innovation ecosystem. we are probably suffering the most right now. the other side, freeze it in trump did not send anyone from his delegation. let's bring in the host of daybreak asia in. thank you for being here.

what has china's overarching message been at davos towards the u.s. regarding trade? >> this is a top priority. the vice chairman of the regulatory commission said donald trump's policies will not derail our long-term plans and where the chinese economy should be going is great news for the u.s. he talked about china not thinking about curbing government debt purchases, which is a huge issue. you have the largest holder of u.s. treasuries cutting back on purchases, but he is saying that is not on the table. >> we got some data on where china is going. growth is slowing. was that talked about much? is it just not a concern? in thes a concern

context of the u.s.-china trade tensions. sayingd from blackrock it is the biggest concern right now in the global economy. the citigroup ceo also saying the u.s. and china represent the bookends of the global economy. if you have a policy in relations, ramifications will be felt, but the chinese economy is slowing down. the official date of putting growth last year at 6.6%. >> do we have anything on trade talks? >> we heard from larry kudlow, saying the u.s. has not rejected preparatory talks for higher-level talks next week. thank you so much. for more on these stories, don't miss daybreak: asia at 6:00 p.m. eastern. >> bloomberg technology is up next in the u.s.. >> have a great evening.

watched our dollars specials throughout the week. from new york, this is bloomberg. ♪

♪ emily: i am emily chang in san francisco. this is "bloomberg technology." coming up, betting on the cloud. ibm fourth-quarter sales beat estimates thanks to double-digit gains in its cloud business. what gives? davos gets into full swing. we will bring the highlights, including conversations with ups and horizon.