to the heavyweights carrying the weight and preventing the worst performance. that in 2017, so that might not be the harboring or of er --ay -- harborin harbringer. scarlet: in the final minutes, we should note the indexes all take a leg lower. these are minor moves in the context of the most we have seen so far this year. i enough to push all three indexes into the red. out of 11 groups, eight are down and three gains. joe: emerging-market stocks, one winner, china. egm sem etf up about 1%. we are here, under the 2800 level. caroline: we are movement into the momentum stocks. into the market

action with our reporters. abigail, what are you watching? abigail: you have been talking about the best rally start in the year for three decades, so why aren't options investors taking out insurance? this is the index in white and s&p 500 and white. investors were unprepared from an insurance standpoint. gap was a predecessor to the volatility that we had last year. we are looking at a similar gap and it may suggest that we could see the s&p 500 drop as this skew index climbs. one reporter of bloomberg says he is seeing lots of call buying andhat skew index supporting what kevin kelly says could be ahead. lisa: that indicator may creditsng bearish, but

or risk on. take a look at the extra yields. i and bonds over investment-grade debt. this is the spread between spreads of these two types of debts. shrinking to the lowest levels of the year and lowest levels since november. typically, credit weed stocks, in this case, you see them meandering, but people are still risk on. our stocks leading credit once again? romaine? intelsat, they are falling about 16% today. falling and this has to do with concern that the u.s. government may not allow the company to sell off its wireless spectrum as it had planned. thatain issue here is intelsat controls certain airwaves used for the rollout of 5g in the united states.

a lot of lawmakers have taken issue with the fact that intelsat would be pocketing billions of dollars of profit off of u.s. taxpayer license airwaves. they are saying foreign companies should not be able to profit like this and u.s. companies should be the beneficiary. the fcc is set to make a decision soon. they are expected to approve it, but several lawmakers introduced legislation to block it and have been pressuring the fcc to step down. we are in a politically charged climates where the competition -- in the competition with china to be them to the 5g punch. scarlet? scarlet: remain in the markets team, great anecdotes -- romain and the markets team, great anecdotes. we have estimates coming in. for this quarter, the first quarter, earnings-per-share missing the average analyst estimate, anywhere from 105 to

$1.11. the forecast eps misses the estimates as well. margins came down because of increased and shipping cost and wages. caroline: the cost is something we were echoing. joe: that was a really big one a quarter or two ago. scarlet: and it will continue to be a drag if we just continue to move higher and rates costs continue to be higher. this is an ongoing issue for the retailers and all companies. still with us is michael and luke kawa. michael, i want to get your earnings view -- q1 earnings so far. we have gotten -- i want to get your view on earnings so far. we have gotten a few so far.

we are struggling to identify why isn't this market moving higher after a strong start. the retail is a perfect example. we get this odd retail print where we can't tell if it is the government shutdown, bad retail number, and then we get great earnings from target and kohl's. this cloudy dynamic is causing that uncertainty. not sure what the next leg up is. thisuld agree with idea that cost for businesses are rising across the board. squeeze profito margins not only in retail, but across multiple industries. we think you should continue to focus on companies with high profit margins. caroline: we just got breaking news to bring to our viewers. uncle bloomberg, the owner of michaelg lp, -- bloomberg, the owner of bloomberg lp, will not run for

president in 2020. let's return to michael roney -- aroney digging into the intricacies. your perspective, to an extent, -- we are having so many political headlines in the fda and all of these ramifications. how much do we see politics and changes playing into what you think? michael: politics and the divisive nature of washington is playing into it. on the the rally, based fda resignation today, in terms of some stocks rallying and some more selling off. there is certainly investor concern about relative winners or losers, based on the political environment. if we can push that aside, this whetherrising costs, it it be increasing commodity costs, tighter financial conditions, continue to weigh on corporate profit margins putting

downward pressure on stock prices. joe: i'm impatient, so i'm excited about this friday's jobs report. we've been talking about the rising pressure from wages. is it about the weights number this time or what do you think the market will have its i most closely on -- its eye most closely on? luke: i think the bigger story has been the headline number and how immense it has been for much longer than anyone could have possibly thought. i think the weights concerns, from a market standpoint, are probably going to kick in, but a story we might your more about is the potential divorce between the wage phillips curve and the phillips curve. those prices feeding through, because like left -- unlike last year, where companies absorbed more through margins, that might not be the case this year. caroline: we getting more retailers coming out thick and fast. urban outfitters fourth-quarter net sales meet estimates.

there's one company managing to pull away from the cost implications. how much, michael, do you look at the economic picture and how do you pass over it for backward looking like we had today? upset.m why wasn't the market excited, that is the question? michael: the government shutdown and i think folks are trying to understand how much of that influenced the data and how much of that is really reliable. we are seeing mixed reactions. last week, the manufacturing number was down, the university of michigan sentiment came in at a mess. today, we have a pair of good numbers on the economic front. it paints this sluggish picture. caroline: sluggish? michael: i think we are continuing to struggle with what the true trend growth rate is.

a lot of this data right now is not providing investors clarity, early because of the shutdown and we are not sure what the true growth rate is. what we find it, and appropriate corporate profits go with it, you are likely to see moderation in returns. joe: sometimes, i feel like this has been the story for 10 years and we are coming on the 10 year anniversary of the bull market. has there ever been a time where things felt really robust? michael: what has happened is that both monetary policy and last year's fiscal policy package have completely distorted the traditional business cycle. better, maybe, or helped the economy more than we were anticipating. are waning, we are left to wonder, what is the true trend growth rate for the u.s. economy? it's lower than it used to be. i think that is where investors will have to settle. scarlet: the dollar, meantime, has been holding firm.

this is something that irritates the president. he's made no secret of wanting to talk the dollar down. impactingo you see it share prices and people's valuation of equities? michael: i think it's a big concern right nowmichael: -- luke: i think it's a big concern right now. the rest of the world is so weak thatne feet on effective is a higher dollar -- affect is there is a higher dollar. estimates have been revised down 5% versus less than 3% for the s&p 500. that divergence on momentum between the u.s. and the rest of the world could be a story that plays up this year. scarlet: so beware the rising u.s. dollar. luke kawa, thank you so much. and michael arone, chief

investment strategist at street -- street state. thecountries gather for national business conference. from new york, this is bloomberg. ♪ . .

caroline: live from bloomberg's world headquarters in new york, i'm caroline hyde. romaine: i'm romaine bostick. joe: and i'm joe weisenthal. caroline: u.s. stocks closed in the red. joe: the question is "what'd you miss?" ge plunged after larry

kudlow warned the company would burn through cash this year because of the hurdles in the power division. bracing for an economic battle. --na's prime goldman sachs is relaxing it stress code, telling employees just consistently with your clients. beijing is getting bruised. china lowered its growth targets and announced a major tax-cut as the economy continues to slow. the news was released this morning in an annual report. bring in the's resident scholar at the american enterprise institute and chief economist for the china beige book. he joins us from washington. the first thing that jumped out that a lot of6% people -- 6%, 6.5% growth

numbers that a lot of people are looking at. what is china's long-term growth rate and what do you think it is going to be? >> long-term is more difficult because you add up a bunch of quarters. fourth-quarter, was 2.5 to 3% of gdp, much below what they reported. earlier in the year, the growth is closer to what is reported. if you want to know where the growth is going, earlier last -- and this is one of the few times that i agree with you, it is a waste of time, but the chinese say we will report a gradual slowdown. to get the gradual slowdown we need a lot more stimulus. they say the current growth is weaker than the target growth. if they needed a slowdown, they put this muchto

stimulus and. we getting information from the nbc. right now, china's economy are slower than they say. joe: is the bank for the buck given the amount of stimulus lower, and if so, what caused that? why is it harder for them to generate the same amount of growth? ,erek: the fundamental problems one is arithmetic. chinese stimulus is arguably going on since to those 19. it's tough for them to find places to spend money. the other problem is that the chinese doesn't trust the private sector financing or private sector investment plans. they are trying to get growth out of state owned enterprises but state owned enterprises don't grow. they fight off contraction, not expansion in a dollar efficient rate. what caroline: do you think of

with trying to get but for your bang? at theseeing the vat limit of tools available at their disposal? derek: i think the chinese -- it is good the chinese are trying the corporate side. we don't have any evidence of tax cuts ever working to stimulate the economy as a whole. certain sectors, for a. -- for a period of time, yes. kenny stimulus has always been banks extending credit. just think the local government bonds, who buys those? it is usually quasi-government entities like banks buying the bonds. they have to have credit conditions under which that would work. it's a good idea to try the corporate side, that another text inductions, but that is not what has worked for china in terms of stimulus in the past. romaine: the trends that we see, with regarding to consumer

spending, do you think that is something based organically and could continue on its own? chinese said we want to rebound from investment to consumption, and now they are dealing with the fact that is not reliable. you would give strength into consumption in some sectors and not other parts. ordinarily the chinese consumed best concerned with less. -- concerned with less. they have a healthier but unsteady consumption of growth and at least two -- leads to this uncertainty this year. ,oe: how has the trade tensions trade war, whatever you want to call it, played with issues in the chinese economy? as a contributed or is it two separate stories? derek: i think they are

separate. chinese exports to the u.s. rose last year, so if you are looking , youn arithmetic affect won't find it. there are sentiment effects. chinese asset holders are thinking, last year, i don't know -- didn't know with a trade war was going. now the stocks rallying bashar are rallying in china because of the sentiment improving. if you want to talk about economic growth, they are separate from sentiment. reat perspective as ever. quick check of the latest business flash headlines for you now. aon is considering what could be the largest merger ever for the insurance industry. a british insurer is weighing in.

aon is prepared to submit an offer in the coming weeks. shares of hurts our tumbling today. their biggest shareholder is closing about five minutes selling about 5 million shares. cause it the most isensive car of all time, it a jet black rocket with 1500 horsepower. it's a cool little .5 million dollars, if you could buy it, but you can't. vehicle.e-off that is your business flash update. gulf one 5 million was something that looks like a batmobile with six exhaust pipes. joe: do you really need that many exhaust pipes?

romaine: at least four. this is a sweet card. have $12 million to buy it, but if i did, i probably still wouldn't buy it. caroline: i will put a call into the actually w chairman and see if he could lend it out for your birthday ride. romaine: i would love that, caroline. caroline: ge's ceo shares lower with a warning of a coming cash burn. we will have more on that big stock move, next. this is bloomberg. ♪ is bloomberg. ♪

joe: ge is tumbling after a

surprise from the ceo. shares sinking after the ceo caught investors off guard with a warning that the company would burn through cash because of the power initiative. it's bring in our bloomberg reporter. rick, we have seen a rally over the last couple of months from ge, but critics would say they haven't fixed anything. reminder tot of a investors that there's nothing fixed. >> over the last couple of months, what you have seen has to do with narrative. people want to see ge succeed, for the most part. once you got through a couple of months without real major bad news, it started to feel like this company had -- and stock and reached the bottom. a wake-up call.

there are problems in the company that need fixing. romaine: i thought they had aired all of this laundry? they seem to have done so at jpmorgan. i rolled my eyes because he's always ragging a pecan -- company. he seems to raise a lot of inues about the aircrafts the health of that business wasn't necessarily up to par. rick: that is sort of the story of ge of the last year, plus all of these businesses that you think you know well, if you look at me for the surface, there may be reason for concern. the jet leasing unit is one business that generally has been considered a crown jewel of ge capital. a good business -- and he says if you look

at this has been the biggest problem for ge over the past couple of years. it's a business they really bet big on. they bought a company a couple of years ago for $10 billion and went all in on others. it turns out global demand for the product was to -- demand for the product fell off a cliff. caroline: we will have to leave it there. rick, thank you. this is bloomberg. ♪ ♪

mark: i'm mark crumpton with bloomberg's first word news.

in and

caroline: target jumped the most in more than two months. if all of strong holiday sales for the current year. emma chandra spoke with the ceo

earlier today. are coming off of one of our best holidays in long time. room -- theis very idea that matured in this very room is starting to mature. to reimagine our stores and brands, and to invest in our team. at the points, there were questions, people are concerned about our direction. people were closing stores, not opening stores. today, i think we have proved that that strategy is working. we're delivering great sales. we grew our digital business over 30%. our stores grew by 3%. was a good year, 2019 will be better. >> do still consider yourself in transition? >> i think we now have murdered

-- matured the strategy, and next year we will continue to accelerate. we've proven our strategy is working, and next year, we will execute that strategy and gross sales and continue to get our shareholders greater turns. said the consumer environment was possibly one of the strongest you ever seen. a lot of people worry about headwinds and 2019. what is the single biggest concern? >> prime concern on our team staying focused on our strategy. can't impact tariffs and never things people have been talking about. >> are you worried about those? >> i'm not. i'm focused on making sure we do a good job on opening up new and great stores, continue to build targetnds, making america's easiest place to shop. i'm focused on making sure we deliver against the plans we put in place and making sure that

2019 is better the 20 18th -- better than 2018. >> you plan to raise minimum wage by the end of next year. do you have concerns about the labor market? >> there were questions into the fourth quarter. we talked about hiring over 120,000 team members. target has become an important choice and retail, and the fact we are investing in wages and training, giving our career members a target has been well received. i feel really good about our opportunities and we continue to attract great talent. >> you mentioned the comparative sales beat you had in the fourth quarter. there were concerns about falling growth margin. over the holiday period, you offered today free delivery, would you do it again? >> we are offering a number of

different fulfillment choices. today, you can order online and a couple of hours, pick it up in our store. in over 1000 locations, you can place that order. -- come into our parking lot, and within two minutes, we will put it in your trunk. we have thousands of personal shoppers across the country. if they -- if you place an order, they will bring it to your home. caroline: it's been a good day for target and kohl's in terms of share prices. both are jumping with upbeat rejections. is sara halle zach. sarting with -- hall zach -- halzack. what is it mean for profitability because the growth argent are being analyzed? if you look a gross margin, it

did decline but it did decline for the right reason. one of the reasons was on microfilm at costs. 31% increase in online sales and are offering free two day shipping, that's will weigh in on the bottom line. where it at a point just needs to be claiming market share online. it's a good sign it was able to do that. the other thing on gross margin this year was taking share in baby and toys. was russ and babies r us are going out of business, and the market share was up for grabs. those items tend to have a lower profit margin than home and apparel. joe: do people go to target looking for the things they want to buy or do they search for like instant pot or crockpot or whatever, and a target by jeanette on google and pays part of that revenue to some third-party? are they showing real traction as a destination or where people lined up -- people wind up?

>> i think there are showing interested -- interest in destination. get have products you can't anywhere else, and they have gone heavy with those private label brands, and other categories, they are seeing strong growth. they have big plans on that in the new year, so they just launched lingerie and the sleeper lines. given how victoria's secret is on the run right now, you can see a lot of space for target. romaine: i use target as a destination, but one store that is over my head and i don't get is kohl's. they seem to be doing ok and have had a lot of partnerships that have aided the progress recently, right? kohl's does well and that's because it is a rare department store not tethered to the mall. it tends to have locations closer to where people live, so

it's convenient to drive to a kohl's. that has been a benefit. the partnerships you mentioned are important. excepting amazon returns is an interesting one, but there has been a lot of work in the space. the just announced a partnership with ww, the company that used to be known as weight watchers. the ceo of kohl's has been really innovative, perhaps more so than other ceos of department stores and saying what should the department store be in 2019? joe: you talk about their advantage by the fact that they are not so stuck to malls, it is -- is it as simple as that where there are stores if they were just in different locations but warned malls, the thing concept would be doing better than right now? mall is's no doubt the a tough place to be. those are formats getting trouble, but i don't think it is that simple.

i think the retails we see struggling are also struggling on the merchandise assortment. gap reported earnings last week and that is a mall-based retailer. navy brand, spun off as a separate company, those are often in strip centers. also, the gap brand is a been in -- is a banana republic strand. it's a mall location, but it is the product. they are not turning out merchandise of what is consistent with trend. that is essential to their struggle as a real estate. caroline: where you all but what you are offering. sarah halzack, thank you. coming up, from russia. holt --lleges a rush russian criminal network profits off a number of u.s. banks. that's next. this is bloomberg. ♪

joe: more european banks getting caught up in allegations of money laundering starting off as a scandinavian affair. it has expanded. how reporter covers banks and she joins us now. with of the interesting when bank europe is not caught up in some under laundering -- money laundering scandal? citigroup was one of the few u.s. banks that are named in this situation, but most are european banks. and really big ones. deutsche bank and dansk a bank are the bigger ones. romaine: what is driving this -- danske bank are the bigger ones. romaine: what is driving

this? what's the common thread? >> a number of people have been looking into this for a number of years. the network of banks that run through offshore vehicles throughout europe. caroline: it seems to be going through estonia and lithuania. it's at the first time we see a group laundering money in this way. you wonder why we keep seeing more and more banks intertwined. one laundromat has also been proximally platform to a russian bustamante best laundromat and others. >> here is part of the problem, this investigation spans across the globe. u.k.regulators, regulators, and there's a large coordinated effort. so far, it has been easy to say we are the banks for the other banks so the other bank should

have been checking their clients were. it is very hard to figure out where liability is. joe: how much of what is going on in europe has to do with the fragmented regulatory structure in europe and this idea that not of different players, one obvious regulator of all of these banks, and the loopholes and openings that creates? sonali: the regulatory system is a problem. not just in europe, a couple of weeks ago, the fed is looking at deutsche bank's role in this entire operation as well. it's a regulatory issue in how money moves across borders is a severe issue. abn amro gets dragged down because their previous unit was the one that was to do with this. caroline: but it was all -- but it was bought by rbs. sonali: that is absolutely true. romaine: what about this know your customer thing? am i supposed to believe they

didn't know their customers? sonali: that's the fundamental question regulators are asking. you bought the bank that had these customers, how are you supposed to know? or you are banking another bank who then had another customer that was suspicious. they will say how are we supposed to know? caroline: due diligence. romaine: well, you will have to put a flowchart or something at some point. basak. sonali the biggest banks and hedge funds on wall street in the u.s. are getting close to a fifth on one of the straight -- on one of the shadiest corners of the market. is our nextow guest. this involves credit default swaps in one company taking one side of this trade and trying to get the company to manage in full. writes.

the big issue was that the series market has taken a hit in recent years. it develops his reputation for becoming one of the dottie us corners in the world of finance because you have hedge funds striking a deal with the company and offering them a sweet refinancing deal while making a windfall of their cvs bed. those shenanigans have turned off investors, and generally, lower confidence in the market. there are various lawsuits and regulators stepping in. that's why we had this large parcel group, some of the biggest banks and other hedge funds coming together and figuring out how they can work towards getting a fix for the solution. the product is important, but they have gotten a bad name in the last couple of years. joe: what is a fix look like? sridhar: it's a tricky fix. the first thing they seem to agree on is to say that if you are a company that is able to

pay off your borrowings, you will skip the payments. they will have a creditworthiness test on it. i'm mature there are hedge funds who will find other ways to , but at least it's also problem. romaine: two of the biggest examples were i heart and romania. they defaulted, even though they didn't necessarily fall into this credit worthy element of a normally constitute a default. sridhar: absolutely. ployipping point was this that blackstone had with the stymie homeowner. blackstone said you are not in great shape, we will offer you a great deal, just make sure that whatever you do gets is a win for the cvs market. that is when everybody gets panicky and worried about that. you had things move in a direction where it didn't bring a lot of good publicity to the markets and market participants

realized if they didn't come up with a fix, regulators would force action on them. caroline: so the overseeing body managing this, is it a game of whack-a-mole? that the more clever ways in which they try to regulate or put in place some sort of rules, the more clever ways there will be to dodge them? sridhar: that will be the problem. you can find various loopholes in this kind of situation. they seem to be working toward a solution that closes one loophole, but what stops someone else from trying something else? withrobably shy with participating -- shy away from participating in this because it will not said good light here. that might be a good way -- reason to enter the market survives in bribes. do you think -- strives. joe: do you think the lawyers that are good at finding

inconsistencies will find ways to game the system? sridhar: everyone needs to keep their job. joe: right. everyone has to eat. caroline: particularly, the lawyers. sridhar natarajan, always a great perspective. goldman sachs is moving to a flexible record. bankers can ditch the suits, if they want. all goldman asks in a companywide memo is good judgment. codeank relaxed its just for engineers years ago, so engineers can roll around in their jeans and shirts, but if you're dealing with a clients, you can be in a patagonia jacket. romaine: i'm appalled. my investment banker shows up, i want him in a blue suit and no brown shoes. caroline: when you are getting a bugatti. romaine: whatever they are doing for me. [laughter]

optics. it's all about joe: it does seem like it's a of a top.gn we can only go down from here. romaine: they're not going to stress like individuals, they will wear the same best and khakis. but there our customers and we love them all. they can wear whatever they wish. it shows that they are independent. this is bloomberg. ♪

caroline: the bank of canada announces it's rate decision tomorrow. joe: and i will watching numbers for the u.s. trade balance out at 8:30 a.m. time. romaine: in the beige book comes out at to put -- 2:00 p.m. eastern caroline: that does it for "what'd you miss?" romaine: "bloomberg technology" is up next in the u.s.. joe: have a great evening.

this is bloomberg. ♪

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emily: i'm emily chang in san francisco and this is "bloomberg technology." in the next hour, listening in. an aide to a top republican lawmaker revealed and nsa monitoring program has quietly shut down. what does it mean for data privacy and surveillance? plus, tesla is blind-sided. employeescaught many with his announced that the carmaker would shut down