from bloomberg world headquarters in new york, i am caroline hyde. romaine: let's look at how the markets ended on the day. theree day selloff to push s&p 500 into nasdaq -- into correction territory. joe: the question is, "what'd you miss?" caroline: is this time more

serious? today, gains and losses then perhaps we will know the risk off mood has taken hold. so far, there has been some evidence that investors buying the dip. get huge inflows late last week. i lead you to exhibit a. the excitement around tesla is no more. after getting the cold shoulder from the s&p 500 index, that partnership as well announced between two of his key competitors today. gm and nikola. of onethink at the end of the shows last week when you said what are you going to watch , i said tesla. i feel pretty vindicated. there was a surge in a lot of

stuff. nutsd absolutely gone since the lows in march. housing speculation, economic recovery. it has also sold off hard since the end of august. look, this is just an example, now giving some of it back. one caroline, as hyde would call the market. you missed that conversation earlier. .old was higher on the day the yen and the dollar also gaining on the day. larger against the basket of currencies. interesting move in

the treasury markets. a lot of people bidding those up. was down at one point to 3.8. caroline: we saw a little bit of risky version -- risk aversion in europe. a record lowching for gilt. some brexit news. we could see international law broken in the u.k.. joe: you guys are still dealing with that? i can't believe it. caroline: we like a protected -- protracted issue. joe: big picture, we had this incredible romp in all sorts of assets. -- incredible selloff in all sorts of assets. three or four days.

is this different than march? they be this time they hit a brick wall or is this what you would expect? >> the problem with parabolic arc it moves is that you know they will end at some point, you just can't pick out where. tesla, some ofm, these other huge momentum names could continue indefinitely. the question was just how long before things petered out. it is hard to get too wound up about the downside that has accrued so far. because things are basically moving back to trend. some work we did today, looking at prior instances where the s&p 500 dropped into a correction, it has only happened in three periods in the history.

it happened twice this year. historical returns actually are not terrible. only one lead to a big selloff over the next three months that stuck around. obviously, that was the end of the tech bubble. it is hard to pick out if that sort of price action is the start of a larger decline. romaine: when you see these parabolic moves on the way up and down as we seem to be getting now, there is always that sense that you do not get that type of move unless there is a general sense here that the fundamentals, just some sort of structural nature to the market, was it ever there? was the structure or support for this market ever there?

>> i think it depends on the specific stock you are talking about. when you look at facebook for apple, these are companies with very real business models making huge amounts of cash flow. butbe aggressively valued, don't look like something from another planet. it is very easy to make the argument that risk assets should have corrected, stimulus coordinated around the world simultaneously in response to an unprecedented global pandemic. what is the right upside that they should have run to? highs, the old all-time a substantial move above the all-time highs? from my perspective, it is hard to come out and say, the market is fairly valued if we are back

at all-time highs but not if we are 5% above or below. i think it is much easier to look at underlying parts of these and say, things are starting to get a little bit carried away. this can't continue indefinitely. investors need to be aware that risk is to the downside, we just don't know when. i think that is just how it is. caroline: i have a terminal user messaging me saying, be wary about this characterizations of treasuries being a haven. of the day. from au look at it longer-term perspective, bonds are cheaper than where we first were. what are bond markets telling us and what are stock markets telling us? scenariorrent baseline in the market and among i think

most prognosticators is that we will not get a shift in how the fiscal regime in the united states works. we look at a repeat of the financial crisis, a slow, protracted recovery. if the fed is not going to take rates off of zero for the next three years, and that is what the overnight swap market is pricing and consistent with what the fed has said. there is no reason for there to be much curve until your 5, 7 year maturity. basically, the 10-year has to be below 1%. should not be substantially above 1.5%. real interest rates are negative. scenariohat baseline means that we cannot get too far off of that either way. treasuries should probably not

trade substantially below zero or price in high risk. at the same time, inflation will create some floor in terms of how low yields can go. the ui have already seen expansion. you can see it in a chart that you made. just a few seconds here. how significant is it either right now or early next year, the question of whether there is a substantial phase for? >> if we do not see substantial belowus, we will see trend growth for years to come. ui benefit expiration alone has carved roughly 3% off of gdp. that is going to show up in consumption numbers sooner

rather than later. we cannot return to where we were previously without aggressive fiscal policy. that is the biggest risk regardless of who ends up winning the white house this november? romaine: george perkins of bespoke investment group. we are going to continue this conversation, talking about buying the dip. we will take a closer look at the qqq's and activity in the options market. that is coming up next. this is bloomberg. ♪

romaine: we are taking a look at this big three-day selloff. of course, the five-month rally.

trying to discern, where there clues that this pullback was coming? we take a look at some of the nasdaq etf's, a big proxy a lot of people use to track the nasdaq and that make it cap. the sharesrdinary, outstanding. so much activity in these etf's. whether it is people shorting them, playing options on him. this market volatility. aroline: it was not just one-way wave of bullish option bets. people were calling this, trying to buy protection at the same time as perhaps the rest of the chasing further gains to

run at higher. more,oining us with bloomberg markets reporter katie groenefeld. to lock intrying their gains because they are anxious over the election or something, or is everyone buying call options to go all out to maximize upside here? >> it is hard to disentangle all the threads running through the options market. qqq,nk it is clear that in the leverage version tqqq, people were trying to get ahead of what we saw. perhaps not as complacent as what has been the narrative. caroline mentioned, you did see the number of puts out near the number in -- highest number in two years.

the warning signs were there. everyone has been saying tech is very overvalued. even as the nasdaq 100 itself was rallying. that typically is a very bearish sign. that is the narrative we saw play out. that dynamic did break and you did finally see the tech giants crumble. romaine: does this give credence to all of the activity we saw in call options, in some of these etf's, the idea that if that was true, the recalibration, that will drag us down even more? is in a think that large part what you are seeing now. we are seeing the unwind of that. i have been talking to people all day, what was the trigger.

it could have been a fundamental reason that maybe we saw tesla and apple waver a little bit. but then that same dynamic on the way up. ability to impact price with your three-month, six-month. on the way down, dealers have to hedge and get rid of that exposure. that is what we have been seeing play out. down 20%, that was a mighty crash. i am interesting in -- interested in tomorrow and people talking about buying the dip. katie: it seems like the dip-buy ers did come in today. it did not erase losses. i was talking to someone at

charles schwab, asking where is dip-buyers? the fundamentals of these companies have not changed much since last week. if you are an apple or tesla bull, your favorite stock just got cheaper. comingou start to towards the end of this week. but there is a lot of drama in the options market to still pass through. that might be keeping some of buyers on the sideline. at: tesla, if you loved it 500, you should love it at 330. more on the world of ev. tesla tumbling. ,he electric vehicle maker after being left out of the

committee that decides emissions.

caroline: we have been speaking of the enthusiasm fading. tech darling tesla kind of the doubt for what was the best and now the worst case. today, it's peas fall record. it had already been falling. this is one of those names, super sexy brand name, all kinds of options trading. interest for tesla options. incredible run up. kind of like what we were talking about last segment. ceo a littlead the bit earlier of nikola, he

compared himself to like tesla at $50. if you like tesla at $500, you will like nikola at $50. joe: that is the hope. after gm 41% today taking a $2 billion equity stake. with -- isis: rush colin rush with oppenheimer. $451 price target. first of all, you do not need a catalyst for today. then there is the snub. then the idea that other players may be gaining in the ev space. how significant is the news out there? colin: at the end of the day, we saw tesla go through -- figuring

out how to produce these vehicles, design them. they did it under a very bright microscope years ago. going through that process right now, they will have a a lot of learning to do. one thing we focus on in our , those vehicles in terms of design for production, many miles they have on the road. caroline: do you think the question of whether tesla is going to be successful has been in any way changed by nikola's agreement with gm? >> not at all. we think tesla has technology leadership, substantial ip on the battery side. we think they have solid two,

three year lead in terms of experience. we are going to learn a lot more about that on the battery day. it is something that we feel is critical in terms of range. also, just the overall operating system. had thisi know we have conversation about valuations. for tesla. gm,the idea that you have which essentially had to buy a little bit of cachet. we spoke with the chairman and founder. >> we said, look, the world is changing. we don't think the existing way of doing things the right way. we don't do everything, we just do some of it. consumerthat direct to definitely is important for us. romaine: that was trevor milton.

one thing he was talking a lot about was that basically they will not do the same manufacturing as tesla does. i wonder if there is an advantage for tesla having its own manufacturing facilities versus a business model where you are outsourcing a lot of the production and even some of the technology. colin: there is advantages to both approaches. a purpose built factory is important. they need to figure out how to make ev's. some of the assembly is fairly straightforward but some of the production around the underlying technology is a lot more complex and challenging. vwhave seen things like struggle with their software and the platform. i thing there is certainly a lot of work being done, money being

spent to catch up with tesla. thank you, colin rusch of oppenheimer. it is worth noting, as we are talking about nikola, and we think of that stock, the highs it hit today. there were winners among the crest of the exit. airlines. airlines rally. technology stocks, because they were so eaten down -- so beaten down, they should end up rising. there were some specific technology names that people were nibbling around the edges. interesting, we mentioned treasuries doing well. but they did actually go out on the lows of the day. etf,the popular treasury

only got 0.6% on the day. even with the terrible close for tesla and others. the 50 day moving average, so much excitement tomorrow and ahead. caroline: we will see if the corporate market continues in terms of those indicator deals. it is going to be busy. some of keep an eye on those momentum indicators. joe: let's talk about this tomorrow and the next day and the next day. caroline: we are vindicated on tesla. what one thing will you be looking at tomorrow, joe? the world cloud etf, that will be the first ticker. caroline: not lumber? joe: and lumber.

aftere: slacked down 15% hours. is: "bloomberg technology" next. romaine: this is bloomberg. ♪

♪ welcome to "bloomberg technology." u.s. stocks selling off for the third straight day. tesla facing its worst rout in history, down 34% for september. apple plunging 7%, wiping out almost $140 billion in market value. big tech companies that had been on a tear.