in dependence with peace of mind. ask about saving up to $1,500 on your installation. virtual appointments now available. ♪ >> from bloomberg's world headquarters in new york, i am caroline hyde. romaine: i am romaine bostick, let's get you caught up on the markets. worst drop in the s&p 500 since june and the broadest set off in the index since march. >> the question is "what'd you , miss?" caroline: definitely a lot of selloff today. a surge in cases causing those in europe. and building on it. there is hospitalizations to rise in the u.s..

the question to come is one next the economic crisis? dear i say, when next the markets? there was a broad selloff. major groups losing 2% across-the-board. technology having one of its worst performing days. now there is no stimulus inside and the u.s. election is on our doorstep, investors are in a risk-off mode. what would help? spending.ays fiscal bill dudley weighed in on that too, saying the fed needs to help the economy. joe, there is definitely some risk-off sentiment. joe: absolutely. obviously we have known for a little while that stimulus in the short-term is the gone. -- is gone. and the virus is really catching people's attention here. this is a great chart. 97 of the s&p 500 constituents falling today.

that is more than some of the really ugly days we saw in march. we had a few days like this in june and also august. nonetheless, there was no place hide. as you mentioned, all the major subsectors fell over 2% today. romaine: all right, let's bring in some upon zach, bloomberg cross asset reporter -- sarah upon zach. a couple of days ago we saw a chart of an increase in single relations. now we have transitioned to a macro driven market. the selloff today seems to be a macro driven risk off event. sarah: you deserve to pat yourself on the back. when you look at what happened today, it was a different selloff nonetheless selloffs of us we have been used to earlier in the year. you look at where we saw a majority of the selling, it was in many different pockets of the equity market, not just in your reopening plays. you look at airlines and cruise lines, they took severe heads,

declines of 5% to 10% across-the-board. but you add to that tech, the s&p 500 information-technology sector was the worst performing of the day, down more than 4%. out these to picking low levels we saw in september when we fell into the tech correction. adding onto what joe just showed us, the fact that we saw more than 90% of stocks lower today. the s&p, that was 490 stocks in the red. it is a relative measure of reselling pressure. you are looking at the intraday low for the index which did near 2000. what this means is that we saw a selling right off the gate at 9:30 a.m. roughly 2000 stocks were falling more than stocks were rising, pointing to how broad-based the selling was. we touched on it earlier, the volume in the market today was immense. 32% higherume was

than the average over the last 30 days. volume has already been relatively high all of 2020 and in the last month too, as investors have been learned about the election and about rising covid cases. also as investors have been worried about the outlook for fiscal stimulus which looks like is not on the table right now. we likely will not get ahead of the election. so there is this confluence of events taking shape. add to that the fact that tomorrow, the whirlwind of earnings reports, it is religious going to hit the deck, the busiest day of earnings season. romaine: sarah ponczek. selloff.macro driven we will talk to somebody who knows about the macro pictures here, from her new york fed president bill dudley. he wrote a great column today at talking about why the fed might be running out of firepower. he says you might need to look elsewhere. that is coming up next. this is bloomberg. ♪

romaine: today we are focused on the selloff in equities in europe and here in the u.s. we are talking about what could percent -- could potentially send it into decline. the selloff points into what kind of recovery we could expect. we heard earlier from new york fed president bill dudley. joe: yes, he said the fed is out of ammo. "no central bank wants to admit it is out of firepower." unfortunately, the federal reserve is near that point, which means america's prosperity hinges more than ever on the government spending plan. it,line: let's get right to

joining us now is the former new york fed president, bill dudley, now working in the university as academic, and economist. your perspective is that we need more in terms of fiscal spending. doesn't matter that we are not getting it now and we might get it after the election. dr. dudley: obviously if we got it after the election, it would not be a big deal. the prospects are that we will not get anything substantial publicly until after the inauguration, which is many months away. point thinkat this joe biden is probably going to be elected president. i just can't imagine the outgoing trump administration, if that happens, is willing to deal on a financial stimulus bill with democrats. we are not talking a week or two, we are talking months. that is important in an environment where the pandemic is worsening. there was going to be more social distancing, more forced

lockdowns of various kinds of businesses, so the outlook for the economy is deteriorating. we are looking in the rear mirror. this week we will get the third-quarter gdp, it will show the worst third-quarter gdp ever, but that is there much in the review mirror. you fall off a fiscal cliff at the end of july. it hasn't had much consequence for the economy yet the cause of fiscal stimulus was so great that it actually boosted savings. and because of the reopening we saw in the economy in july through september actually provided support to the economy. but now everything seems to be moving in the wrong direction and i think that is what the stock market is reacting to. romaine: you bring up what the last fiscal stimulus did. when they first started talking about negotiating this next round of stimulus, the economy it in relatively good shape, was still deep in the hole that was starting to show progress. we are now at a stage where we're talking about an increase

in covid cases, the potential for more lockdowns and presumably the potential for a pullback in economic catalyst, economic spending, if you will. does that change the thesis that whatever gets passed out of congress, if we get something, will have any real material effect. dr. dudley: if it is sizable, it could do exactly what we saw happen with the first fiscal stimulus implemented back in march and april, that did provide a lot of support to the economy because they bolstered household income in supported small businesses. is certainly kept the economy going. obviously, we don't really know how the pandemic is going to unfold, but what we can say right now is the margins are worsening. quarterly gdp numbers will be fine. if we look at things on a sequential basis going forward, i think we will see a substantial slowing of growth. you can't rule out a prospect of a double-dip if things get much

worse. joe: i want to go back to the mean of your argument about the fed being out of ammo. let's put aside fiscal stimulus for a second. when not even curve control, why not say more aggressive forward guidance? "we will not upgrade until inflation is at 3%?" why not more asset purchases at the long end of the curve, why in your view do these things that count as meaningful dry powder to be used for the federal reserve. dr. dudley: the main point is that the federal reserve can do more along the lines of what you suggested. the question is how much of an impact it would actually happen economy. at this point, not very much because the fed a pretty accomplished most of what monetary policy can do to support the economy. they got interest rates down and that still needed the auto and housing sector. financial markets are well functioning. at this point, the 10 year treasury note yield if it fell to 40 basis points in the 30 year mortgage rates fell from 3%

you think it would make much difference in terms of the trajectory of the economy? it is not quite right to say the fed is out of ammunition it is not out of ammunition, but the effects of the ammunition they reaching rapidly diminishing returns in terms of the consequences of those actions. caroline: are you seeing anywhere else around the world the time them nature of monetary policy and fiscal policy actually working in unison -- the tandem nature. dr. dudley: i think anywhere there is a correlation problem in terms of getting the timing right. in the united states, it is particularly difficult because politics are so partisan. on a polymeric to. ---- in a parliamentary sound government where one country has control and can exert their program, you could bring forth fiscal stimulus a lot more quickly and without as much

controversy. right here we have such a big split between the democrats and republicans in terms of what should be done. romaine: i guess, what options are left here? if you don't have the political will to do the fiscal side of it. then you have the monetary policy structure at the moment but i guess some people are questioning whether it will be enough to actually put up the slack, what options are there for the economy. dr. dudley: first thing i think we could do to manage the pandemic better. allll wear masks -- if we wore masks, we would do better in terms of the trade-off in the pandemic and the actual economy. if people practiced social distancing and mask-wearing well , the pandemic would not be severe and we could have an opening up of the economy. we could do a lot better by being more practical in terms of how we actually address the pandemic. joe: you mentioned it is hard to see a major economic impact from some marginal decrease at long end rates.

but one of the things we have seen in this crisis has been the fed using tools that aren't rate policy, trying to get more into credit policy and churning mad money into other sectors. there has been the main street lending facility, there is the union facility, could the fed interview do more with credit policy. not only make those to make interest rates easier but being more aggressive and taking risks that may be will not get paid back on loans and trying to get money into the private sector, through more aggressive use of some of these tools. dr. dudley: they could certainly make the terms and conditions of the mainstreet lending facility more attractive. the other lending programs to basically support markets, you know, the markets already well functioning. the programs have been a success. you look at the municipal .rogram, those markets are working well cities and states have access to funding. i don't think if you change the terms and conditions, it will

difference. you are right, the main street lending program is one area where the fed could make the terms and conditions more attractive. and the fact is they do have a backstop from the u.s. treasury so if money is lost, it will be lost by the u.s. treasury not by the federal reserve. so that is certainly an option. caroline: we have gdp numbers out tomorrow. it will be a record number but it will hide an awful lot of weakness and ongoing perspective that the u.s. economy is still 4% lower than it was pre-pandemic. are you optimistic the economy will manage the club back met 4% without fiscal stimulus -- low back that -- claw stimulus. fiscal dr. dudley: i think the most likely scenario is we continue to have an economy with some downside risk of a double-dip. it will be slow going from here because fiscal stimulus has been

spent. the monetary policy has done most of what it could do. at this point the course of the pandemic and the ability to get an effective vaccine and have it the senator broadly is the key thing right now. joe: our thanks to bloomberg opinion columnist and former new dudley. president, bill there was a lot of negativity today, but our next guest is still more optimistic for that light at the end of the economic tunnel. we will be talking to andrew zatlin, founder of southbay research, next. this is bloomberg. ♪ this is bloomberg. ♪

♪ caroline: today there were some pretty negative signs around. no economic stimulus, covid case is surging here and in europe, stocks tumbling in every sector in every pot of the world. our next guest will be giving us a healthy dose of optimism, of course. -- one of the things that

caroline: we are having technical issues with joe. romaine, we will be looking perhaps at the glass half-full potentially. everyone is worried about the economic fallout but some still are saying there is an opportunity for growth. romaine: yes, let's bring in our next guest, andrew zatlin, southbay research founder. he wrote an interesting piece talking about the recovery and some of the conditions underlying the recovery. i went to start off with the consumer spending side and where you see if at all glimmers of hope? andrew: i look at this whole situation as a very interesting, unprecedented situation. this is a self-inflicted body blow. let's keep that in mind. we throttled back activities. this was not just a normal slowdown. we created the situation and every time we have seen in every or municipality where we have loosened up

restrictions, consumers are diving in and coming out en masse. we have to take a step back and understand what is going on. most consumer households, their finances are in an unbelievably positive place. not just because disposable incomes year-over-year hit double digits because the government threw money at the problem, it is because not only is there money coming to them, they have not been able to spend it. i didn't take a spring vacation. i am not throwing a halloween party. i am not going to visit in-laws at thanksgiving. i am not planning a christmas time holiday. let's face it. that money that was budgeted is just gathering and gathering. so most households are actually sitting on a growing cash stockpile. joe: andrew, the counter argument i feel like would be that the longer this goes on, the measures of permanent unemployment rise, the less inclined to we are to see businesses invest, spend, and

they're spending is someone else's income. so at what point does this start to do real damage that makes it harder to have a robust recovery , especially now that we are seeing virus levels surge once again in many parts of the country. andrew: good question. i want to caution, we want to avoid using a bit broad brush stroke and saying "the entire economy." economies, the restaurant, hospitality economy then we have everything else. you look at payrolls, transportation and retail, almost every sector of our economy is 95% to 97% of the payroll they had pre-covid. a monththe economy ago was within kissing distance of being whole. then we have these companies that are really dependent on tourism, like hawaii. hawaii has to be approaching a literal depression. we have got to be careful,

though. there is both a regional difference and there is a sector difference. when i talk about the average consumer, i am obviously not talking about someone in the airline industry or the restaurant industry, but that is 15%. those economies operating below 95% level right now, they are less than 50% of payrolls. it is the other 85% of the economy that are chomping at the bits to spend. you see an opportunity present itself every single time. i know the market is crashing, who doesn't love a buying opportunity. what you are seeing in the latest earnings, margin expansion coming out of a classic recession. we have de-stocked inventory of people and things. every cfo will sit and tell their people that even as revenues grow, be happy that you have a job. they are achieving margin expansion because the cost of their politics has been held flat. that will only hold for another

quarter. we have inflation, it is already there. what we are starting to see on these calls is it revenue beats and earnings beats. so the stock prices got ahead of themselves. it is not a reason to panic. what we will really be concerned with is, let's fast-forward to spring, one year in, does it matter? most people will say, i will not put up with this anymore, i want to get out. the weather is nice. i have been cooped up for a year and i am done with this. guess what, i am sitting on a cash pile that has grown for a year, i am going out and spending. caroline: but they will have to spend in other ways. there are 30 million to 40 million people in the u.s. will face potential eviction wants the moratorium is over. i just can't see how those people who are probably putting money aside for future liabilities, why they would not spend it there? andrew: i dispute that 40 million number. that is a theoretical number.

the reality is a lot of people are in trouble, i am not discounting that, but when you look at the number of people who are out of jobs since covid happened, it is 10 million, not 30 to 40 million. 10 million people are out of jobs, of which 4 million are in the education, restaurant industry and so forth. they are 40% of the job losses. the other 60% is a thin layer. yes, in a typical recession, we are seeing if you percentage of jobs lost, the economy takes a hit, but every month, we are seeing improvement. not just 10,000, but we are talking one million people per month coming off the jobless claim continuing claims levels every month and every week. we are seeing the unemployment claims number drop. it just dropped below 800000 and it will continue to drop. the economy has not healed 100%. this is not the crisis it was

back in april. far from it. what i am suggesting is that we come to spend time and a lot of these problems have healed. is the stimulus going to matter when you have most of the economy healed? the you throw another stimulus? if so, how much? these are questions that will be addressed in a couple of months. meantime, the average household if you look at their debt level or savings level, you look at personal spending, they are sitting on a lot of cash. they are not as exposed. there is a group that is exposed and vulnerable and they have too.given a lot of runway, what i'm suggesting is have a huge inflationary challenge coming. you are seeing it right now. die a month prices are shooting up. if i have got the money -- diamond prices are shooting up. caroline: lucky for those who can afford diamonds. andrew zatlin giving us the other side of the equation to today's doom and gloom. joe: "bloomberg technology" is

up next. romaine: we will be back tomorrow. have a great evening. this is bloomberg. ♪

♪ ♪ emily: i am emily chan in san francisco and this is "bloomberg technology." power.up, big-tech under fire ceos of google, facebook and twitter defending themselves on capitol hill. but republicans and democrats blasting the platforms' desire for censorship. we have more on the most heated