what is the fed today? and what is the best mechanisms for assuring that the fed is the central bank we want it to be? following a tradition in a started with this man if you get nothing else it will be how to pronounce this man's name. and pronouncing it incorrectly is like going to san francisco and commenting loudly on what a impressive 3 point shooter steph curry s. thank you for the one person that watches nba basketball. please google steph curry highlights. you'll thank me for it. he was famous because of a book he wrote in the late 1860s and early 1870s sometimes credited with a novel theory of central banking and emergency lending functions but the book is much more in favor of central bank transparency and governance. topics i'll have more to say about in today's talk but in his introduction to this important volume he starts in auking about the subject of the bank of england that in his words, two hosts of eager dispute on this subject ask of every new writer the one question. are you with us or

what is the fed today? and what is the best mechanism or mechanisms for ensuring that the fed is the central bank we want it to be? reframe it is our following tradition that started with this man, walter badgett your if you get nothing else on today's presentation it will be how to pronounce this important man's name. gets jealous of sorts. pronouncing it incorrectly a lease among central banking titans like going to a sports bar in san francisco and company while the whatever% three-point shooter stephen curry is. it's walter bagehot on you're welcome and thank you for the one person who watches nba basketball. steph curry. please google steph curry highlight. you really think before. so walter bagehot things because a book he wrote in the 1860s to early 1870s. sometimes unjustly and mistakenly credited with introducing a novel theory of central banking and its emergency landing functions. the book impact is much more in favor of transparency and governance. topics i'll have more to say about in today's d

fed independence. it is also a special honor because i'm sharing the day with alex pollock and kevin hassett, but also allan meltzer. for a young historian, there is no greater honor than to have my work engaged by professor called theo kevin given of fed historians. hopefully my buttering up the panel will dull the critiques in the discussion after my talk. this is probably a loss hope. -- false hope. metzler, heows alan is not one to pull punches, and we have a few disagreements. kevin asked has the fed gone too far. i am going to make a somewhat different point, and raise some related preliminary questions. what is the fed today, and what is the best mechanism for mechanisms for ensuring that the fed is the central bank he wanted to be? reframing this argument, i am following a tradition that started with this man -- walter badgett. if you get nothing else from the presentation it is how to pronounce this young man's name. walter bagehot. you are welcome. thank you for the one person who watches nba

fed independence. today is a special honor because i'm sharing the day with my friend alex pollock and the host, kevin hassett, but also allan meltzer. for a young historian, there is no greater honor than to have my work engaged by professor metzler, who kevin noted, alled metzler the given of fed historians. hopefully my buttering up the panel will dull the critiques in the discussion after my talk. this is probably a false hope. anyone knows allan meltzler, he is not one to pull punches, and we have a few disagreements. kevin asked has the fed gone too far? i am going to make a somewhat different point, and raise some related preliminary questions. what is the fed today, and what is the best mechanism or mechanisms for ensuring that the fed is the central bank he -- we want it to be? reframing this argument, i am following a tradition that started with this man -- walter badgett. if you get nothing else from today's presentation it will be how to pronounce this important young's man. e is walter bag

the fed policy markets.teresting charlie showed a slide plots, and was putting off the critics on the dot ot's. at the moment, the markets, we are hearing fed officials say -- the markets are not believing it. john: but which fed official hasn't given us that guidance? now they are saying that her comments are the only ones that matter. so janet yellen has to come out now -- traditionally in may, the chairman of the fed has had a joint economic committee -- i believe it is a testimony occurrence. she needs to go out and say that june is a live possibility. she is the one that matters and she is more dovish now than the guidance from other fed officials. so should janet yellen have to come out and say june is possible. john, do you, think she should come out and say june is possible? after all, june is when we find out about brexit. john: brexit comes a week after the june meeting. and then come september, there will be something else people worry about. the u.s., with a 5% unemployment rate, 2% core inflatio

we also have the fed. any hawkish fed talk will spike gold.re also fundamentals for all three that you can make the argument. eric: all the things that you mentioned were very heads up p. one little catalyst as opposed to a bigger broader market etf. scarlet: let's look at some things that we can talk about. there are etf that you can tie into it so far as industries that would benefit or would be hurt by either of those leaders. eric: you're going to read all these articles about etf to play for trump or clinton and i would all.e the mm in the past eight years, alternative energy etf's are down for the past eight years. where did you think it would not do well? financials and aerospace? those are up 100% under obama. i do not think there is any rhyme or reason to this. keep a low-cost diversified portfolio for whoever wins. scarlet: eric balchunas, have a great long weekend. alix: it is our mystery stock of the day. it is not game over, but it is certainly game slower as customers slip their discs while sitting on their couches. the short is

fed minutes.ey lacher saying the case behind them would likely be strong as the dollar rises. this is the msci emerging markets index, heading for its longest run of weekly declines since august, on a five-week losing run. developing nation currencies falling for a third week as well. investors detouring from risk-taking as the possibilities of a fed rate hike coming to the fray. that is the msci emerging market index. really quickly, term premium. not since 1962 have treasury dealers demanded less compensation to own a long u.s. government bond rather than a shorter government bond. right now they are not demanding anything at all. a federal reserve bank of new measure falling to a negative 0.38% on tuesday. many bond professionals view a level below 0% as a signaling that debt is theoretically overvalued. this is a result of all these central banks pushing interest toes negative and a flight assets in the united states. both short-term treasuries and long-term treasuries. that is why you are see

when the fed minutes came out. banks rallying that offset declines in consumer shares, particularly retailers because of disappointing results. underneath,violent but looks placid on the surface. increasing long-term rates -- you saw utilities getting slammed. that sector down 2%. of course, rates in general and the dollar after those feds minutes that perceived to put june on the table. alix: janet yellen will be speaking in late may and early june. we are also taking a look at factors in after-hours trading. tesla motors falling in extended trading. it's going to sell $1.4 billion in shares to fund its expansion of its production of the model 3. it will boost annual production to 500,000 vehicles in 2017. there was a lot of speculation. tesla says it will spend $1.4 billion. alix: cisco and salesforce. salesforce estimate, their large corporate customers are spending a lot of money. announcing $2 billion in sales for this quarter. in terms of cisco, obsessed -- -- also forecasting avenue to july.% ending in they

to fed seekers.here have been a lot of fed seekers saying june was live. what was the market surprised by the minutes? what do you make of that? does the fed have a communication problem? they can say june is live, june the market isen surprised as if they had not been saying that? >> we have a failure of communication. what makes it even more of an obvious failure is when they try to convince the markets they were successful, that was in march. ity said members agreed would be appropriate to move at the next meeting. the voting members. participants, it is clear it wasn't in the statement when the meeting was finished. they didn't have enough of the consensus to put it there. it would have the same effect as in october. they would have repriced. it's hard to believe suddenly we hawks.is hurdle of scarlet: it does feel like the fed is trying to say listen to us, we have seen relatively -- volatility pick up. as the fed shakes the market up, does it wind up being self-defeating? >> very much so. is of

the fed,'t fight to black rock saying it is time for fed traders to start planning a move. the federal bank is moving closer to a rate hike in june, or july. finance face off in the g7. they're pressuring japan, with the yen strength in focus. and the hunt for the missing egypt airplane enters the second day for the search. a report that some of the jet has been found. ♪ anna: welcome to the program, wn" and we'retdo live from london. let's get straight to what is happening in the market. the key feature has been the reevaluation of what the fed is going to do in their june meeting. we talked about that a lot yesterday. overnight, we continue to see this flow of hawkish currency coming from the fed, but the market hasn't been responding in the way that many would have anticipated. the wirp function bloomberg to run these through where fed futures are pressing the market will move and we have a 20% chance of the fed moving in the month of june, or hiking in the month of june. that number has moved a lot. it went up to 32% yesterday, but then it fell again. if the market is s

well, fed critic peter shift said you've got another to fear because the fed will not raise in june, or anytime soon for that matter. >>> first, we start off with the markets. stocks surging for the second straight day. question here, do you stick with the names that have been surging over the last few days, banks, chip stocks, old tech names like microsoft and cisco, or do you start with the stocks that have been sitting out this move? the hot stocks since last year that have cooled off, starbucks, nike, and disney. where are the best buys in the market right now if the rally is going to continue? guy? >> i think starbucks is interesting. in early february, traded down to $54. bounced aggressively. we sold off again. starbucks is interesting against that point. but it all started with invidia. this is a name steve mentioned for months going into this quarter. made an all-time high today. sort of gave it back a little bit. amat was the next one. i think amat looks really interesting. i would say with that. i would take profits in invidia. >> the questioned you have to ask is, what di

if the fed worried over the week that the fed might scare everyone back to o brichb it's been very farest that. >> oil and the u.s. dollar. oil prices are rising again this morning. back above $48 a barrel. so multi month highs here. there is still a lot of talk about supply disruptions coming out of nigeria, canada and lower output out of the u.s. >> the euro today is a tad stronger. the yen is a tad weaker. the pound a bit flat, a bit below flat today. close to 146. the pound had has had a decent week. retail factors also growing confidence. the betting market saying just a 1 in 5 chance of an exit vote so the confidence is growing the remain camp will win the vote. >> with a lot of angst over the fed and currency market this seems to be whether the stock market globally likes the best right now and that is a weaker dollar versus the euro and a stronger dollar versus the japanese yen. that is sort of the calm force when it comes to the currency market. once the dollar strengthance against the euro. there are concerns about currencies and all that. we might see markets fall out but at

as long as the fed was increasing its balance sheet those things happened ever since the fed taperedan to maintain a flat balance sheet, now we are seeing stocks and interest rates are not going down. tom: the yellow line was yield and that was taken and price and the three lines dovetail perfectly. the fed is doing is just maintaining and is that good for the economy, is it adding anything to the economy? one of the arguments some of the fed officials are receptive to push downou do this, on interest rates so much and increase the wealth effect, you pull back spending. now you are not getting any bang for the buck. toolbox, i associate the term with an acclaimed said researcher in cyprus during their moment of crisis. define the toolbox. neil: i think the fed has a number of tools left to combat the next recession. the first thing they can do is what they are doing right now, just take the threats of hikes off the table. tom: is that because mr. trump says we can print money? michael: it is in terms of helicopter money. it is one of the tools out there that you might eventually get

at 8%, the fed won't move.: implied probability an actual probability goes back to the ex post anti-analysis. everyone agrees that there is over communication. there is maybe now communication, but the foundational point away from the media power game is john williams of san francisco last week to kathleen hays. we are going to wait and see what the data is talk to me june 13. jonathan: we have the dog of the fed and the tail is the market . right now, the tail is wagging the dog. tom: i don't agree with that. i think the idea that the fed will wait and see what the data is with some economists adjusting mabel go i -- suggestg they will go in june. i love the idea that we need higher interest rates to boost savings. the single most interesting thing this morning was and nielsen of denmark talking about his denmark. he had an authority about it. this is not normal, totally confused. i go back to the idea of a fed in all due spirit desperately trying to get to normal. they will determine that the second week of j

will the fed listen?aking news from target. $1.29 a share, the estimate was one dollar 19 a share. a adjustedow seeing -- the estimate was 1.36. we bring in shannon pettypiece to make sense of the numbers. shannon: you see that they beat on earnings-per-share. they will say that they are controlling their margins but what analysts compare about is same-store sales. sales increase? it was not as good as expected. analysts were expecting 1.6%. in the world of retail analysts, they really needed to meet the same-store sales numbers. david: cost control? shannon: cost cutting. it is good, it shows the ceo is going in the right direction but it didn't look good with same-store sales and second quarter is not looking good. so a lot of questions about what the consumer is doing. lisa: is this another says -- another symptom of the amazon effect? what can target due to generate interest in sales? we side with macy's. in march and april, consumers seem to pull back on everything except cars and travel. we are seei

let's get more in the fed minutes. most said the june rate hikes would be appropriate if the economy continues to improve. joining me now for more is a global quantitative strategist at the investment institute. were you surprised by the nature of these minutes? found really, they another way to use a lot of words to say they are data dependent. andgs happen between now june. we might raise rates. the numbers do not really agree on what that means. just covering our options. >> way to see what the data says p are you make it sound simple. why are the markets reacting so strongly? >> i think it is a struggle of whether the news is good or not. good news has led to central banks becoming a little more tight around the edges. ae paradigm has shifted little bit where the fed come the european central bank, bank of japan, i think they still want to air on the side of letting growth do what it has got to do. higher rate coming with real economic data, it will lead to economic earnings. >> would you say that the data from now

alix: china trying to avoid a fed driven market tantrum.fficials are trying to deduce when they will raise rates. the best case scenario would be for july. the chief global economist joins us now. what kind of consideration should the fed give china when it comes to the timing of the rate increase? >> to be brutally honest, not very much at all. the fed job is to set monetary policy. that is what they will do. china is in the boat of all the others trying to figure out when the fed is going to move. globalfed has alluded to developments however they couched in previous statements. clearly they are mindful of the ramifications of what they do. >> that is the way to think of the international implications. is there some feedback loop that would come back into the night it states? that is a pretty indirect mechanism. for a central bank to be able to divide that with any confidence and make that the basis of moving the policy decisions, that is a big move. alix: they have to be concerned with not repeating what happened at the beginning of the

should not the fed -- shouldn't the fed be raising rates?problem is if you look at it, in 2014, we had a similar divergence developing. it proved to be a false start. i think you are absolutely right. i think 5% unemployment is something that anybody would give their right arm for. dudley's comments yesterday, he still says the fed is data dependent. he is kept the options open. rolled back a little bit in saying that we need to see the data. guy: you still don't believe, do you? richard: july? it becomes more interesting because you get the brexit out of the way, the spanish elections out of the way. also, it you get the odds get into levels which have been consistent with what the fed has done in the past. matt: richard jones, thank you. guy: matt, it is been a great show. bloomberg tv. francine lacqua on the pulse. the radio is going to be continuing. jon ferro and i. ♪ francine: don't fight the fed. as the central bank talk sunday june rate hike, global stocks rally. g7 finance ministers meeting japan. yen strength sharpens the debate ab

a plus for the fed.ts movement, i think dig tadz that investors actually by putting on their flat eners are happy. >> here the thing. if the markets and the stock markets start moving lower and start acting like they're having trouble and we have another tantrum, they're going to pull back, right? this say big test for them. let's see if ultimately how it plays out. >> i don't think, so michelle. i don't think. so i don't think so. listen, there is no way to normalize without a stronger dollar and a negative reaction to stocks. just no way. it is absolutely impossible. >> misch snell. >> either do it or you don't. >> you're right, michelle, to worry about the market reaction here. this raises a really interesting question f there was all this talk in the april meeting about june, why does the april statement not convey any of that? i'm not -- i'm thinking the -- a little bit of the other side of rick here. rick, i'm going to think on the other side. i don't think they get an a plus on. this if they were

louis fed president says there are signs the s. is growing below the trend pace of 2% per year. he spoke in beijing today and said inflation expectations remain low and he praised the performance of the job market. the u.s. labor market is very strong so this is a definite fact are in favor of the fomc view that we would have a gradual normalization of the u.s. interest rates. he also said there are fewer international influences on the u.s. economy. was tops birds movie of the box office in north america over the weekend. it's based on game and it took in $30 million. in second place was disney's captain america: civil war. your bloomberg business flash. vonnie: thank you. the talk that opec will reach oil supply is becoming increasingly unlikely as iran shuns talks and they will resume production. joining us now is vincent piazza. >> good morning. vonnie: it has been a relief in the last few weeks. many constituents, how sustainable is the rally? >> you had optimism off of the lows in the first quarter based on the dream of this

the fed think raising rates.y: it's an interesting week we just had, the idea that the fed may start to tighten again in june has come back in play. what did you think about the feds raising rates in december and do you think they should continue on this path. >> i'm personally in a big believer we are in a very low inflation environment for a long time. i think the global economy suffers from a lack of demand. i think they will be with us for five, six, seven years. governments have to start spending. the private sector isn't picking it up. corporates always buy back their stock. ebb says they are getting their epfs up so they can get the bonuses. they don't see the demand. gary: if the fed moves it sounds like you continue to believe they are making a mistake, given where interest rates are and what the economics look like outside the united states. >> if i a voting member i would say you are better off waiting until you seat ghost of inflation materialize. there is the ghost deflation out there and that's a lo

feds. they had the authority to crackdown on the mortgage market. the subprime mortgage market and other things that were clear in 2008 that lending spenders were a total force. in 2005 my dog was preapproved for a visa card with an $18,000 cred limit. if you are smoking in bed and you live in georgetown it is our problem and therefore there are layers of kinds of things we will try to do. we will say you cannot smoke in bed. that is not a crazy regulations. just think, we can still contain the damage. regulation is stop the stupid behavior, contain the damage and the last is the systemically important risk and there are controls that say if you are so important as an institution, let's say you are a skyscraper we will give extra attention to what you are doing. the question is do you actually do that? and the last person in the book i spoke with was ben bernanke and he pointed out that regulations that say about the smoking in bed, this isn't a bed, this is a sofa. when cigarette taxes wen

we have been talking a lot about the fed and other chances of a fed interest rate increase are coming work, and you have been looking at what has happened in the past, kind of, after the first, which we, of course, first had in december. >> right. julie: what has your research shown? >> we want to draw the relationship between the beginning of rate hike -- cycles and volatility. we went back to 1990, when the fix data begins, when s&p sector data begins that we want to in in this analysis. -- embedded in this analysis today leaves you with three tightening cycles. 1999 was in the same economic expansion as 1994. late-cycle, typical u.s. economy heating up. the fed steps in, begins to tighten. that is more comparable to the period we are you now, because we're just about at the anniversary, seven years since the economic expansion. what you find is when the fed begins to tighten in these historical scenarios, markets are lower over several months, over one- and three-month period s. also, volatility is higher. the point we are making out of this analysis is that no matter how well tele

we have to talk about the fed. the topic we all like to talk about. so do fed officials. like to talk about it. do you think they're out talking too much? feels that ainly way. there's this push and pull in all these ve between s.d official market has hy the totally -- the fed's true starts to affect allocations that historically affected.have been so bonds might look a lot more attractive because the yields are so low. just a general approach to balance. in such a long low interest rate environment. >> yeah, it's tough. this one hand, you have picking up of the growth in the u.s. with some inflation fears the feds responding to that. but at the same time, you have negative interest rates in germany and japan. bigger narrative and i think equities are a safer bonds. terms of >> if you look at fed funds and thing.s, they say one if you look at the bonds you see story.erent >> first of all, we look at what the fed is actually saying. narrative is very clear about june and july and youtipping point is whether post.to go pre or seems -- market fed rate increase are taking up

a fed hike in june. david is with us. what makes you so sure that we are going to see this market contradiction this month? >> first we've been bullish the last three months. positioning was way too bearish and we thought concerns china was exaggerated and dollar was over bought but now we are ripe for correction. speculators also long oil. and third fed is still on the fence with regard to hiking in june. and with regard they hike or not right now we have priced in virtually nothing. so the risk reward ahead of that is not great. so we think there will be a correction but then we will buy. >> so if the fed hikes in june how big impact on emerging market flows? it is only 25 basis points if they hike one would assume. >> yeah indeed. and we have become used that fed hikes ares inially bad more yen but --. we actually think the impact on the yen if yen continues to be better will not be that bad. that's why we think that we should buy that correction ahead of the fed meeting. what really matters most is w

and that is the fed. theo the extent that it is fed, it increases the number of opportunities to do something idiosyncratic or different. into a: you have turned family office. talk about the process that led to that decision? seeingentors have been that struggle as of late, i wonder if they will go down that path? john: icon and a lot of people, thought that the fed money printing at the bank of england and bank of china -- around the globe, it would trigger a commodity rally and trigger inflation. i got a little impatient for-five years down the road waiting for that to happen. maybe i was a little too early, we are starting now to see signs of inflation and we finally have seen a bottoming out in commodities. crude oil has doubled over the last 90 days so there is some indication that the five-year trend of disinflation and deflation and falling commodity prices might be turning. alix: i hear a lot from the analyst community that oil has moved too far, too fast. there are so many longs in oil right now

neither does the fed.n you think about the things that drives stock and drives the economy in the long run, it is economic performance. and it is earnings. we see the runway to both of those improving. that is what the fed sees as well. this is the point where rate hikes will reinforce positive messages. mark: why is it when investors are less bullish on stocks that we see a big pickup in the stock market, which leads me to my favorite chart -- in the aaii investor sentiment bullish readings, which you have referred to. at its lowest level in 10 years. why does this precipitate a rebound? julian: it does not always work that way, but the point is when you have this extreme level of caution, but it tells you is everyone who has wanted to sell and reduce their risk has already done so. image of whator we saw january and february. data was coming in worse than expected. there was a panic reaction. we are seeing data starting to be better than expected. and because people are not sufficiently exposed to the po

it hasn't changed the fed view. if the data provides reassurance to a data-dependent view, then the fed is on the table for june. david: i was looking at the minutes from the previous meeting, the march meeting. view.a robust if you are took in trust -- contrast the view, is there still conversation about that in these minutes? mike: there was still concernmike: about business spending and there was still some concern about overseas developers. but those concerns have diminished significantly because, in part, federal financial conditions have improved. --ng with the rising rages raising wages and some decline in energy prices. the minutes say they explicitly took out that reference in march the global developments in order to send a message to the public, a message that apparently a lot of investors didn't get. there was also one reference to brags it -- to brexit. there is no mention of it being any kind of disqualification or a factor that could derail a move. david: stay with us. we will go back to michael hanse

the fed is due ta-dependent, but not just u.s. data-dependent but globally data-dependent, and i think they've come to an important understanding with china, which, after currency pegged to the dollar. while you might get one rate hike, which i think is unlikely, you're not going to get significant rate hikes. >> can i make money in the stockmarket this summer, and if so how and where. >> yes, you can, tyler. not only you but all of your viewers, i believe. but you have to be, you know, realistic about your expectations if you're looking at the u.s. stockmarket especially and if you're looking at, you know, the overall averages because earnings growth is not going to be that strong and as you guys mentioned, it's an election year. but as long as the economy continues to grind higher, the stockmarket's going to do the same. interestingly, though, we've got a new bull market emerging in something that's been a bear market for years and that's energies and utility stocks. that's where i would be putting money at the margin to make mo

once again from the fed.kets reacting. i have a chart here of the two year yield, climbed to the highest since april, overnight. market reacting a bit to what we heard overnight from fed officials, was still a 64.6% chance of a rate hike at the end of this year. john: this is why i think the, with the markets. the market is not commenced the more rate hikes are coming. what the fed has neither the intention or the desire to stop on the backend of the asked year. need to keep the room for maneuvering, and to do so, there to talk up the possibility of raising rates. don't want to catch the market cold, if they decide to act. and the best chance of getting rates higher is by continuing to remind markets that is where they intend to take them. anna: is june still alive? joan: it is. it certainly is still live. fromhe data has been far entirely comfortable. but there has certainly been some bright spots. and as i say, the fed would like to take rights higher. and as we flexible so it is in a position to take advan

fed goes. it determines how markets perform. we have a whole series of disruptive events coming up. the brags it. presidential election. it made me bring back some memories. >> all right. you can see all these charts and more on twitter. i want to bring in our bloomberg news stock market reporter. joe: you have stocks rebounded from a six-week low. investors worried about central-bank action, who won this week? guest: i don't know about specific traders but i will tell you which sectors. it is bit of a switch. the defensive sector, they had been providing the market come in keeping them of float. it is closely related to the fed. people start to expect yields to move up. those value names don't look quite as appealing. they also happen to be those dividend names. if you have the expectation of a hike in yield going higher they will selloff. energy is big here. scarlet: we have breaking news. matt marantz oil and natural gas ipo has been suspended or withdrawn. this is the headline. they are wit

fed rate hike.morning. >> yes, as you say asian stocks falling for the first time in three days. falling towards a seven-week low. it is a pretty broad base selloff. all industry groups down on the asia-pacific index with energy stocks actually leading the losses. we are seeing declines in both china and japan. we are seeing these losses. as you say, part of it being driven by the speculation over the fed because fed fund futures are indicating for the first time since march that there is a better than even chance we did see a rate hike in july. we know that the probability of a hike in june has jumped to 32% from 4% last week. let's take a look at the dollar. we are seeing the bloomberg dollar index rising, hitting a two-month high. gold on the other hand falling for a fifth day in a row. that is its longest losing streak since november. this is the picture ahead of yellen speaking on friday. as we are getting more hawkish comments building up from various fed officials. the question is could we ge

it's been the fed the fed the fed for, you know, a long time now. >> ground hog day continues. >> yeswing from top to bottom but finishing virtually unchanged right now. the close of the bell here at the new york stock exchange, shareholders services association and sim corp ringing the bell. >>> thank you bill. welcome to the "closing bell" everybody. i'm kelly evans. we were up. we were down. finishing just about on the flat line. a slight drop for the dow at 5 points. and the s&p fractionally higher. we'll keep an eye on that for you. 2040 the level there. and the nasdaq up about half a percent. embracing yourselves for more out the fed tomorrow morning. nevers are getting set right now for a big round of earnings. dominick choo, susan li, courtney reagan and urban outfitters. cnbc commentator mike --. and carol roth. welcome both. fast money trader steve gras sew will join us shortly. seems like we're up and down up and down. >> the market had to readjust to what was going on in the treasury market. not a full on panic. that is isn't the temper tantrum because i this i the idea th

cities percent or 100% at the fed is going to move. that means it notes -- it is good to be modest. thisdo they need in market? they need diversity from all the risk going on in equities. scarlet: where are we in this great liquidity debate? tf's -- in do body what way do bond etf's argued the liquidity rates. david: on average, it trades 6% doeser, j and k, than it in the primary market. this liquidity wouldn't exist. it is buyers and sellers expressing opinion on high-yield bonds every day. the average spread of a high-yield bond is 150 basis points. that is pretty expensive, whether you or not -- whether or not you are a small investor or a large institution. alix: we look edgy and cayenne most of its portfolio is triple k and-- we look at j and most of its portfolio is triple c rated. david: we have seen interest in high-yield etf's. when we are looking at high-yield as an investment, it is the near term because it has an attractive coupon. we are likely to see investor flows. looking into the future, we will need more clarity on w

the fed think raising rates.y: it's an interesting week we just had, the idea that the fed may start to tighten again in june has come back in play. what did you think about the feds raising rates in december and do you think they should continue on this path. >> i'm personally in a big believer we are in a very low inflation environment for a long time. i think the global economy suffers from a lack of demand. i think they will be with us for five, six, seven years. governments have to start spending. the private sector isn't picking it up. corporates always buy back their stock. ebb says they are getting their epfs up so they can get the bonuses. they don't see the demand. gary: if the fed moves it sounds like you continue to believe they are making a mistake, given where interest rates are and what the economics look like outside the united states. >> if i was a voting member i would say you are better off waiting until you seat ghost of inflation materialize. there is the ghost deflation out there and that's

- for the fed to go. consumer sentiment and robust real household income growth. those getting hints that savings, the income growth is being deployed into consumption as well. reboundwill be see the in oil prices affect? carl: to this point, it is very contained. even though gas prices have risen, they are still at very low levels, which are supportive of consumers. i don't think we have to worry about oil just yet. as we look at business investment or capital investment in the gdp accounts, they are's -- there is a definite drag on business spending and that is concentrated in the energy sector. one quarter out is too soon. will this report give you any confidence we are avoiding what happened last year and the year before? we have a week q1 but better q1 better q2 andut q4? carl: we have a recurring pattern of q2 strength, so you cannot sound the all clear. you have to average the two numbers to get a better sense of the economy. this is a cyclical anomaly. you adjust for the usual pattern and save the

the fed in focus. markets try to make sense of june rate hike speculation. >>> new this morning, snapchat is raising more money. and this financing round valued the company at $22 billion. >>> facebook, new policies on trending politics. following advice from conservatives. it's tuesday, may 24th, 2016, and "worldwide exchange" begins right now. ♪ >>> good morning, welcome to "worldwide exchange." on cnbc.

the fed think raising rates. gary: it's an interesting week we just had, the idea that the fed may start to tighten again in june has come back in play. what did you think about the feds raising rates in december and do you think they should continue on this path. >> i'm personally in a big believer we are in a very low inflation environment for a long time. i think the global economy suffers from a lack of demand. i think they will be with us for five, six, seven years. governments have to start spending. the private sector isn't picking it up. corporates always buy back their stock. ebb says they are getting their epfs up so they can get the bonuses. they don't see the demand. gary: if the fed moves it sounds like you continue to believe they are making a mistake, given where interest rates are and what the economics look like outside the united states. >> if i was a voting member i would say you are better off waiting until you seat ghost of inflation materialize. there is the ghost deflation out there and tha

and the fed caught the down dravt from the fed news, and europe was not open, and it uniformly movede downside. and then you have extended the losses in the course of the session, and despite the fact that the egypt plane was traveling like this through europe, it is not the reason that the stock market is down, and i will show you that in a moment. the example, the oil majors, the hea heavyweights in the indices are lower, because oil is lower, and partly, because it is priced in dollars, and if the fed increases rates, then it will move down over a period otime, or at least that is the theory. and what the banks are anticipating the fed to do you can see jpmorgan and others falling off of the highs earlier. travel stocks are down in negative territory in europe, and the most notable is the uk tour operator thomas cook. he came into the session to today explicitly warning and giving a profit warning because of what has already happened in europe, and the fact that notably, the holidays to turkey for example are being affected by the brussels attacks. and so he sepss a historical mov

will it impact the fed debate? investment equity investment officer. play the drama for us. : it is a great number, but not so great if you take three factors into consideration. spending was flat and prior months, so there was a catapult effect. prices increased significantly. part of the spending increase was households paying more for gasoline. 3, the savings rate coming down. which is good news as consumers became more optimistic so they loosen the purse strings. those three factors are unlikely .o be repeated going forward income looks decent, households are spending at a decent clip, meaning current quarter growth will bounce back from the lousy but let's not get to out over our skis, too excited, based on the number. the fed likes the number, but yellen and company will go into the june 15 meeting say one month is not necessarily establish a trend. news. but, it is good for the bad news, the rest of the week? carl: we got through the good news with income spending and whatnot. the question of the second half

between theorce market and the fed.a chart, a two-year and this is as flat as it has been since 2007. that inversion intentionally could be very caveaty. for you, do you like the dollar story from deutsche bank? tracy: we see all the analyst talking about how the dollar rebound is only just getting started. it is crazy when you look back in march, how the dollar make everyone nervous, made the fed turned dovish. now it seems fun. manus: tracy, great to have you with us. you will see much more from tracy alloway. bloomberg . >> okay, leeza. we're ready for you on set. leeza: thanks, guys. >> i'm walking to set with our ladies. >> we're gonna do a last, final mic check. leeza: of course. all right. have a good show, everybody. female announcer: the following is a paid presentation for dr. denese skinscience.

jeffrey lacher of the richmond fed.s is bloomberg surveillance from london and new york. ♪ francine: that is the french foreign minister speaking at an impromptu news conference after meeting with the families of people on board. saying 56 people were on board. it is a fluid operation. we know there is a search and rescue operation under way. 16 of those on board were french citizens. it was 20 minutes before landing that we lost contact with the airplane. too early to speculate on the causes of what happened. at the moment, all we know is there is a huge rescue operation by air and navy. the egypt air airplane vanished at 2:30 a.m. local time. tom: the search for knowledge and details. tell us what he is saying with your wonderful french. moment, he isthe saying, i'm trying to listen and , we need to verify. we are for extra information. we need to make sure the information is correct. i think, tom, where we have had high checks that did not turn out to be hijacks. -- wee had explosions need to remember the am-370 airp

a different story on wall street where they price in the fed-rate high risk. number is still in focus because energy, wti, seeing a 3% gain on last week. that was good news for some of the stocks here in europe as well. we'll also give you a view how the horses are faring one by one. a lot of individual stocks here, particularly when we look at the german market, we're looking at bio. we'll get into more details on that megamerger proposal coming up in a minute. we'll get to the big news of a morning, it's a $62 billion mega deal. bayer is offering $122 a share for monsanto and a tie-up and the german chemicals firm said it would create synergies over a billion dollars in year three. the company has been quick to say it was confident in its ability top fund that transaction through both equity and debt. well, let's get a look at how bio shares are faring in the announcement here. the stock up 2.8%. that underperforming the broader market losses we're seeing in germany. some investors cite concerns over the financing picture but also the price when you look at