Transcripts For BLOOMBERG Bloomberg Markets Americas 20180112

Iran, leaving the deal intact for now. Releasepresident did new sanctions among 14 people and entities involved with the Ballistic Missile programs, and a crackdown on government protesters. President has repeatedly denounced the Nuclear Agreement negotiated by president obama, and in october, declined to certify that it was an interest of the u. S. He has stopped short of. Crapping that deal altogether south africas ruling party is calling President Trumps comments on african immigrants extremely offensive. The deputy secretary general of the African National Congress Told reporters that developing National Countries do have problems. It is not as if the United States does not have difficulties. There are millions of Unemployed People in the usa, people who do not have health care or access to education, and we would not make commentsto so derogatory about any kind of country that has social, economic, or other difficulties. It isand el salvador said expressing the countrys resounding rejection of President Trumps remarks. The foreign minister says that el salvador declares respect for its brave and dignified people. In venezuela, two days of protests have left three people dead and 16 more injured. Venezuelan Officials Say at least two farms were attacked by mobs of people, who slaughtered cows. An opposition lawmaker boasted ofposted a video on twitter, a bunch of men attacking a cow. Spanish finance ministers have agreed to push for a break the deal that keeps the United Kingdom is close to the European Union as possible. That is as close according to a person close to the situation. Both have close trade and investment ties and are concerned about the impact of tariffs. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im Mark Crumpton, this is bloomberg. Going to ask wha what is going on. Scarlet might also out of my hand, mark. Julia i take full responsibility there. Scarlet lets talk about stocks. Higher today,ng almost a Straight Line up with the exception of wednesday. In the new year, nine trading days, and eight of those have seen record highs with a big overall rally for the major averages. Today is no exception. The dow, s p, and the nasdaq are all solidly higher. Reform,ct of tax optimism about earnings season, so it will be interesting to see what will bring this to an end. The technical signals already suggest that we will see a pullback later this month, but until the momentum turns, stick with it. That is according to kb stocks. We are looking at two weeks of big gains here, we see the s p 500 up almost 1. 5 on the week after gaining more than 2. 6 last week. It is also worth noting that over the last four months, we weeklyd only three declines, and they are quite small. A lot of bullish momentum, and this is where the dow as well. The dow up on the year almost 4 , gaining over 1000 points. It is a pretty remarkable thing for stocks. The dow is leading the path today. Lets look at some of the top point boosts for the dow on the day. Up 1. 8 ,oking at merck after the fda approved a merck and after zeneca partnered cancerneca partnered drug. Travel is higher for a second day in a row, and microsoft with bullish comments out there. Another record high for microsoft, so 20 straight for stocks. Keep them going. Julia for more on todays market moves and what might come next week, we are joined by scott. Great to have you on the show. Even more excited to have you, because at the back end of last week, we were saying that a lot of analysts have been caught off guard because we have rallied so far this year, a lot of the 2018, and targets are quickly approaching, if not being surpassed. You are one of those who, last week, readjusted your forecast for equities. Explain what you are for now . Scott the thing for us is our number that we had assumed had a 23 tax rate. We had a 53 right off of ff of capex. Writeo our targets were forced higher, and after that adjustment, we were looking for an 8 return this year for the entire year, as you just mentioned. We are up 4 already. We do not want to annualized what we have seen so far this year, and we are expecting some gains. I think at some point, it seems like a stock market wants to go about every day but at some point, we will see some more volatility. I think what is going on with , andback and forth trading what is going on right now, you are in the very early stages of seeing some chasing going on here. I would argue there is a lot of institutional chasing the back half of last year. The benchmarks, the s p 500, thing keeps going up every day and you have to be in it. Moree going to see some broad chasing going on, in the very early stages. And that can carry you for a while before anything that happens. Scarlet how can you tell that there is chasing . How can you tell this is here, acting out, and people are afraid of missing out. What should we look for to determine how much more is left . Scott you have to remember i am dealing largely with retail investors. Retail investors, many of them have had way too much cash on the sidelines for almost this entire rally. They are certainly underinvested in stock, at least in our opinion. So the day today, my phone is ringing, i am talking to our salesforce in the field, i am talking to other people, Money Managers i know around the , and interest has really increased. We have gone from the john templeton, bull market is born on pessimism, but it grows on skepticism, the nick rose it is born on skepticism, but you are looking at optimist him, because more and more people are optimistic every day, and the thing at the top will be euphoria, but we are not near there yet. We are moving along, people are getting more interested, they are underinvested, and so, to me, those are the signs that i aok for that this thing has ways to go. The bull market is not over, but keep that in the back of your mind. People are starting to get excited about the market. Julia what does that mean about positioning . A debate we have been hacking is the backup in rates that we have been seeing, and you are one of those saying look, take a look at fixed income and rotate some cash into small cap equities. Talk us through that . , wet relative to large cap have been underweight smallcap, and that worked out just fine. But this tax code change is a lot more beneficial to the russell 2000 type stocks than it is for the large caps. They pay a higher tax rate, and if you look at the earnings number, pretax we thought the 38,ll was going to earn 30 nine dollars. We are at 52 now on 38, 39. We are at 52 now. It is different in terms of large cap. ,e do not think that long overweight large caps, or short, underweight short caps were going to help. We shifted things around. You need to have u. S. Economic growth, domestic Economic Growth meaningfully increase. Our number is 2. 9 for gdp this year. Some people are calling for even higher, but i think you need to see at least that. Of gdp in the u. S. Comes in at 2. 4 , 2. 5 , smallcap is not going to be the outperform or this year. Scarlet i like how you are talking we are shifting between skepticism and optimism and moving in the direction of optimism. Earnings season began for the fourth order, and in the coming weeks we will get a lot more results. If there are any expectation misses, and those are quite high, do you expect people to forgive pretty quickly, meaning they will look for the Silver Lining and continue to bid shares higher . Scott i think the last couple of quarters in 2017, the second and the third, people were paying attention to earnings. They did not for a lot of this multitier rally. Rally. Iyear but i think forgiveness will be the big word, because it is all about what the tax code is going to do for you . What is it going to do for your clients . What is it going to do for your top line . I really think the outcomes in this Fourth Quarter are going to be fine, and the market knows that. I think that the actual results are going to be very little looked at, it is going to be all about the outlook. When we have talked to our analysts, it is how hard are you going to press the cfos and Company Executives in these Conference Calls . How much are you going to press them to find out what this tax situation means for them and that is thes . Important thing. What i think will happen, and some early indications are if there is a lot of vagueness these companies do not want to give a lot of guidance, they do not want to go out on a limb. They know it will be beneficial, but it will be tough to get a good gauge on how beneficial. It is tough for them and certainly tough for the analysts. ,ulia the risk to the upside we are still underestimating the bang for the buck on the tax overhaul, is that true . Gdp. we are at 2. 9 they think if they are wrong, growth will come in higher. I think there is a potential for that. Come intoe fed will play here. Right now, everyone is thinking wetaxes, but the fed are looking for two hikes out of the fed this year, the there are some permit will competitors of ours formidable competitors of hours were looking for four, sometimes five. If you grow 2. 9 or less and have five rate hikes, that is a bit headmanned big headwind for the market. There is some risk to the upside, i would lean to the upside, but the Downside Risks are definitely there. We had a huge run, and i think you do not want to just aim for the stars, so to speak. You do not want to add a lot of risk here this late in the cycle. You want to be in this thing, but you do not want to swing for the fences, i do not think. Scarlet be in this thing, but dont swing for the fences. Scott wren, thank you very much. Coming up, where theyll be fewer analysts on wall street after the changes to nafta . Will discuss. This is bloomberg. Julia this is bloomberg markets. Im julia chatterley. Scarlet m scarlet fu. President trump is still facing questions about his profane remark about immigrants from haiti and african countries. Here is a scene, shortly after the president signed a Martin Luther king day proclamation earlier today. [applause] mr. President , will you give an apology for what you said the other day . Sir, did you ever mr. President , are you a racist . Scarlet lots of shouted questions, the president ignoring them completely. Lets bring in our white house reporter. We have heard democrats to list and tested missing stinson themselves,stancing but has anyone in the Republican Party denounced him or separated themselves from the president . We are starting to see more and more republicans come out on the record and separate themselves from the president. We heard House Speaker paul ryan say he was disappointed with the statement, we heard a few minutes ago from senator don john mccain, saying the statements are not in line with american patriotism. We heard from mia love, whose parents both came from haiti, saying the president needs to issue an apology and calling his statements elitist. We are seeing more speaking out, but there are not many republicans who are trying to just move on from this without addressing the issue. This will make it harder for democrats to come to the table and Reach Agreement on immigration, which is already a very difficult issue. The president using language like this makes it harder for both sides to come together and reach a deal. Julia and that is the key. Scarlet that has become an art form, pretending what you did not you did not hear the president and move on. Is not just bad for the immigration deal, but for the shutdown. I wanted to talk about chiron iran as well. U. S. Holding to the iran nuclear deal, but they are saying the europeans need to do more as well. Everyone needs to come together to hold this nuclear deal and improve compliance as far as the United States figures it. What do you think here of the decision from the president and the Administration Today . Toluse we just heard from several administration officials, who briefed reporters on this deal. They said the president is calling for the european leaders and has already been speaking with a number of them to make nuclearto the iran deal, otherwise he will pull the u. S. Out of the deal and try to impose new sanctions on iran. Over the next 90 days, four months or so, we will expect the president and the white house to be trying to increase some of the pressure on iran. They not only want to change the current deal, but they want to add a new deal on top of what has been negotiated that will take away any sunset provisions from inside the iran deal and impose harsher harsher strategies harsher strategies and sanctions for iran on various things they have done on the Ballistic Missile site. The president is driving a pretty hard bargain, trying to get European Countries to increase some of the things they have already agreed to and go further than what they put on the table during the deal when it was agreed to a couple of years ago. We have not seen any sign of the European Countries are willing to do that, that they have a few months to come to a final decision on that. Julia to lou on already but olorunnipa, thank you. U. S. Firms have used the resignation of economists to get visas for Research Analysts from the u. Mexico and canada. Is our reporter, who broke the story. Doug, thank you for joining us. I know something about the excitement of trying to get a United States visa, but explain the difference here. What ability to disease up under nafta did this visa under nafta give the analysts the ability for Company Transfers rather than coming in on a different visa into the country . Visas arews part of the nafta agreement, and what we are seeing is a tightening of the immigration policy. In specifically, this seems to be a visa that was used for many years by the canadian banks and analysts,bring over and it was because it was a very sort of openended, vague description, and what we have seen now is the eight u. S. Immigration department is saying look, there have been issues with this broad definition. We will actually narrowly define it, and by narrowly defining it, they have basically said if you are not an economist, if you are an analyst, you do not qualify for this visa anymore. Scarlet what are you hearing in terms of workarounds for banks and employees who are in the process of trying to renew their visas . Perhaps they are on the socalled tn visa, but they need a new version because they are working in new york . Doug this is fairly new. There was an immigration memo that came out in november, and a press briefing december 18. We are only now just starting to hear and see some action on that. There are alternatives, but they can be more costly and a little bit more onerous. You could have the prospect of these are, but1b they are a lottery system and cost a lot of money, and there are limitations there. You cannot be in the country for over six years without applying for a green card. , andther is an l1 visa intercompany transfer. Those can be done, but they are more expensive and there are limitations as well. The third alternative is that they could be repatriated back to their countries, but it leaves a bit of a gap for those on wall street. Scarlet certainly some vacancy that might result. Doug alexander reporting from toronto, thank you very much on that breaking news. The wall street analysts from canada and mexico at risk here. Julia gamestop getting crushed today, despite the strong holiday sales report. What is putting a dampener on their forecast . We will be discussing, next. From new york, this is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Julia and i am julia chatterley. Gamestop is our stock of the hour, shares falling over 11 today, despite a bounce back in holiday sales. Emma chandra is here with more. Why the disappointment . Emma the prices have mostly benefited from an easy year ago comparable. This chart shows they had fallen in the Fourth Quarter of the previous year, and the forecasts are not looking really good. They looked at fullyear adjusted eps in the middle of its range, shorting analysts estimates, and expecting a noncash charge for the Fourth Quarter, and due to the longer upgrade cycle for a number of devices. We have seen analysts say the holiday sales look good, but overall, it does not look that good. And at loop capital, they cut their price target for gamestop. Scarlet emma chandra, thank you so much. You aree will miss you, glowing. You look amazing. Scarlet emma is going to take some time off to be a mommy. [laughter] scarlet lets get you to the Bloomberg Business flash, a look at some of the biggest business stories in the news right now. More industries are facing trouble in 2018. According to loan market data from highland capital, Moore Industries are weakened or stress this year, up from 9 in 2015. And a broader range of sectors are affected, with broadcast and media joining energy and retail. This wide range could push a domino risk. In the wake of the tax cut, this company will spend over 1 billion in ad and at 25 billion jobs they will spend 2000 checks to 60,000 workers in the u. S. That is your business flash update. Julia still ahead, the commodities close. Latest crop reports in the u. S. Show ample supply. This is bloomberg. From bloomberg World Headquarters in midtown manhattan, this is bloomberg markets. Im scarlet fu. Commodity markets closing in new york for the week. Lets get you started with oil. Little changes on the day, but if you look at brent crude, it it is, in the last couple of hours, moving higher, up 9 10 of 1 , 3 for the week. It had briefly retreated after yesterday, reaching 70 a barrel. Still below that level at the moment. Hedge funds are boosting their bullish views on brent, according to futures data. Still prices in china are coming back down to earth. China arerices in coming back to earth. This is a benchmark product used in construction, thinking to the lowest level since august as demand eases. At ther story for zinc, highest level in one decade. 41 over that period as china boosted its metal demand outlook. And quickly, spot palladium rising to eight record high amid tightening supplies. In agricultural commodities, todays crop reports from the usda push the agricultural some index to a record low. Winter wheat plantings and corn supplies came in above estimates, while domestic soybeans climbed on lower export demand. Insight isfor more our commodity strategist for bloomberg intelligence. They to have you. Agricultural commodities cannot catch a break here. The question is how much worse will it get . That is one thing we can feature in our first chart. The market is expecting it. Most fund shorts are the extreme ever, so they got what they wanted. The market is still lower. The issue today was more landing of wheat planting of wheat, but soybeans are a little. How much worse is it going to get . Julia we are showing you this chart here, which is actually showing the green spot some and as youbindex, say, everyone was expecting this. How much worse does it get . Mike i do not know, but at some point you get short covered rallies. We are getting into the planting season. We are planting soon in the u. S. , and sometimes, they have to price in a bit of risk that weather, it has been stable for five or six years, and protecting the weather is another story. [laughter] scarlet lets talk about oil, because even though today seems a bit muted in comparison to the rest of the week, it has been a blockbuster week for the energy complex. Everyone is bullish on it, if you look at head to and speculator positions, everyone is all in on crude. Exactly right. Managing money positions, hedge funds, petroleum is highest ever. Not just in growth rates, but on a net of open interest. Over 22 of open interest is now speculative hedge funds. That is in the most ever. And the market is stretched from its mean, 24 above that. The last time we were there was 2011. We have to go back seven years, when the market peaked. I am worried the crude oil is ae highest probability for sharp correction. That is what it did last year. Fundamentally, it looks good, but it is a little too risky, at least in the short term. Julia even just showing that, it feels uncomfortable, i guess is the right word. Even when you have other people coming out saying joe political risk, potential geopolitical risk, potential supply cuts. Mike but you have to depend on those things, but if you depend on what is happening with u. S. Production ramping up, risk goes back to normal. Scarlet lets talk about currencies, because at the end of the day, it comes back to how the dollar trade . Everyone is looking at oil or wheat in opposition to where the u. S. Currency goes. Mike that is the key story for the end of the day. It has not been shown yet. The bloomberg dollar index made a new fourmonth low, maybe five month low. If we pull up the next chart, you can see it is turning, making a good turn. That is despite the last year that last year, the fed accelerating that weakness. The dollar trend is down, and that is good for commodities overall. And that is part of the inflation pick up stories. Julia a lot of people are talking about this rotation from bonds and equities into commodities, because there is so much optimism. Look at theu longterm relative value, commodities are well below the horizon in 2011. Most Financial Assets stocks, stocks and bonds, are pretty lofty. Julia mike, great to chat with you. , strategist were bloomberg intelligence. You have also been putting out some things about bitcoin and gold as well. Do we have time to talk about this . Talk to me about what you have been doing as far as bitcoin and gold are concerned, because that is something you found quite fascinating as well . Bitcoin oftentimes peaks during fed tightenings, and the last fed tightening, the end of december, might be a longterm peak. That is the same time that gold bottomed. So what i think is that the bitcoin bowl is turning into a bear, and the gold bull is refreshed and diverted. I expected to continue. Scarlet famous words. A bold turning into a bear. Julia we will have you back on to discuss. Lets get a check on the headlines with Mark Crumpton. Mark Hillary Clinton is blasting President Trump for his comments about immigrants from haiti and africa. On twitter, mrs. Clinton noted today with the eighth anniversary of a devastating earthquake in haiti. She said instead of remembering the tragedy in onoring the resilient people of haiti, what we are subjected to trumps ignorant, racist views of anyone who does not look like him. The quotes could eventually damage and disrupt the lives of many people. Mr. Trumps comments were said to have go against the universal value the world has been striving so hard to establish against world war ii and the holocaust. These are shocking and shameful comments from the president of the United States, and i am sorry, but there is no other word we can use, they are racist. Julia President Trump President Trump denies he used foul language or said anything derogatory about immigrants from haiti or africa, however, he did tweet he used strong language. The Russian Hackers who penetrated the Democratic Party have been laying groundwork for an Espionage Campaign against the u. S. Senate, according to the Cybersecurity Firm trend micro. They say this group is trying to gather the emails of americas political elite. The reports said the hackers are working for confidential information to leak. In montecito, california, crews are searching through rough and model month and role, hoping to find more survivors of the deadly mudslides. People remain missing. 70 people have been confirmed dead. 100 homes completely destroyed, 300 that we damaged. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Mark Crumpton, this is bloomberg. Scarlet thank you, mark. We have some breaking news. An activist is apparently building a stake in lowes. De shaw is said to build an activist taken the retailer stake in the retailer. The stock is getting a pop on that headline. It is up by 2. 5 . We will keep you posted on any further details on this exciting new development. Julia troubling times, ongoing troubling times for retailers. Zuckerbergsrk latest Facebook Post might cost him 2. 9 billion if declines hole through the coast of trading desk close of trading close of trading. What is a risk factor and what is weighing on the stock today . From new york, this is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Anda im julia chatterley, it is time for a look at some of the biggest business stories in these right now. U. S. Trade representatives have put alibaba on scarlet this is bloomberg markets. Im scarlet fu. Julia im julia chatterley. New yorks penn station is falling apart. The agreement is from the 1930s, and the tunnels are crumbling away. How was such a critical hub allowed to fail . We spoke with one of our reporters about his latest piece in Bloomberg Businessweek. Wrecks Everybody Knows penn station is a mess. Too many people, too many trains , but what is underneath the worrisome. Even more there are two tubes in one tunnel, two tubes that go under the hudson river, and they date back to 1910. They are literally falling apart , in part because they were flooded during hurricane sandy, but if they fail, the whole north quarter shuts down, and could costt 100 million today. This is a problem not just for new york, but the entire country. Carol i have gone to washington, boston, and it gets black and you are in a hole. But 45,000 travelers in penn station, 450,000 travelers in penn station, this is a crazy busy station. Day, and0,000 people a it is about it was not designed for it, maybe about one third of that many people. We are dealing with a system that the number of tracks, the tunnels, all of that days back to 1910, when the Pennsylvania Railroad built this thing in the first place. The thing that has changed his they knocked down the beautiful station that was above ground and crammed Madison Square gardens on top of that. But Everything Else is a system that was designed for a different time, a Different Number of travelers, and it is a mess. Julia and you talked about the darkness and not being able to see, but you went down there to have a look at the conditions, and even post hurricane sandy, they have deteriorated quite dramatically. What did you saw . What did you see . Devin that is the point of the story, you go through it in the dark, and i commuted for 20 years without paying attention to what they look like. But when you go in and see, they are coated with all of these sulfates and chlorides from hurricane sandy, eating away at the metal, concrete, and the wires, and they have been doing this for five years now. Julia and you talked about the flood doors as well that were installed in world war ii. World war ii, lets say that again. Julia in case there were german uboats. Are they still there and holding backwater . Devin they are not holding back water, and with a even hold back water . These floodme about doors, they date back to world war ii, and that is the only thing, if the tunnels collapse in the water came through, that is the one Thing Holding back the river, and it is like well, that seems a little hard to believe. Likeyou see them, it is you have to be kidding me. It looks like out of the bride of frankenstein. Carol when i go to that station, i run. It is not a fun place to be. Are the tunnels safe . Devin they are safe for now. The big issue there are two issues. If there is another superstorm like sandy, the tunnels might fill all the way up with water. Carroll and we are seeing more and more of those superstorms. Devin i know. And historically, there have been worse storms than sandy, factorse are always that made sandy really powerful, but it was not the worst storm new york has ever seen. If those tunnels fill all the way up, there is a possibility that they might crack and collapse. There is a level of sediment above the tunnels. A lot of that has washed away because of the building of back downtown, a change to the channels of the water. That is a concern, but even if that does not happen, these tunnels, amtrak says within 70 years, one of the tubes might have to be taken out of service. That might slow practically down then shut whole system because you are running a fraction of the train through one tunnel. Introduction to new york when i arrived. Derailments, and that was sort of my entry. That was the critical question, and you chart through the attempts to do something about this. Difficult . Been so whose response ability is it, and why has it been so difficult to enact essential upgrades . Carol amtrak owns it . Devin they do, but they are permanently underfunded. And you have this situation where it is not really it is shared by new york and new and thethe station tubes. Most of the people going through there are from new jersey. They come through the north rebuttals river tunnels. There have been at various times amtrak cannot afford to fix it by themselves, so various projects have been proposed where the states would share the responsibility, but it is very expensive. Julia and the cost is rising. I know, i know. When you look at even gateway, the Gateway Program that would involve building new tunnels, rehabilitating the old ones, watch wrote tubes four tubes coming through the hudson would be great. That started at 13 billion about four years ago, now it is up to 29 billion. Julia that was devin leonard, speaking to myself and carol massar. Scarlet i think got every day that i travel through grand central, which is beautiful, airy, and light, and when i go to penn station, it is a big reminder of what needs to be done on infrastructure. Julia this has become a political football. We have tracked the difficulties they have had in trying to come up with a solution, and then President Trump came in and said whatever the plan was, they are not doing it. Scarlet and he is from new york, so he would know what the conditions are like. Julia but it has become a marketing tool, i think. Somebody very smart said to me recently, why not build a bridge . Scarlet build a bridge . It would not solve the problem. The tunnels are still there. Julia we do not need them if you have a bridge. Issue ofo read the new Bloomberg Businessweek, available on newsstands and online. Kickst earnings season up, but how will profits be affected by the latest tax cuts . This is bloomberg. Julia its 2 00 p. M. In new york, told 00 p. M. In new york, im julia chatterley. Scarlet im scarlet fu. Welcome to bloomberg markets. Scarlet we are live in bloomberg World Headquarters in new york on the next hour. Youre the top stories we are covering. The Bank Earnings finance a kicks off. Jpmorgan kicks off better than expected tax benefits. Wells fargo dropped. Jpmorgans tax benefits did not work out this order. Says some of the recently disclosed of all abilities playing the chip industry can put its processors at risk, rolling back earlier reassurances. Bitcoin as week for scrutiny intensifies from regulators. A wall street lawyer makes the case for a crypto crackdown. We are one hour from the close of trading, markets are rallying. Its unrelenting. Abigail it just keeps on going. Nasdaq up p 500, and higher eight of those nine trading days. 2018, a lot of bullish momentum for a second week in a row. All three indexes up more than 1 on the week after last weeks big gain of more than 2 . The dow is almost up 2 . A lot of optimism on the earnings season. Bullish momentum kicks in and keeps on going. Relatively to the weekly gain, a big week for the major averages. This is the s p 500 group rank returns. We are looking at the performance. Up top, we have industrials, up about 3 thanks to the likes of ge and boeing. Consumer discretionary being helped by amazon. Energy being helped by oil. On bottom, the race sensitive stock, utilities, telecom, real estate. This as rates are rising. The high dividend makes them look less attractive. Today we had a higherthanexpected cpa number cpi number. Lessig at the 10 year yield, it is at 2. 55 . This is a longerterm chart. June out of june, there is a backup. Thehe backup was out of election. Interest is that a side raise, it comes from the fed decision last year in december. Plus tax reform being passed. The 10 year yield has gone above the coiling range. Is the question is whether it can make it above 2. 6 . If yes, it will be on the upside and rates may climb quickly. These are the stocks trading at record highs on the days, looking to explain why we have record highs for the averages. Amazon cisco, jpmorgan. Jpmorgan stands out for reporting earnings that missed on revenues due to the trading revenue situation. The tax not helping them in the Fourth Quarter, but expected to help them in the year ahead. Shares seem to be rallying. These are some of the participants. Check on theget a headlines on the bloomberg first word news with Mark Crumpton. Senate minority leader richard germans as an immigration meeting in the oval Office Yesterday grew combative times. He added that republican senator Lindsey Graham pushed back after President Trump used a vulgarity about african countries. Senator graham has released a statement in which he thanks senator durbin for his statements of support. It continues. Following comments by the president , i said my piece directly to him yesterday. The president and all those. Attending the meeting know what i said and how i feel. I have always believed america. Is an idea not defined by its people, but its ideals. Earlier today, senator durbin took exception to the president tweeting that he didnt use of vulgar language. Comments said things which were hate filled, file, and racist. He used those words i use those words, i understand how powerful they are. I cant believe in the history of the white house, any president has ever spoken the word that i personally heard him speak yesterday. You have seen the comments in the press, i have not read one of them that is inaccurate. Surprise, the president started tweeting, the ninth he used those words. It is not true denying he used those words. It is not true. He said the things repeatedly. Mark the chairman of the Congressional Black Caucus said the statement reinforces the concern that we hear every day that the president s slogan make rica great again is cold code for making America White again. Nature was canceled to open a new 1 billion embassy, because of protest. But as Lawmakers Said mr. Trump was not welcome there after he retweeted videos from a far right British Group and criticized london mayor following a terror attack last year. President trump says his decision was due to concerns about the embassys move from the elite may feel district to a far less fashionable area of london. Three churches in chile were attacked with firebombs days hisre pope francis makes first visit to the country. No one was injured. Unknown attackers through pamphlets at the scene that contain a message the next bombs will be in your casa. The pontiff will arrive on monday. Global news 24 hours a day powered by over 2700 journalists and analysts in over 120 countries. Im Mark Crumpton, this is bloomberg. Scarlet lets get back to earnings. Jpmorgans net income falling 37 while wells fargos profits took a hit from litigation expenses. The big question Going Forward is what the tax cuts mean for their results in the years ahead. Jamie dimon addressed the issue in todays conference call. Its the effect of retained capital and increasing competitive American Companies that will drive jobs and wages. I have no question that we will be far better off. Scarlet we will be far better off. Joining us is josh, the managing director and bank analyst at Graham Fisher and co. Money. In the quarter that just ended, the tax change meant a hit for jpmorgan. Why is therd, consensus view that this is so positive . We look at things like sify designations, you have to question that. Josh you have some reason to relative to the larger regionals in the Community Banks. Less for ay benefit number of reasons. The deferred tax asset, what were seeing right now, it is bigger for many of them. More portly, they pay for their more importantly, they pay for their higher premium than everyone else does. That went from deductible to nondeductible. Thats another one of the pieces. All in all, its still probably going from 35 to 25 21 . I think it is pretty positive and will remain pretty positive. The macrot change backdrop of where we are in the cycle. The fact that on the top line, the results were good and i think they will continue to be tepid. Julia just the tax rate, when it has gone from 32 to 19 , if they make the same profit this year as last year, thats 3. 5 billion increase. They can put that to work. Ifh they can put it to work there are areas where there is significant loan demand they can satisfy. Julia youre saying there isnt . Josh you see that in the loan growth numbers. Tepid loan growth this year, that was off of a number last year. There is that have been driving it for the past several years have been 1 to 4 family mortgages. Julia they can make profitable loans . Josh they have been digging at the bottom of the barrel. Thats part of the reason they are not getting such great command. The law of large numbers and subverting them the most. Its a different cycle. Fortune 500 companies who in previous cycles had to go through banks for syndicated loans, or Capital Market access are going directly. They have locked in a longterm low rate get through the Capital Markets. Where is the see and i loan growth coming from . The mid tier and smaller borrowers. We have scraped the bottom of the barrel. The average yield has gone from to under 3 . Scarlet optimists argue it will grow faster. Thats the bit that you are taking if you believe in them. You also have to remember that late late stage ages stages of economic recovery. We have to see what the policy is. We are seeing growing were seeing growth in inflation. The possibility that the fed gives us three hikes this year. The question is how much is it going to impact the Net Interest Margin if there is no loan demand. Scarlet lets talk about wells fargo. It has issues. On a consumer side, it has to fight off the insurance charges, the mortgage tree charges, and the fake account scandal that plagues it. They have been cutting expenses, there is not a lot of room to cut left. Its more than those areas, seems to be every single one of their business lines. Auto lending, issues that have had with charging service members, the credit tory lending, the nonprime lending. They have had a lot of problems for a lot of their business. Julia we dont see a steepening in the curve to help it. What about the regulations . What about the regulation . Will help. Dereg there is no one on hington,ulatuoino there is no one focused on the regulation for wells fargo or the cities. Deregulatory in banking last year, that was clear. Everyone agrees the focus needs to be on leveling the Playing Field tween the Community Banks and regional banks and the cities. The same these. What do you like in the banks . I think they are by and large a hold. Community banks are where you want to be. Julia managing director and bank analyst at Graham Fisher and co. We get more insight on banks when we talk to the cfo of wells fargo. Thats coming up at four clock p. M. Eastern time, 9 00 p. M. In london. Scarlet coming up, the admission. Chipmaker announces bone abilities in its risks. You can see amg recovering a bit today after coming back on tuesd thursday. This is bloomberg. Scarlet this is bloomberg markets, im scarlet fu. Julia im julia chatterley. Vulnerabilities related to chipmakers continue. Amd reveals the weakness can put processors at risk. Rolling back earlier assurances. Emily chang joins us in San Francisco with more on that and the other headlines. Emily im here with alastair, Eric Newcomer, i will start with you. What is the latest on this flaw . How sweeping is it . The next thing i think will be the focus is these Big Computers that run the internet we all use. Intel says ition, is an industrywide issue, 100 of the market servers. Its their issue at this point. The patches they are coming out with fixes to servers havent really been tested. Have of personal computers been tested, so we dont know the impact. If youre going to have to computer, you want to hack an internet server, not a pc. Emily how much time will it take for the fix is to be available and work . They are bringing out new patches right now. I think they are getting out there, but the thing to watch is the impact of how slow will the service be . Will they be able to reboot properly, or crash all the time . That will be a thing to watch. Emily eric, you have a story about lubers panic button, which allows them to shut down and hide all Customer Data if they were raided. How does this work . People dont realize 20152016, uber was getting raided by police, tax authorities, all over the world. They were facing police storming into their offices, employees wouldnt know what to do. Headquarters had an interesting solution, to lock down all of their files when they found out they were occurring. Police may be wandering around offices, but wouldnt be able to access the computer systems. Emily were they using this in a the u. S. , or around the world for foreign organizations who may not have had legal intentions . This is outside the u. S. , Different Countries have different cultures around police raids. Theres certainly reasons why it uber global wouldnt want wider data in new york being obtained by local authorities in paris. There is a logic behind it, but it will raise questions for governments about whether they were able to obtain all of the information they had a warrant to obtain. Emily what is the latest on the new ceo being brought into the company . We have talked about skeletons the you think there will be more stories like this . He might be surprised. A i think he is undertaking pretty thorough attempt to understand what went on. How much people who have been booted from the company or left are going to provide that information. Hes taking an effort along with his chief legal officer to get a grip on it. The fact that the company proactively revealed that hack, it didnt cover it up. I think it is a strong sign that they are willing to come forward. In this case, from their statements, it seems like they are not disowning the program, they think there is a logic to it. I think this is different circumstance in their opinion. In the case where they find legitimate problems, they are trying to disclose those, especially when they have an obligation. Emily ces is wrapping up, what were the overall takeaways that you think will be lasting . Cars, ar, speakers are probably the pic. Google wasers, there in a big way. I look at big Ten Companies and whether they turn up at ces at the level. Google is trying to catch amazon. They had a huge booth and a lot of marketing. That shows that they are trying really hard to catch amazon in the speaker race. On the car front, the main message was self driving cars are coming, but it will take longer than we thought. Theres some great progress being made. Starting to best tested with no pedals and steering wheels. Finally, on ar, amazon is possibly doing some ar glasses soon. Our tech editor, bloomberg reported Eric Newcomer Eric Newcomer, i will send it back to you. Chang in San Francisco. To an into Bloomberg Technology later today. Emily will speak with congressman ro khanna of california. Scarlet in the meantime, lets get a check of some of the biggest business stories in the news right now. Scarlet d shots had to build an lows. Stake in the firm intends to use its holding to make changes at the retail chain. Lowes has been struggling against home depot to avoid a retail slump. Representatives for both the shock and lows declined comment. Are bezos and his wife donating 30 million to the dream. Us. It helps Pay College Tuition for undocumented immigrants. He says his father came to the u. S. At the age of 16 alone and unable to speak english. His donation is the largest ever received by the organization. That is your business flash update. Julia still ahead, paris and its rivals. Help didnt play in todays option inside. From new york, this is bloomberg. Julia this is bloomberg markets. Im julie chatterley. Scarlet im scarlet fu. It is time for options insight with abigail doolittle. Abigail joining me is dan, president at market take her mentoring. Market take her mentoring. We have seen this run for stocks, the latest fuel, the Economic Data we have had. As we look ahead, what catalyst are you looking for . Do you think we will continue to see this momentum . I think we are likely to continue seeing this momentum. We will keep watching Economic News keep looking at the fed, i think a lot of this is fueled by the tax cut. It is a case of rumor and news. Ie when are the others one of the other events were looking ahead to has to do with the imposition of the tariffs on imported solar modules. That could happen at the end of the month. It has helped one stock in particular, solar. Your trade has to do with that stock. What to your attention beyond the news to a trade on first solar . When i set of traits, i like the perfect storm. A combination of a technical and fundamental set up. What to my attention was the stock because of the story of the potential tariffs, it could be up to 35 if all goes the way first solar hopes. We also see support at 71 a share. More support down at about 67. 5, if you look at a chart, once it has gone above these support levels, all year it never looks back. Julie you have your fundamental and technical thesis. What does the trade look like . You are selling a put spread rather than buying a call spread. Why did you make that choice . There is an important distinction. At trade that i am looking is selling the february 18 expiration 67. 5 put, then buying the 62. 5 put. Right now, in pride volatility in first solar, it is elevated. Options are more expensive. I would rather sell Something Like selling a quick credit spread rather than by a call spread or a call debit spread andpay over and above what i should be paying. Julie we will be watching this into the end of the month. See if they get they further bump. Have a great weekend, good to see you. Julia, back to you. Julia thank you, julie. Still ahead, cfo of wells fargo. His insight on the latest bank results and how they will be affected by tax cuts. We keep saying this will be the critical thing for these banks. What they say about the implications of tax rather than the quarterly earnings. Going to be at 4 00 p. M. Eastern time. From new york, this is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Mark im Mark Crumpton with first word news. South africas ruling party is calling President Trumps comments on african immigrants extremely offensive. Jessie duarte of the African National Congress Told reporters the developing countries do have problems. Its not as if the United States doesnt have difficulties. Millions of Unemployed People in the u. S. , millions who dont have Health Care Services or access to education. We would not dare to make about anys derogatory country that is in, any social economic or other difficulty. Mark el salvador says it sent a diplomatic protest note to the United States, expressing the countrys resounding rejection of President Trump remarks. Salvador demands respect for its brave and dignified people. U. S. Ambassador to panama is stepping down, reportedly saying he can no longer serve the trump administration. Thats according to multiple media reports. The state department