For the s p 500 in the last week, and then there was a lot of selling. The nasdaq was briefly in the green before fading back down. Seems as though the concerns last week about higher Interest Rates and the feedback loop into the u. S. Economy are persisting. As well as the sense that the market was overdue for a correction, even as we get some investors saying that it is no cause for alarm. We have seen the point swing increase in the averages. The s p and the nasdaq, with a trading range in the s p 500, swung back to the market. They really hadnt been there in the past year. You see a clear up trend in the average in terms of the swings in the points in the s p 500. This as we watch the vix today go to its highest since november 4 of 2016. The worst performing group today, speaking of a return to volatility, the s p 500 volatility index. We are definitely seeing a risk off scenario that has to do with whats going on with the earnings from these companies. Hass becomes the latest to report a wider than estimated loss. You can see that its down 5 of Natural Gas Prices falling. On a forecast for warmer weather in the second half of february. Its not necessarily here right now. Pete energy being pushed by that. ,xxon mobil, incredible decline as a largecap company it doesnt tend to move around a lot, but it is falling again after the disappointing Earnings Report from last week. What is also fascinating about the declines we are seeing is that they are coming despite relative strength in largecap technology. The socalled thing stocks really outperformed and help to support the market overall, but thats not happening right now, even though many of these stocks are rallying, they are not rallying enough, or enough to offset what we are seeing elsewhere in the market right now, david. Thanks, julie. Congress needs to act once again to avoid government shutdown. What stands between us and keeping the government open . House Republican Leaders are set to discuss this with their members at a Conference Meeting at 7 p. M. Later today. I am told that no decision has been made on what kind of government funding bill they will bring up. My colleagues and i have heard from sources that they are discussing a measure to keep the government funded until late in march, buying time for the immigration debate. A lot remains in the air. We know that democrats dont quite have the appetite for a confrontation similar to the one that led to shut down just a few weeks ago. Iery we are hearing that a partisan immigration bill could be in the works. That would include money to study border security, but not a border wall. How does that sit with the president . Not well. The white house is not in favor of a plan that resembles the one being put out today. It is a companion bill for the legislation already introduced in the house. The white house is demanding appropriate border funding. In other words, not a promise down the road. They want it to be included as part of any daca deal, otherwise it is a nonstarter for them. That is less contentious than many seem to believe it is. The most contentious issue standing in the way is the president s demand for cuts to Legal Immigration, specifically family sponsorships of adult children, siblings, and parents of american citizens. That. Ats are saying no to it also remains unclear if a majority of House Republicans will support a legal status for any of these young people brought here illegally. What about within the congress . We do have some support for a sort of centrist sort of approach. Is this not enough to get through congress . Probably it is not enough to get it through the house of representatives, which leans a lot more conservative on immigration. It probably will be enough if it comes up on the floor for a vote without amendments that poison it to get through the senate. A move pointt of with the president , so i think that will be problematic, when the votes come up in congress. Particularly these conservative members, who will take the president us position into consideration when they make their decision. Trump, sayingnt over the weekend that the memo released by the House Intelligence Committee totally vindicates him in the russia probe. Could we see a democratic counter memo anytime soon . House are hoping to move as early as today to have a vote to release their own counter memo. The memo has been the subject of a big political firestorm. Democrats essentially dispute the central allegation in the memo, written by republicans on the house intel committee. What the democrats dispute is the allegation that the steel dossier funded by democrats was the central basis for the warrant that led to spying on carter page, a former Trump Campaign aide. We will see what democrats wind up producing, what they are able to offer to dispute that allegation, but that is being used by the president himself to argue that the current russia investigation, an offshoot of the previous one in 2016, is built on shaky grounds and that the investigators are biased. Lets see what that memo says. Thank you shery for the updates. Coming up in the next hour, we will have live coverage of the president s remarks on taxes from ohio. Coming up, an exclusive interview with minneapolis fed president Neel Kashkari. With the economy gaining speed, does he think that more than three right three rate hikes are in store this year . This is bloomberg. Shery this is Bloomberg Markets balance of power, im shery ahn. David and im david westin. Taylor . Barnier, and the u. K. Brexit secretary met in downing street yesterday. He warned the u. K. To prepare for the inevitable trade challenges if they move ahead with plans to exit the single market. We are with the Customs Union. Setting aside the secret market. Balanced through trades, goods, and services. The time has come to make a choice. Prime minister theresa mays office has made it clear that the United Nations will not remain in a Customs Union with with theter they break block. The south African Ruling Party is facing one of its Biggest Challenges since 1994,. Truggling critics of jason zuma, as well as supporters of the president , gathered outside of their Party Headquarters today in johannesburg as the two dozen members of the Ruling Party National working committee began to arrive for meetings to discuss zumas fate. Leaving almost one year after he was detained in a bribery suspended high court the sentence that put him on probation for four years. He was the highest profile figure caught in a probe to bring down the former south korean president. Safety investigators in South Carolina say a fatal passenger train crash could have been prevented. The switch was locked in the wrong position, sending the amtrak train down the wrong track. Two people were killed, 100 injured when an amtrak train crashed into a freight train. Eight people remain hospitalized. Global news, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. A big day for the fed, the central bank has a new chairman. Jerome powell was sworn in earlier today. Onres a lot of attention what the fed is saying after they suggested that more than three hikes might be coming this year. This as we saw the fastest wage growth in eight years, in january. Lets toss it to betty liu. Betty take you so much. Its so exciting to be here with the minneapolis fed president , Neel Kashkari. Thanks for joining us here on this big weekend. It was a great weekend. My did your team win . Neel im a lifelong Cleveland Browns fan, so im crossing my fingers. But for last night i was hoping end, good game and in the the eagles pulled out the victory. I got both. Betty i felt the same way. Good game. That was a big event over the weekend, but we also have the big event that shery just mentioned, the swearing in of jay powell, coming in at a time when people were saying look, up until now it has been goldilocks. Stock markets were rising until the last couple of days. Now it seems like the markets might be testing things at this point. Do you think that jay powells job is about to get harder . Have all been waiting for inflation to come back up to the 2 target. On friday we saw a hint that wages might be rising. Thats a good thing for the country and a good thing for workers. We need to see. As you know, we have the 2 inflation target and the maximum employment mandate. Sometimes those trade off of each other. With five or six years of experience at the federal reserve, j is well equipped to take this on. You dissented at the last three meetings, saying we should not be hiking rates. Have you changed your position . Neel not yet, but i want to pay close attention to the data. I was paying close attention before, but now with expectations creeping up, there are some signs of life in the employment report that say lets see if this is real. It could be a blip, but lets not ignore it. Shery betty if not when yet, then when . Neel we shouldnt be more concerned than being below target. Any of us are seeing urgency to slam on the brakes, but we have two full of the data. Betty voices are growing as to isther or not this target sustainable. Should the fed be looking at a range instead . Symmetricou look at a 2 target, i look at that as achieving 2 overtime on average. Below sometimes, above other times. You cant finetune it too much. I dont view that as different than having a symmetric target. Betty why not . Neel if youre willing to let it climb above, in. If we are at the symmetric target, we should be going up to 2. 5 inflation for a few years, averaging over time. But im open to having the conversation with my colleagues. Shery do you get a sense that do you get a sense that Wage Inflation might get to a point that by the time we recognize it going forward, it neel be too late . Neel its certain it might be too late . Neel it certainly is possible. But we are not providing that much accommodation today. Because the committee has raised rates a few times in the last couple of years, the neutral. Nterest rate is still very low we are probably only providing about 50 basis points right now. Is relative to neutral. We dont have far to go to be at a neutral or stable Monetary Policy. Betty i want to clarify this, if you were voting this year, would you be voting for these rate hikes . I need to see the data. I have taken a policy of never predicting. I want to see inflation climbed back to the 2 target. I want to see wages climb back. O a sustainable economy not consistently undershooting. Those other measures i am the most focused on. Why do you think the 10 year yield is going up so fast . Neel people seem to be pricing in the tax cut having stronger effect than a few weeks ago. In the long term, i want to see if it is nearly shortterm stimulus or if it abides longterm supplyside benefits. I have been surprised by how much optimism the tax cut seems to have engendered among my contacts around the district. Optimism could lead to more investment or activity. Betty why are you surprised . Neel i dont know. People saw the taxcut coming and there was a sense that assuming ld have have something coming in the next few months, now they are excited by the fact that companies are paying onetime bonuses. Will that translate into Real Investment . I dont know and they dont know. We need to wait and see. David seeing how betty seeing how yields have written trading these last two sessions, going forward, seems that as indicated by futures trade, has the risk of recession increased here . One of the risks i was looking at was the flattening of the yield curve. It has gotten steeper. Thats a good sign, as opposed and the backling end being angered. That would be more concerning to me. The fact that it is steepening of it takes off the pressure, saying that if the bond market inflation keep up, that might be what they need to see. Alan greenspan was talking about asset bubbles in stocks and bonds. Would you agree . I think thats taking it too far. Valuation certainly seems on the high end in terms of the stock market. We will see. Maybe the taxcut will lead to stronger earnings growth. If you look at the cutting of corporate taxes, meaningfully it has a drop to the bottom line and stocks could be pricing in higher earningspershare. In addition, if the bond market and stock market are pricing in a lower longterm yield, that could also lead to higher valuations. I dont see a crisis on the horizon, but we are paying close attention to it. Betty what is the biggest current risk to the economy . Neel if Oil Prices Take off, that could be a big negative shock to economic growth. I think the dollar will put on inflationary pressures. These are all things, but at the same time you are getting growth from all over the world. Thats a great economic environment to be in. Right now i would say the risks are balanced, i would hope that you would have these good problems for the reserve. Id if we continue to see betty if we continue to see this exhilaration in wage growth, our Companies Want to take that and transfer it over to higher Consumer Prices . Do you think that is going to happen . In some sense, i hope so. Business always tells me that they cannot find workers, but they are not raising wages. It is an anchored inflation expectation. People expecting inflation to be low. If we see businesses raising wages, not just onetime bonuses, but raising the hourly weights, passing that on consumers so that inflation builds, that tells me that we are achieving the dual mandate assigned. The fed has powerful tools to keep inflation from getting too high. We have limited tools, if it continues to run low. In some sense thats a good problem to have. Betty do you feel at all the we need to be rethinking Monetary Policy tools, given what we have experience with this low. Nemployment should we be rethinking completely some of the Monetary Policy tools . So. i dont think again, when i look at the metric of the target, we have been treating it like a ceiling. Up,y time inflation creeps we cap the brakes. Its ok to go a little bit , there shouldnt be any more concerns about that, as long as we are completely committed, and we are, to keeping inflation in check over the longterm, these minor variations around 2 should not concern us too much. I think we have more flexibility than we are willing to admit. Betty putting on your market hat, is it too much emphasis on where the 3 level ends up . Is there too much focus on that . In general, there is too much focus on data. The average hours that workers work actually went down. The total takehome pay for workers wasnt so high as the 2. 9 Hourly Earnings growth suggested. As a general rule, we need to look at the longerterm and a broader range of data and not be too focused on the 10 year today or Hourly Earnings on one day. Before we go, i know that you tweeted some nice words to janet yellen. She did expressed disappointment for she wasnt nominated four years. Do you think that she deserved four more years at the fed . Neel i said so publicly, beforehand. But at the end of the day it is the president s call, and every president gets to make his own appointment. I think the president made an outstanding choice in jay powell. I think he has got great experience. Hes not an ideologue. Hes pragmatic and a consensus builder. He will do a great job. What is one thing you have learned from janet yellen that we dont know . Neel you may not go that about her. She has excellent interpersonal skills. Some people will assume that economists do not, but she made a point of calling every fed president and every governor personally before each meeting to talk about our outlooks. She ran very efficient meetings and was exceptionally wellprepared and worked hard to build a consensus. I know that everyone appreciated the care and time she put into that. Fory all right, thanks joining us on this historic day weekend. [laughter] shery, im going to toss it back to you. Shery great interview, there, betty. David in the meantime, where are we . Taylor we are at the lows of at session julie we are the lows of the session here. The s p 500 is off by 38, 39 still erie of the nasdaq, on a relative basis, the least bad of the three. Just as we were seeing for much of the month of january, momentum to the upside. Now there seems to be momentum to the downside that is not necessarily catalyst or news driven. Yes im a we got a measure of this morning that came in better than estimated, we still have this evidence that the economic recovery is helping and continuing, but we didnt see the movement in bond yield that we saw last week. Bond yield is not seeing much change today to match that a climate we are seeing in the u. S. Averages. For weeks now, if not months, we for had folks calling correction in the as and p 500. I should mention that now, if you compare today with the close of trading, back on the 26th of january, when stocks closed at record highs on friday, when we ,aw the big upsurge in stocks we have got a 5 pullback. We are getting towards recordbreaking streaks of gains for the s p 500, without this 5 pullback. If it sticks today, we have broken that streak. Down from the close on january 26. As we are watching the selloff, of course, its not just u. S. Stocks, it is across risk assets, including one of the hot areas, the hot assets of late last year, talking bitcoin. Breaking below 7,000 per bitcoin today. We see that pullback from the peak in december. Of course, what is also perhaps amusing about this chart is that it has more than doubled in the past year david . Julie hyman, last year the past year. David thank you so much. This is bloomberg. David this is Bloomberg Markets. Bloomberg markets balance of power. Shery we continue to see that selloff deepening in the afternoon session, the dow losing over 400 points, down 1. 7 . Volatility and equity markets surging at the moment, the vix rising above 20 for the First Time Since 2016. The s p 500 falling around the crucial support level of the 50 Day Moving Average at the moment , losing 1. 5 . The nasdaq is also down 1 . We also have all other asset classes, like energy, natural gas, wti, also losing ground. Take a look at what the dollar is doing as we see this risk off sentiment, bouncing back 3 10 of 1 as the risk off continues. The treasury yield, now losing ground as we see that rebound in treasuries. The yield curve continuing to steepen. We just heard from the fed , sayingt, Neel Kashkari that a steepening yield curve is a good thing for a third day. Globally, also, the selloff continuing with emerging markets at a threeweek low. We turn now to taylor riggs for first word headlines. Taylor the top democrat on the House Intelligent Committee getting tough words from the president. Adam schiff was accused of being one of the biggest liars and leakers in washington. He was highly critical of President Trump during the fight over that controversial republican memo. President s tweets false smear. A report that american troops have started to pull out of iraq. According to the associated press, the drawdown comes after the u. S. Victory over the Islamic State last year. The u. S. Army says that the presence there will be based on conditions. Theresa may, likely not to survive the civil war over brexit. Plus, potential leadership rival, jacob rees, he has urged quitting the eu without transition. She has held onto her job so far by avoiding too much clarity on what the british divorce will look like. Beer,ther of auto warm joined by mike pence as a special guest this week. This according to a Trump Administration a fizzle. To bringvited attention to the human rights abuses of the kim jongun regime. Powered by 2700 journalists and analysts in more than 120 countries, im taylor riggs. This is bloomberg. David as pointed out earlier, markets are down again today. Task started to wear thin . The stock market is facing its roughest stretch of its presidency. They have looked at it from both the federal and state levels. Welcome toson, bloomberg. Good to have you. Asa good to be with you, david. Lets start with the markets and where we are in the economy. As you know, markets go up and down. President has not been shy in claiming credit for markets going up, does he get lame for markets going down . Asa there will always be fluctuations. This is somewhat of a significant decline. We have had what, eight years of strong economic expansion . That is generally a sign that there will be a change. The fact that we had the federal tax bill gives us optimism about another sustained economic growth. Despite the change in the market for now, which we hope is see incredible good signs and optimism in the economy as a whole. Our companies are expanding and they are taking the benefit of puttingral tax bill and it in employee bonuses or are expanding jobs. This will help incredibly in terms of the economy. Consumer spending is up. In arkansas, consumers still have confidence in the growing economy. Gdp growth is higher than he national average. Im very optimistic about where we are going. Youy you were in david were in that business before they were, but are you concerned about the timing of this, when we still have a fair amount of accommodation on the monetary side . Is there a danger of overheating the economy . Asa i think the test is whether we can expand with this new tax bill and do it in a way that overcomes the train on the deficit. As you know, the cbo scored it heavily, but they did not count the dynamics of economic growth. We believe it will be higher growth that will offset that. I think that is a test that we will watch in the coming year. But right now, i think that there is room for optimism and reason for it and i hope it continues. Shery does it worry you that the budget deficit could lead to running out of fiscal options . Asa sure, anybody who has been in congress shery but nobody talks about it anymore. Asa they need to talk about it more. The last time i was in congress was the last time there was a balanced budget. Sure, we need to talk about the deficit in the terms of needing to reduce it, getting back to a , needingbudget structural reform in washington. There is a lot more that needs to be done. I hope that congress can give positive signs that we are going to address that. I think the big test will be whether this tax cut works in terms of expanding growth, so that it does not expand the deficit. That is very important to us. Of course, if, i think the Consumer Spending and the inflationary growth is over worried right now. I dont think thats going to happen. It hasnt in the pattern in the United States. If that can be controlled, even if the Interest Rates pick up a bit, we will continue to expand. Shery could trade tensions take away from the benefits of tax cuts . Asa if we dont Pay Attention to it, yes. Everything from agriculture to tysons and the manufacturing that really is dependent upon that trade and the opportunities to expand in the global marketplace. Very important. I agree with the president and tough helped us with his positions that have increased manufacturing opportunities to return to the United States. But if you dont manage it well so that we can continue the emphasis on global trade and just negotiate a better position, we could hurt ourselves. David how confident are you that the president will not overplay his hands his hand . Some of the things he has said, youve got potential problems with china. Youve got a lot of investment coming into arkansas from china. How concerned are you that we might push it too far . I have lived long enough that i remember the trade embargoes of the past, its our ways agriculture that gets hurt the first the worst. If we overplay our hand, at some point there will be retaliation, hurting us in arkansas and in our farming community. Is the president overplaying his hand . You always have to judge this president by actions and outcomes. Thus far, on actions and outcomes, hes still ahead of the game. Whats the bigger problem for the United States, from your perspective . China . Or nafta . The first one would be nafta. Look at canada and mexico, our leading trading partners in terms of agriculture. , integration, from aerodynamics to the automobile industry, thats the most significant. If china once to invest in the United States in terms of manufacturing, if they want to have access to the entire north American Market and not just the United States, its very important that we continue that trade. Shery thank you for your insight, governor. Stick around. A check on the markets, a selloff continues in the afternoon session. The dow is down now 400 and 50 points. We are seeing the worst month, the lowest in the month already. All sectors in the red. The s p 500 is losing 1. 5 percent, while the nasdaq is down 1 . Live from new york, this is bloomberg. David this is Bloomberg Markets balance of power, im david westin. Shery and im shery ahn. We are back with governor asa hutchinson. President trump has presented his immigration stance, he wants to see from congress. Who is going to move these negotiations forward . You see the president more engaged on this issue, providing a leadership role. He put forward a leadership proposal to congress, contrasting with other issues where he said congress, this is what we want you to accomplish, so do it. I think that he set the goal post right, address the dreamer issue, and then order security. What is in between should be negotiable. That is a good starting point. Congress needs to respond and act on this. President trump, arriving in cincinnati. Is headed to a Manufacturing Company to deliver remarks on his tax reform bill, continuing the conversation on what the president wants, when it comes to immigration you pointed to the pillars that the president wants to see, but how realistic are they when we are talking about a border wall. He wants to see a wall in restricting family sponsorship, a no go for many democrats. Shery it shouldnt be. Asa it shouldnt be. Whenever you are talking about this, first of all, you have to have border security. It is an absolute for the president , and it should be. He has leaned forward on the dreamer issue. Giving our country what we need in saying that you have got to address this. In between, we have Legal Immigration that should be negotiable as to what the string is of the Legal Immigration. Is it going to be changing the family immigration part of . Is it going to be changing the lottery system . That can be negotiable, but there needs to be reform of that. We need to maintain that legal flow of immigration, it means so much to our economy, to the fabric of america. I think that is what he is trying to articulate, shutting off that low of immigration to the country. But you cannot reduce the overwhelmingly legal side, that would hurt the economy and change, really, the structure of where we are going. Governor, you are responsible for that. What is realistic, what really should be done . On the one hand we hear bill the wall all the way across, others say thats nonsense. You know this world. What really would work . To be a combination of security measures along the southern border. There are some places that physically, you cannot actually put a physical wall. I believe the president understands that, and he has the typexibility as to of wall and the areas in which you want to have that fiscal barrier physical barrier. Other areas, there has to be surveillance, electronics, very sophisticated equipment, as well as human personnel. Its got to be that combination. Also, and i think that he suggested these numbers, where it was a reasonable amount that the democrats could accept. David what is that . On the one hand we hear a few hundred million, then we hear 25 billion from the president. What is a number that makes sense to you . Asa the president positive number is where it should be. It will take that kind of investment to secure the southern border. It should not simply be increasing the numbers of order patrol and agents out there, they are doing an amazing job, but it cant just be that, that will cost us for a long, long time in terms of human investment. It has to be a more sophisticated part of it. It also has to be that verification of our employment systems. That is what pulls them in there, the opportunity to get a job without sufficient verification. It needs to be both systems. Shery let me touch on infrastructure. This will require a lot of investment. Federal spending, it will not be that much, so how much more of the burden can you, as a state, take on . Be measured and more on the conservative side, because additional investments will have to come from private sector partnerships or by some type of new fees or tax increases for highway and infrastructure. The states dont particularly want to do that part of it. The 200 million, i believe it is, in Infrastructure Investment is significant and can be maximized if the states do access and partner with that. Its not just highways, this is talking about bridge construction thats needed. It could be water projects and a combination of federal investment with the state partnership and the private sector that can really spur that growth. I think it is important and we should have bipartisan support for that. I hope the congress can do it, even though it might not 1 trillion investment originally mentioned. Governor, great to have you with us. As we go over this, President Trump is there an ohio, with his wife on the right. A speech on his tax package in cincinnati in a few minutes. U. S. Stocks, resuming that slide. Abigail doolittle has an update. You are absolutely right. The dow, the s p 500, sharply lower. The s p 500 and the nasdaq, down for a third a in a row. On pace for its worst three days since the brexit. This follows last week, last week being the worst Weekly Performance for the three major averages since early 2016. Back above 20, 23 is the highest reading in quite some time, trading higher by 31 today. Volatility is back, uncertainty is back. A piece of it is the move up in yields. The 10 year yield is up 42 basis points. Represented in red, it tells us that haven bonds are selling off as stocks selloff. This is somewhat unusual. Pointing to the fed being on pace to raise rates. A is certainly causing repricing risk. January was a big up month for stocks. This is a chart of the nasdaq 100, which has been rising, rising, rising. In fact, relative to january, a big rally. Pullback was suggested by the oscillator on the bottom. Conditions were so overbought, we are seeing a natural correction down to the 50 Day Moving Average. Telling us that the nearterm buyers have disappeared, to some degree. Selling pressure is likely to intensify. We are seeing a correction from overbought conditions. Bitcoin, you cannot go a day without talking about bitcoin. In the last six months, you can see that coin is up in a big way , more of a double from the peak last year, down more than 60 . The question used to be, what, bitcoin and a bubble . Down more than 60 from the peak , how can we not get is in a bubble . Beers,ion, bubbles, tightening down in terms of the trading, those are among the concerns for bitcoin. Shery not going to bubble anymore. Abigail bubble, pop. Shery thank you so much for that. We will continue to monitor that selloff. Live from new york, this is bloomberg. Im scarlet fu am withouti chatterley, welcome to Bloomberg Markets. Scarlet we are live from bloomberg headquarters and you are the top stories we are covering. Resuming, u. S. Stocks a decline is this a healthy correction or could it be Something Else . Donald trump touts taxes. Cuts onle plan puts tax the battlefront. Just stops taking a tumble, super bowl ratings also for the first time in nearly eight years. A check of how things are faring with julie hyman. Down therewell has been a big swing that has occurred in todays sess