The close of the u. S. Trading. Lets get a check on where stocks are trading with julie hyman. Yellensjanet testimony gave the markets another rally. Julie and day how many of the Health Care Debate . Of ave not seen that much reaction yes, they have climbed from the lows of the session but almost a black line on health care today as the move appears to be incremental. Jason gorman, who covers health care for bloomberg intelligence, says maybe this gets closer in the senate, but still an uphill battle in the house. Health care not getting much of a reaction. We are seeing a rally, albeit a muted one, on day 2 of Janet Yellens testimony. Dow rising to a record again to. Ransports also rallying s p and nasdaq, not much changed, but something of an upward bias. On the bloomberg, you have a mixed picture. Financials are bouncing after yesterdays declines to technology continuing what has been an impressive rally. The fifth straight day we have seen the nasdaq higher. Have not seen a rally like that that long all year, if you look at the magnitude of the fiveday gain, and the individual largecap components rallying. Telecom stocks are down half percent today. When i mentioned the financials and the bounceback, it has also to do with what is going on with bonds. The 10year yield the we saw the yield fall yesterday. s testimony this morning, and cpi data tomorrow the feds preferred inflation indicator, we dont get that until later. In the absence of that, what we are getting is cpi tomorrow morning, and the traders will be paying a lot of attention to that as we see a little bit of a bounce in yields. We will see what kind of direction as janet yellen is talking about inflation, potentially transitory. Julia thanks very much, julie. Now to washington. The revised Senate Health care plan is out but it remains in jeopardy with divisions in the party. Senate Majority Leader Mitch Mcconnell spoke earlier on the senate floor. Afterr mcconnell numerous meetings with constituents and intensive conversations with members from our conference has updated last better care discussion draft with additional provisions to make it stronger. Lets get to kevin cirilli, chief washington correspondent for Bloomberg News. Give us the details of what the revised plan looks like. Thatonal journal saying Susan Collins and rand paul are out. Portmanenator rob clarified his position to reporters, saying he is undecided, as is senator mike lee, an ultraconservative in the senate. Senator Susan Collins and senator rand paul, a moderate and a conservative. There is no room for ever for the majority of your as he looks to get his bill across the finish line. Money to stabilize the market in addition to the 112 million in the original bill he put forward. It keeps in place some obamacare taxes. I caught up with senator bob corker, republican from tennessee, whether conservatives are open to keeping these taxes. Senator corker what it does is keep revenue base in place. Tax reform will do with what taxes should be in place. I dont think anybody should look at the particular types of taxes, but just look at that as a revenue base. About an hour ago i spoke to senator lindsey graham, republican from south carolina. He put forth his own plan and he said it would put more taxes in place for majority leader. Julia kevin, great to hear from you there. Kevin cirilli, chief washington correspondent for Bloomberg News. Republicanming up, senator Richard Shelby of alabama will be weighing in on the revised healthcare bill. He will join us from capitol hill in a few moments. In the meantime, we want to bring in gary shilling, a Bloomberg View columnist. Before we get to janet yellen, the fed, and monetary policy, want to get your quick thoughts on the Health Care Bill. Do you folded into any of your analysis . Particularlye to, with what it means for the whole trump trade. There was enthusiasm initially that they would get permissions in the health care, deregulation, lower taxes, huge fiscal stimuli, and so on. I think people have come to the realization that it is going to take a lot longer. Trump ran as an outsider, running against not only democrats, but a lot of republicans as well. He really does not have the congress behind him. There is a lot of controversy, anytime goodies are taken away from anybody. That is bad in the eyes of many people. It is tough to see him getting much there. The main question is, what does it do to this whole idea of a new look in washington . Yeah, just more disappointment, or if they can get something, maybe momentum the other way. I dont think we can be overly enthusiastic at this point. Scarlet speaking of goodies, the Central Banks are still stimulative, accommodative. Janet yellen testifying for a second day. How does that change your view of what is to come . They are typically happy with higher rates because they drag their heels on raising by anywhereosits, from six months to 18 months. They can go behind, and that is important now. Ratherhas been growing modestly, to put it euphemistically. It does make the banks happier. The other point, you have to fundamentally say, scarlet, the old adage, dont fight the fed. When the fed starts raising , in 11then inevitably out of 12 times in the post period, you get a recession. Right now they are not only raising rates, but they are trying to do quantitative easing. Theyve not had to do with before. Theyey can pull this off, will be geniuses, but you have got to be skeptical just on a statistical basis. Scarlet clearly you are skeptical. Julia i love your point, 12 attempts since world war ii on cooling the economy and all he wants without a recession. Only once without a recession. Inflation is also a problem for janet yellen and she introduced elements of uncertainty this week, and markets took that as recent to party and that rates will be lower longer. Gary i have been talking about disinflation longer than you have been alive. [laughter] gary you have come to the source. That is the thing the fed doesnt realize. They think we are in a typical postwar expansion, where, sure, the Unemployment Rate goes down, rates have to go up. Well, they are missing a couple of things to the Unemployment Rate is going down not because you have more jobs, but because people have dropped out of the labor force. Some of them are starting to come in, or reserve army of people who have come in. Another thing is globalization. You and i just looking at labor supply in the u. S. Context you are not just looking at labor supply in the u. S. Context, but on a global basis. A lot of smart people down there, but they dont seem to get it, and they happen trying the same game since now 2009. You would think after a while they would try something else. Julia it is not working. The oil crisis critical as well for inflation. You are predicting 10 to 20 oil. That is eliminating. Is, youll, the point have an excess supply situation, and it is getting even more so, because american factors are adding american frackers are adding more than opec can take out. They are cheating on themselves. The longer this goes, the harder it is for them to keep that agreement together to just 1. 8 Million Barrels a day. The point is, it is inventories and if they cannot reduce is inventories, then the dollar pressure is on prices. When you look at what is the martial cost when youre in a price war, it is in the average cost. The full cycle cost is meeting the budget, it is the marginal cost. Once the holes are drilled and the oil is flowing, what does it cost to get to market . In the Permian Basin in texas, 10 to 20 a barrel and less in the middle east. Scarlet you have this bullish forecast of 10 to 20 a barrel for oil. We saw oil prices dropped earlier this year and it didnt dropped on equity prices. Why not . Gary actually, on balance, if you look at this since the started they started in on this program, november 2014, there has been a positive correlation between oil prices and stocks. In other words, if oil prices go up, stocks go up. And if oil prices go down, stocks are down. You would think the reverse. We are still and oilimporting nation. Lower prices mean lower oil bills more money for people to spend. Something else is overshadowing this effect. I think it is probably the financial risk, not for the major oil copies, but for the medium and smaller ones, which we saw go bust when oil prices collapsed 2 years ago. That is what is going on, then you really have this problem. Even if we take the oil out of the s p 500, we find these positive correlations still exist. We wrote this up in the monthly newsletter. And a column on that. Scarlet we saw it. Julia definitely check that out. Gary shilling, Bloomberg View columnist, thank you. Now lets get a check on the first word is with mark crumpton. Mark President Trump is again defending his son for meeting with a russian lawyer during last years president ial election campaign. The president was asked about the meeting in paris during a joint press conference with french president emmanuel macron. It is calledmp opposition research, or Even Research into your opponent. I have only been in politics for two years, but i have had many gee, weall up oh, have information on this factor or this person, and frankly, hillary, that is her standard in politics. Politics is not the nicest business in the world, but it is the standard where they have the information and you take the information. Mark the president also blamed the media for, in his words, making a big deal of it. Attorney general Jeff Sessions cause of the Largest Health care fraud take out operation in american history. Prosecutors have charged more than 400 people, including 6 michigan dollars in a florida rehab facility, in connection with the Health Care Fraud scam that totaled 1. 3 billion. The Justice Department says those charges include more than 120 people accused of prescribing and distributing opioids and other narcotics could former president jimmy carter is being treated for dehydration in canada, where he is helping to build houses for habitat for humanity. The group says the 92yearold carter was dehydrated working in the hot sun and the building site in winnipeg. The former president reportedly taken to the hospital for observation. Mr. Carter told habitat officials he is ok, and encourage volunteers to keep the building. Chinas jailed Nobel Peace Prize has died fromobo multiple organ failure related to cancer. The 63yearold author and former University Lecturer was transferred from prison to a hospital last month after his condition worsened. The activist was in prison for his calls for a direct election and freedom to assemble. In a statement, secretary of state Rex Tillerson expressed condolences and called out the Chinese Government to release lius wife, who is under house arrest, and allow her to leave china. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Scarlet thanks so much, mark. Coming up, we will talk the state of the Senate Health care bill with republican senator Richard Shelby of alabama. We already have 2 nos from Party Members get from new york, this is bloomberg. Julia this is bloomberg markets. I am julia chatterley. Scarlet i am scarlet fu. Senator Mitch Mcconnell has unveiled a Health Care Bill but will he get enough support . Senator Richard Shelby from alabama and a member of the Senate Banking committee. That randstart with paul has come out against the bill and senator Susan Collins has indicated she will not vote for it. Do you expect debate to be open on the bill and you expect a vote next week . Sen. Shelby well, that is an excellent question. We lost 2, we cannot lose any others. We will wait and see. Never count out Mitch Mcconnell. He has worked the system, he knows how to do it. If it can be done if we can get 50 yeses to go to motion to proceed on the bill where we can debate the bill, amend the bill, so forth, that is what we should do. I was an original, and still am, straightout repeal man. We should, but that is not in the offing right now. The question is, are we going to debate the bill . We should. Are we going to do it next week . We dont know yet. But this still is a big improvement to a lot of the naysayers on the bill to begin with. I do have problems with this bill. There bigll in taxes are still in there, which i talked about being a bad part of any bill, that part of obamacare scarlet does that make it a no vote for you, then . Sen. Shelby im trying to work to yes. I want to work to yes where we can salvage something. It wont be everything i wanted, which is a straightout repeal. But if we can get an improvement over what we have now, that would be progress, and we can fight another day. But we have got to fight next week to fight another day. Yes, this still stands, senator . Sen. Shelby what now . Julia are you and yes . At yes . Sen. Shelby oh, you can count me at yes. It is a moving target things change, they come up with different things. But ive always been a yes. It is better than no and the status quo, where we are now, which is horrible. Julia do you think tax reform is a bargaining chip here for some of the conservatives . They may not get what they want in this health care repeal, but they could be made promises that they will get what they want with some kind of future tax reform. Is that an option for Mitch Mcconnell to get these nos on board . Sen. Shelby well, i dont know who the leader is talking to specifically and what he is saying. Tax reform to meet should be separate from health care. 2 different things. Im focused on repealing the Health Care Bill, improving if we cant repeal it. I am also for fundamental tax reform. That will come later in the fall. As you Mitch Mcconnell, know, delayed the august recess by 2 weeks. What do you think could be accomplished in those days . Pulled every tax reform and other items . Will there be tax reform and other items . Sen. Shelby on the appropriation process, funding the government every year is important. We come to the october deadline and have not met our obligations. In 2 weeks could help us moving Appropriations Bills and the senate, like they are doing in the house. That would be progress. Julia we want to move on and talk to you about Janet Yellens statement this week. There is a lot of speculation that she wont remain after february of next year. Gary cohen is one of those being suggested as the next fed governor. Do you think he would make a good fed governor . Sen. Shelby oh, i think you got the qualifications. Look at his background and what he is doing now. He would make an excellent chairman of the fed. [coughs] sen. Shelby excuse me. Scarlet he would make an excellent chairman of the Federal Reserve, but as you know, he doesnt come from an economic background. Yes concert on the federal he has not served on the Federal Reserve in any form. He comes from the banking side. What kind of balance would be needed from the Federal Reserve at the top so skill set would be complemented with what we have seen so far to ensure continuity . Sen. Shelby i dont think you need to be an economist, and academic, to be head of the Federal Reserve excuse me. Julia sir, do you want to stop, because you are choking and i dont want you to continue if you are uncomfortable . Sen. Shelby pollen thank you. Scarlet thats fine. Pollen, allergy season. Julia senator Richard Shelby of alabama, thank you for speaking to us. New york reached 90 degrees today well, isnt that hot outside . Scarlet it was pretty bad. Julia that is the skyline of new york. We have details on starbucks latest bid to perk up sales. From new york, this is bloomberg. Scarlet this is bloomberg markets. I am scarlet fu. Julia i am julia chatterley. Time for the biggest business stories in the news right now. Securities are offered to shareholders that were wiped out last month as part of a banks resolution. Plans that lost money could receive stocks or bonds as compensation. For customers who shares between may 26 and th to 23rd of last year. The Worlds Largest coworking space start up plans to open several locations in brazil, argentina, and colombia. It already has five locations in that region. It plans to boost its workforce in latin america by 20,000 next year. With sales lagging in the United States and increasingly saturated coffee market, starbucks is looking to a fraternity favorite to perk up growth. Brews fromfrom a keg. It is testing nitrogeninfused coffee. Starbucks plans to offer the beverage in more than 1400 u. S. Locations by the end of the year. Flash your business update. Scarlet still ahead, the commodities close. Hit withwheat getting a hangover from the crop survey, keeping traders in cell mode. Looking at stocks, we have dow off the top levels of the session. It did hit a record high, up 26 points and in the s p 500, financials leading. Julia some stabilization after the moves we saw with janet yellen sticking to the script. As you can see, relatively unchanged for the u. S. Dollar. And we have oil, just to give you a check. Higher by 1 . From new york, this is bloomberg. From bloomberg World Headquarters in midtown manhattan, this is bloomberg markets. Im scarlet fu. Lets get you started with a look at agriculture. Soybeans, wheat, corn hit hard two days of declines for these agriculture futures after their big runup. You are looking at losses of at least 2. 8 . Moving on to metals, golds bouncing around. Lift, a get a boost little bit of a lift this week as fed chair janet yellen signaled a graduate approach to interestrate increases. Finally moving on to oil, wti is higher, spiking at around 8 00 a. M. Wall street time, the International Energy agent ceases the rebalancing of double oil markets has become less certain with little evidence that stockpiles are shrinking. Global, the ia does say demand is climbing faster than estimated. Ophelia . Energygoing just a quick as well because the price of oil and natural gas remains energy bonds starting to fall in tandem with energy stocks, which may signal trouble ahead. Joining us from houston, our Bloomberg News reporter ryan collins who covers power and gas companies. Us. T to have you with correlation is back between bonds and equities. Why now, when it wasnt earlier this year . Some kind of watershed . Thank you for having me. In entered a bear market june. Starting out at the beginning of the year shareholders were ditching and bondholders did on board, because of the fact that shareholders care about future profit where bondholders just are really worried about getting repaid eventually. As we enter june and Oil Continues to slump, bondholders are starting to pick winners and losers in the market, my sources tell me. What that points to is the fact that it can spell trouble ahead for some companies. Scarlet we saw even more energy filing for bankruptcy greater guess we could see what what you can say about bonds stay higher at the capital things are on hold in 2016. Why . Bankruptcies of Energy Companies in 2016. At that same time, bonds stayed pretty sharp. So, its just a different case. We are at 45 oil, and its a different situation this time around. There are Different Levels of quality, even within the bonds, arent there . If you look at the cs and lower, they are selling off. As set right . Yes. High yield are actually doing pretty well at this point. Its really those energy junk bonds that people are starting to get iffy on. The other question for me now is, what about the broader highyield market . When we saw the big selloff in all, we saw the concerns about not only energy highyield, but also the impact that would have in the highyield credit markets. Why do you think it will be different this time around . Whats changed . There is more hedging. Have protect themselves straight Natural Gas Companies always hedge much more than oil companies. At the same time, they have protected themselves a little bit more this time around. 15 , 20 , i believe great great to chat with you. In the meantime we have to keep an eye on the different senators and the responses to the Health Care Bill. So far we know that rand paul and Susan Collins have indicated they are not on board yet. Richard shelby do we just spoke with says he isnt yet but a lot of work still needs to be done. There are other bills floating around as well, which is the strange thing here. Lindsey graham, bill cassidy as well. Right. Scarlet they have their work cut out for them in the two first two weeks of august. Lets get a check of the headline, bloomberg first word news. Mark President Trumps proposed budget would not balance within 10 years, contrary to the white houses claim, according to a report today by the nonpartisan congressional Budget Office. The cobe estimates the different deficit in 2027 would be 720 billion under mr. Trumps plan. The president s Budget Office said its proposal would result in a 16 billion surplus that year. Still the cbo says the trump budget would reduce the deficit well below current projections. Senate Republican Leaders today released a revised Health Care Plan that would provide an added 70 billion to stabilize insurance exchanges over a decade and efforts to win over gop holdouts. The change comes on top of 112 million for the same purpose in an earlier measure by a Majority Leader Mitch Mcconnell, who helps the modified bill will revive prospects for the embattled Obamacare Repeal effort which stalled about 2 weeks ago. Chuck schumer was not impressed. After 2 weeks of delay weve now seen the revised republican trumpcare bill. It appears that little has changed at the core of the bill. Mark without having seen senator mcconnells latest plan, dozen republicans and Democratic Senators have discussed alternatives. A bipartisan approach that would infuriate conservatives and probably would be a hard sell in the house, when lawmakers in may past their own plan to get obamacare. The ukrainian president Petro Poroshenko says exit should not affect relations between ukraine and the European Union. His remarks came during a meeting in kiev with the European Commission president cker and thejun European Council president great ukraine is not currently a member of the eu but it is linked economically and politically through the Ukraine European Union association agreement. Most important documents, i mean, the association agreement. After the authorization oursion, after this is new reality. And i want just to repeat this quote. The European Union acknowledges european integrations of ukraine. Mark corruption was also discussed, with Jeanclaude Juncker saying ukraines efforts were not satisfactory and quote, lets work was needed. Brazils expresident says he will fight to become the Workers Party candidate. This despite a corruption sentence against him. Yesterday a judge sentenced him for 9 1 2 year term accepting more than 1 million in benefits from a Construction Company in exchange for favors. Te, only thed, quo brazilian people can declare my end. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Style, a up, back in look at why many hedge Fund Employees are now returning to the banking jobs they once left behind. From new york, this is bloomberg. This is bloomberg markets. Im julia charlie. Scarlet and im scarlet fu. Julie looking at retail today, a bit of a rally here in the spider retail index or etf, as the xrt up 2. 5 today, driven largely by target, although target seems to be a point or an excuse for buying here, theres been very poor sentiment in the industry. A lot of poor sales. Target coming out and saying sales this order will increase versus higher forecast projected decrease. Someis seeming to spark veteran sentiment today. The company has been rolling out some new products. Brian cornell has also talked about a strategy of decreased in prices. I know you guys will take more into target later in the show, the shares are 5 right now. They are still down 24 year to date. But they are giving some hope to other retail today, Department Store retailers are also getting a boost in today procession from macys to jcpenney print jcpenney also announcing today it will be coming out with more toy products in its stores. There was an analysts note today that perhaps was helping along the optimism. The goldman analyst saying in a note that fewer calendar destructions in the Second Quarter versus the First Quarter will make for an optically less about quarter, in other words, some timing shift of things like easters, one of the things that perhaps Prescient Company sales in the First Quarter of the year. It is not just Department Stores we are seeing. Many of the Specialty Retail stock also do better in todays session. Now, despite the fact that we are seeing the rallies today, just to put things back in perspective, one of the things thats really put these retailers under pressure has been amazons dominance, everincreasing dominance. You take a look at the bloomberg, what we have is amazon plus market cap in blue which is almost a Straight Line upward versus a basket of other retail stocks. These is now larger than other stocks combined prayed my talk about these other stocks market cap wise, we are talking target, walmart, costco, macys, khohls, macys. Its a basket of stuff and amazon is bigger. Scarlet pretty remarkable chart. Thank you so much. Many investors are returning to their roots, were talking about leaving hedge funds and returning to bigname digs. There are Different Reasons for this. But is this a significant shift . Oin me as Alina Weinstein so, what have you seen . What kind of bankers are leaving hedge funds and going to the south side . I think the area thats been hardest hit as an asset class has been macro funds. Thats what were really seeing, rates traders hoping they would have maybe a bigger heyday at a hedge fund. It hasnt really worked out. And they are going back. But they are not going back into trading. That is a no go zone and will continue to be. Going back to managed groups, going back to franchise, Market Making type. Not big position seats. Is this kind of a temporary parking spot . I think if they were at a fund, if they were to macrofund and they were just to be candid, really good at what they did. They would thought they found a spot at another fund great if the macro fund is in trouble, they could have found the spot in another fund to be macro pm, but if their performance was reflective, maybe they are better off not in a risktaking seat but a franchise building seat. Thats probably the right home for them. Its a very efficient market. They cant make money there, and actually, this is about reduced regulation, the hope of reduced regulation. But if theres some hope that perhaps there might be i dont think so. Whether i speak to republicans, democrats, moderates, ive even had ceos of big american banks tell me that they feel we need some sort of Regulatory Framework to prevent another crisis from happening, i dont think this administration is going to liberate the banks to where they were preprices. Prop trading is not coming back. What we will see is more leniency in terms of regulation, but thats not being big position takers and risk takers. Thats just these guys are turning more to franchise seats. Scarlet thats not enough to lure people to the banks, is it . Nothing has changed. If you want to push the limits, if you want to make uncomfortable disposition in terms of using capital, is not really a great seat for you. You need to be really good at what you do. The perspective with hedge funds, as weve seen, the less couple of years have been difficult in the hedge fund universe. Lps have lost patience with underperforming funds. Theres not a lot of room for guys who are kind of mediocre at deploying capital. Julia what about bonuses . Forent through a period these banks where there was so much supply in the market that they do not pay people signon bonuses to go back into the banks. Is there any sense in the macro field that they can lure, even perhaps better trade is macro is, are theuestion hedge funds struggling to retain talent to some extent in an environment where fees are coming down, perhaps performance fee is under pressure too . Going back to our guys who are comfortable in a seat not much of a big risktaking seat two years ago, when trading was in its fifth year of straight decline, a senior person left a bank, you got bonuses, i dont think there was a big push to replace that person. They would either say lets do without, or we will take 2 junior people and fill that position. Now were seeing the person leaves, they will do something about replacing that person. They are not getting a tremendous risk taker from the buy side, a guy who is best off managing a team are dealing with clients. Thats what they should want. They dont need a big problem oriented guide. Scarlet as you make clear, theres a huge distinction between a hedge fund muddling along and another one producing superior returns. Doing very well, for instance. Said to gain 30 this year according to our reporting. Some hedge funds are performing well. My question is, are they doing so with fewer people . Do they need to attract talent from the south side. You know we talked about this before. Weve been done with that for a while. People who wanted to take risks left a long time ago to go to the buy side. What weve been doing for the last 7, 8 years is count on one hedge fund. So then it becomes its not about doing with less, because you are talking about funds that are successful. But i would tell you is a general rule, the investing team that these funds are lean. What they can do, they can be very particular about who they bring on board because every seat matters. Its more of a multimanager type structure. I get a platform with multiple pms. And they are doing well, they want to grow that and they want who have ae pms reason to raise more capital. And they are raising capital on the back of great performance. Julia we see more funds closing now that our opening. You see within that environment actually a shift, and evolution of bestperforming funds attracting talent. Its almost like an upward cycle for the best and downward cycle for the worst in people move around even within the industry. Thats always been true, even 2 or 3 years ago when it was sub 3 trillion. Would say to you is its becoming even more concentrated. Let me say one macro comment. Ral, perhaps some of your viewers feel like hedge funds are in big trouble. That couldnt be further than the truth. The reality is the industry managed mark capital than ever before. Idea that last year was the first year of net withdrawal to the industry, lets talk about what that number was straight it was 70 billion, versus 3 trillion plus. Thats barely 2 . Scarlet but the number of players have shrunk. Thats true but its always been very concentrated. Julia market forces. Is not a washout of the hedge. The pie is growing, its reappropriation of capital to the funds best position to survive. Those are funds not betting on a founder being smarter than everyone else but have built a mousetrap trap that is sustainable and has some sort of competitive advantage that is really differentiated from are there other funds in that strategy or just other hedge funds, period, in terms of their infrastructure. Julia just got to look for quality, like any asset. Great to chat iwth you. With yuou. Coming up, bullseye to target. The retailer trading at the highest level since last november as the companys turnaround plan appears to be taking shape. T we will discuss from new york. His is bloomberg. Julia a turnaround could be in the cards for target. Shares of as much as 7 after announcing sales likely to increase this quarter. Bloomberg intelligence seen her discretionary analyst joins us now. Great to have you on. Whats driving this . They saw better traffic. Part of it is likely their price investment theyve made within the last few months. Julia when is a price investment, does that mean more competitive prices . More competitive pricing. Id say if you look at the whole announcement, they had better sales than expected or they planned to. So positive versus negative in the single digits. The eps was largely driven by a tax benefit, so if you step back and think about the price investment, there may be some margin pressures. I think its great their product is resonating at the certain price but i wouldnt say this completely turned around yet because 1 quarter doesnt make a trend. Scarlet of course they would hope to maintain this level of interest from shoppers. Seema if they can keep that momentum theyre are rolling out their new private label brand. That is a differentiating factor and they can hopefully regain some of that cache they used to have. Julia we are showing the target share. Down 27 in the last year. Its interesting they go and announced Something Like a modest increase, eps will be above the top end of estimates with minimal growth in samestore sales we are about yet we pounce on it like its a miracle. Seema thats a difference between looking at the name fundamentally and as a stock. The stock is beatendown. High, short interest. Thats a little bit different than looking at fundamentally its better there is improved traffic but it doesnt mean the company is turned around. Its not any different than it was. Scarlet speaking of turnaround, can a fashiont executive do for tiffany . Seema hopefully he was focused on a more youthful brand, and i think tiffany needs a bit of invigoration to attract a younger millennial customer, which if you broadly think about millennials they tend to be less brand focused than their older peers which is why private labels are doing well in other sectors of retail. Its only 6 of their sales online, they probably need to have a broader online. Its very small. They are really dependent on people coming into the store. The other larger players have improved but they have been faced with more macro factors, the stronger u. S. Dollar, slow down in tourism and the fact that their flagship is right next to trump tower. They have some factors out of their control but from a broad perspective, its about bringing it back and trying to attract the younger customers that will be the spender going forward. She did one ad with them over the super bowl. So maybe they need to park lady gaga in front of fifth avenue. Thank you so much. Up, we will take you to the allen and Company Sun Valley conference for an exclusive interview with a retired army general stanley mcchrystal. We will get his perspective on president Donald Trumps foreignpolicy agenda and his handling of the battle against islamic state. From new york, this is bloomberg. Julia im julia chatterley. Scarlet and im scarlet fu. Welcome to bloomberg markets. We are live in bloomberg World Headquarters in new york, over the next hour, here are the top stories were covering on the bloomberg and around the world. Clock tickinghe for republicans to unite on a plan to repeal and replace obamacare. Two republican senators are already known for the latest revised Senate Health care bill. And, syrian ceasefire in focus at Donald Trumps press conference with president macron in paris. And, a corporate news, slams on the brakes in russia. The Ridesharing Company is merging its operations there, marking its second major global retreat. We are one hour from the close of trading great lets get a check with julie. Have stocks rallying, a modest rally but secondary rally during the second day of Janet Yellens testimony, her comments yesterday were widely though theyish even didnt really seem on the surface at least to deviate from what she said before. We have ppi down and traders are watching closely as well. The in terms of gains in s p specifically, look at the big point gains here. We have had this rally in texas. The nasdaq goes for the fifth straight session. Apple and microsoft two of the stocks, example of tech stocks that are strong today. Financials bouncing back along with bond yields and ahead of earnings kicking off tomorrow morning. Home depot an example of the retailers really and today in the wake of that better forecast coming from target. Also, in terms of technology we are watching snap today. Shares snapping back finally. This is a nineday chart from the ipo. The first update weve seen in that period of time. Shares of around 4 on the day although still down 12 over this nine session stretch. Upgrading the stock to a buy from a hold, selloff since the First Quarter result and ahead of next month, walk of expiration has created a compelling opportunity in the shares here. Those shares getting a little bit of a boost. Where watching health care, as this Health Care Debate back and forth does continue. We have a mixed picture with the stocks. It is one of the stocks taking a hit. That has to do with commentary out of an analyst from bayer, who said he took a deep look at the companys florida numbers and that they mean that secondquarter estimates are too high along with the rest of healthcare. Scarlet thank you so much. We want to take you now to washington, for treasury secretary Steve Mnuchin is speaking. Lets listen in on what he has to say. Tepid Economic Growth projected rated projected shortfalls for Social Security and medicare. To help make these Program Sustainable into the future, we should focus on strengthening the economy today. Compounding growth will help ease projected shortfalls. To this and, it is essential for us to implement tax and regulatory reform. A return to normalize level of 3 or higher gdp growth means trillions of dollars into the economy in additional revenue to meet our obligations. Persistent and strong Economic Growth can help bring these programs to sustainable solvent states. This is why the administrations program for Economic Growth is so important. And now id like to turn it over to secretary price. Thank you very much, secretary mnuchin. Good afternoon, everyone. It is a great honor to be here today, representing the department of health and Human Services as a trustee of Social Security and medicare. To my fellow trustees and all the folks at the department of treasury, department of labor, hhs scarlet weve been listening to treasury secretary Steve Mnuchin right now. Secretary talking about the need to generate at least 3 gdp to continue to fund Social Security and medicare successfully. We will continue to monitor these headlines as they cross. From new york, this is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Julia im julia chatterley. Ivanka trump and her husband Jared Kushner are there and the president s agenda a hot topic. David gura is there as well and he joins us with an exclusive interview. David . David a pleasure to be joined by stanley mcchrystal, author of the book team of teams. Former commander of isaf. Let me ask you about mozilla. We heard from the president today, he was speaking in paris alongside the new french president and he talked about the victory hes marked and most will. Do you agree that we have a battle here that was hard fought , do you talk it up as a victory in the fight against isis . Stanley it was definitely a prerequisite for moving forward or it was symbolic. When most of l2 isis, it was a shock to people. It was necessary to take it back , it was necessary the iraqis do it. It was a coalition of different parts of the iraqi forces. That was just incredibly symbolic and key. Thed what is your sense of integrity or strength of the iraqi forces at this point . Goal from day one was to view them with the ability to defend themselves. How are they viewing that now . Had a low think they point after america left and with the rise of isis, it was seen that they were much more fragile and much more sectarian than they needed to be. My guess is what has happened is this has been a trial by fire, its been almost three years. 10y are much more copper than they were. The thing about combat is it starts to make you much more of a meritocracy. Id like to believe they are much more enforce now. David how different is this enemy than the one you faced in iraq . Here we are fighting isis. How important is it as an opponent than the one you faced . You think about al qaeda from pakistan, those the original version. Al qaeda in iraq was 2. 0 and it operated using Information Technology and it gave this incredible speed and network power. Social mediaa phenomenon that leverages frustrated young people, primarily men, who come to a cause for sometimes murky reasons, but it allows isis to have a military side, but much more franchise like effective than it allows them to get a global reach. While most will matters and raca is important, they are not like capturing capturing capital of the enemy country. We likely will have to deal with the idea and the fact that theres a generation of young people who think of themselves as isis fighters, and its hard to go back to a previous job if you never had one. This is who you are. I think its a longterm problem but it will continue to evolve. David you evolve, your team evolved when you were in baghdad fighting al qaeda. You talk a lot about technology. You had access to incredible defense technology, incredible surveillance tools and yet that wasnt enough. You had to be able to adapt and to change. That began to work. How lasting have the changes been within the u. S. Armed forces . Stanley i think parts are, particularly special operating the problem is, any rational enemy continues to change away from what youre good at. The fact weve gotten really good at precise targeting, really good at surgical strikes, they are going to evolve away from that and they are going to evolve to be harder to find, much more spread out around the world, much more likely to go act underground again. So we will see strikes around the world by an element thats not in lockstep command and control but in this luke orchestration of a network of franchises. How well does our National Security apparatus embrace technology at this point . Youre right about granddaughter learning to use technology in a way you are not. I will do folks in the pentagon understand the role that technology plays . The American Military understands technology and loves it, sometimes too far. Thenology is almost never solution. Technology is a tool but its a cultural change the force had to make. The key change that jason rock had to make when we suddenly had these new technological tools was a cultural change in how we operated. The far harder change was in the minds of our team, and in what we thought was important. I think thats going to be even more true in the future. If we fall in love with what looks like an easy technological fix, we will have it. David let me ask you what youve learned since you left the armed forces. You went to the Jackson Institute at yale. Now youre doing a lot of consulting. You outline a teams approach you learned that improved upon. I read amory slaughters book about this new networked world. How do you apply what you learn to the Business World . Stanley distributed organizations are the new norm and constant change which requires speed and interconnectedness. You cant lay that i piece of paper and say, this is what will be. It is a cultural change. Do first thing you have to is understand that youre going to operate differently but continue to operate differently. So what you nail down a get right on monday is probably by thursday not going to be right anymore. Thats upsetting to people. And thats upsetting to a generation raised from efficiency and the industrial age. Thats an entirely new process. I found businesses struggle with it because they are people, and businesses who are efficient for many years and so they have silos, they have procedures thats comfortable, and so moving away from those, even when they can see a tsunami of change like in the health care sector, even when they can see that, its really hard to make the changes that you need to. David you try one of these symptoms systems maps. Whats the biggest obstacle to applying that to a company, when you meet with a client and they are thinking about adopting this approach, whats the hurdle they have to overcome more often than not . Stanley sure. Its never an inability to understand the requirement. People will look at the problem and say, we got all the challenges communicating, we cant make decisions are we make decisions and we dont implement them, people dont buy it. It is the daunting nature of a cultural change in an organization, because i can tell you to reorganize your firm and you say, no problem. We will bring in a new computer system. If i said, york to change the culture of how decisions are made and how elements interact, suddenly you back off and go wow, thats really hard. Its a constant process that must be led by leaders, but has to be embraced that every level. David you wrote this book with a couple coauthors, interacting with evil from different professions. From different professions. Do you think that approach could be brought to the armed forces in the u. S. . Do u. S. Armed forces consulted enough with people outside that particular realm of expertise . Stanley i didnt know how to answer this couple years ago. The answer is no. The military does certain things very well. We are disciplined, focused. Adaptive. E are very but on the outside people will make decisions much faster. We think of military leaders being decisive but military leaders grew up in a bureaucracy and in peacetime particularly theres a government bureaucracy, military. You typically dont have that decisive habit. And theres also, the military can become twoway conscious. The ability to get information up an organization or across an organization can be stopped by service differences, rank frances. Because of where you rank on your clothing, suddenly its harder to tell somebody the higher end rank of a Different Service or your own service, what you have to say. Respect for authority is critical. But sometimes that respect has to go so far that says, they have to understand this reality. I o into my bosses to say what they dont want to hear. David let me ask you what you see is the greatest geopolitical risk at this point. Deposit on july 4. We saw it on july 4. My stock answer is education in america which will allow us to fall behind. Lets look short term. If you look at north korea, north korea is a bit of a black box to us in how they make decisions. Weve always deterred nationstates by holding them at risk. To a degree we can do that with north korea. But where not sure how rational they are. Many of the actions they take it have been rational but now they have this extraordinary power. If we say we will crush them like a bug, if you really look at the military realities of that we are at a point now where a country that didnt take entirely seriously, i could argue, and i spent a year in the now has thers ago, ability to cause big problems. We will have to focus on it. David thank you very much, i appreciate it. The author of the book team of teams joining me on the sidelines. Scarlet, julia, back to you in new york. Julia bloomberg best david gura speaking there at a conference in sun valley, idaho. Scarlet lets get back to Business News straight it seems its a game off. The two daily Fantasy Sports companies have called off their merger in the face of opposition from the federal trade commission. Robbins says a threat of a long and explicit legal battle was a factor. He says draft kings is in a stronger stronger position financially then when the deal was announced in november. Neither side had shown a profit despite raising hundreds of millions of dollars from investors. Technology, luber handing over the keys to his rush business, the u. S. Based right mailing Company Merging with his russian competitor which is known as the google of russia. Joining us from San Francisco is Bloomberg Newss emily chang. It seems first uber retreated from china and now its retreating from russia in a matter of speaking. Similar story. Basically we are seeing over strategically backing away from an unwinnable market. Uber will have a 36 stake in this new venture, investing 225 million. Yandex investing 110 million, to be 3 stake. It doesnt have a name yet but this is basically the second major retreat that we have seen from uber, from an international country. Of course we saw uber leave china, take a 70. 5 stake. In both cases we are seeing local incumbents that were too powerful to take on. Uber couldnt compete. Wase understand it, uber losing billions of dollars in china. We understand, at least there have been reports to the extent that uber is losing more like 170 million when it comes to the russian market but yet again we are seeing uber back down. Julia where else could we see this . Weve seen rumors about a potentially similar situation in india or southeast asia. Its a testament to the strengths that some of these countries are settling with them. Competitors are settling with them rather than crushing them. Emily thats an interesting point, julia. In india they are losing money there in southeast asia. Theyre competing with grab. They are losing money there. China actually negotiated this deal in russia or mostly negotiated the deal, reportedly before he left as ceo. There are some questions, if uber is going to retreat from these other countries whos going to do that deal. Uber is in the middle of a competitive search for its new ceo, the company is dealing with a major lawsuit, cultural issues, a possible ipo. In the meantime, globally they are still losing a lot of money. Ionsmberg reported that mill of dollars were lost in the First Quarter of the year. You can look as these competitors are being magnanimous, but in fact they are getting a good deal on their site and they are getting their markets back. Emily, great to get your perspective. Emily chang in San Francisco. According to the New York Times , the cv to that ceo flying in. Apparently there are plenty of people that still do. And agricultural etf benefited from the recent gains in grains. You. Tell this is very nice, i like it. From new york, this is bloomberg. Julia this is bloomberg markets. Im julian chatterley. Joining us for todays options inside is an equity derivatives strategist, talking about one of our Joe Weisenthal favorite recent topics, which is the rally we have seen in grains recently. Youre looking in the etf called dva the tracks agriculture. And, as been some interesting activity in this lately. Tell us whats going on. Just for some background, the dva is an etf that tracks 10 agricultural indices traded includes grains like wehat, corn, soybeans, live cattle. Grains make up 40 of this etf. Weve seen very large optums going into this etf. Over the past two days theres been a total of 47,000 in this etf. On a notional exposure basis, thats quite large. And thats a very unusual flow for this etf, which is usually quite illiquid and sees little volume trade in the etf itself, let alone the options. Julia what do you think is going on there and how do you capitalize on that activity . Thats a weird thing. You would expect if you want exposure to agriculture you would treat underlying futures, or options on the futures. The reason for that is because the correlation between Agricultural Commodities tends to be very low. Whatever live cattle is doing tends to have little to do with whatever wheat is doing. Hard to make all Agricultural Commodities move in the same direction. As such, this etf tends not to move too much. Such, we like actually selling options on this etf. Theres a chart we want to bring up that basically shows the volatility premium, or expected into thesebaked options. Its very high compared to how much this etf moves. Its very rare for all agricultural things to move the same direction. This is the realized volatility, is that very sort of steady, which line is that . The blue line. Then the options they can volatility, the implied volatility, is the white line. Its larger than what you tend to see. The gap is quite stable. Whats interesting about that chart is you do see things like that in the s p. The correlation is not stable. Stocks tend to have a fairly positive correlation. When the market falls off, the correlation goes to 1 and the volatility spikes. If you were to look at charts like that for the s p, you would see the chart is much more spikey. Much more dangerous provocation. These things are naturally not correlated to each other. Julia youre looking at selling that call the you said people were buying a lot of, that you had seen a big tradeoff. At the same time, buying actual shares of their underlying dvf. I dont have an opinion on the way agriculture is going to go. I think the volatility premium of these options is much too rich and theres an opportunity here to sell to somebody who seems to be very price insensitive. Julia thank you so much. It always pays to look under the hood of the etfs, to see whats in it. Back to you. Julia still ahead, low Inflation Holding the fed at bay. The path towards normalization. Trump is again defending his son for meeting with a russian lawyer during last years president ial election campaign. The president was asked about the meeting during a joint press conference with french president emmanuel macron. Pres. Trump its called opposition research, or Even Research into your opponent. Call, wed many people have information on this factor or this person, or, frankly, hillary. That is standard. Politics is not the nicest business in the world. They have information and you take the information. Mark the president also blamed the media for, in his words, making a big deal of the meeting. We are also hearing that when he was in route to paris, the president told reporters he would invite Vladimir Putin to the white house, but, i dont think it is the right time. I only want to make