The border tax is dead. This was one of the Critical Issues in tax reform. This was about trying to keep tax reform revenue neutral. One of the ways was a border adjusted tax. About thisn talking 20 tax rate on Companies Domestic sales and imports. Staunch opposition to this. Paul ryan is telling republicans that border tax is dead. The question is, if thats the case, how are they going to finance tax cuts . Are they going to be just shortterm, not permanent . Otherwise, youre not going to be able to keep it. Scarlet thats the big question mark. This was predicated on replacing obamacare. Thats not forthcoming at the moment. We have bloomberg reporting that steve bannon has proposed increasing taxes on the highest earners. Perhaps thats another way of doing it. That is something paul ryan loved. Wasa a trillion dollars it supposed to raise. Try finding that somewhere else. Scarlet its a tricky one. Look under the covers. Julia we will bring you further headlines on that as we get them. Markets closing in two hours. We get a check on stocks with julie hyman. Julie a pretty dramatic will back comes asked today compared pretty dramatic pullback on to whereday compared we were this morning. The dow only 19 points higher. The s p down. 4 . In particular, a selloff in technology. The nasdaq 100 also down by about 1 . Thee are up off the lows of session. We saw a dramatic turnaround from traders. Attributing it to a note that warned of some of the risks of hedging activity we have been seeing, some of the Financial Instruments being used in the market right now. Be that as it may, if you look at where the selling is concentrated, it is in technologies. Here are some of the biggest drags on the nasdaq 100. Microsoft, apple, nvidia down pretty sharply. Percentagewise, if you look at some of the biggest declines in ca nasdaq 100, you have after dow jones reported that bmc is no longer ask during a exploring ae longer buyout of the company. Most of the Railroad Sector is seeing a drop. Pharmaceuticals beating estimates. However, the forecast for a Cystic Fibrosis medication revenue for the full year came in below estimates. Netflix getting caught in the downdraft as well. After we talk about low volatility, remember that tech volatility has remained, at least on the relative basis, elevated. The via femme, that looks at nasdaq volatility. , thate seen the bfm looks at nasdaq volatility. Over the past 11 sessions, with a spiked today, a spike above 10, remember, the fix has been so low, the lowest since 1993, and holding below 10 , historically, a very low level. Right now it is spiking to 11. Its all relative with the lack of volatility we have seen recently. This is quite liked. Julia thank you for the check on that. Lets get a check on news with mark crumpton. Mark a tough warning for President Trump from a Top Republican senator. South carolinas Lindsey Graham was blunt in discussing actions the president might take against attorney general Jeff Sessions and special counsel robert mueller. Senator graham there will be no confirmation hearing for a new attorney general in 2017. Jeff sessions is fired, there will be wholly hell to pay. If you decide to go after mueller, it could be the end of the trump presidency. Mark this after rumors that the president was considering using a recess appointment to replace sessions. The white house denies it. The policy on transgender individuals surveying in uniform has not changed. To generalrding joseph denver, the chairman of the joint chiefs of staff. We willfor now, continue to treat all personnel with respect. A british judge has ordered that critically ill infant charlie guard should be move from a hospital to a hospice where he will inevitably die, within a short time. The order was made after a deadline for charlies parents to agree on endoflife care plans came and went. The judge said that meant you have charlie, who has a rare genetic disease 11monthold charlie, who has a rare genetic disease, should be taken off life support. Robert mcgaughey, the worlds oldest head of state, has repeatedly robert heade, the worlds oldest of state, has repeatedly refused to name a successor. Global news 24 hours a day 2700ed by more than journalists and analysts in over 120 countries. This is bloomberg. Amazon had a 13. 7 billion deal to buy whole foods. Prime day and its planned services will affect the Current Quarter. Amazon is the focus of todays the numbers dont lie. Lets start with the whole foods deal, by far the largest in amazons 23 year history. The. 1 billion purchase biggest since a 1. 1 billion purchase back in 2009. Is expected to enter the 800 billion dollar market for food and beverages. Up until this point, amazon has held just a tiny share of this space. It is also part of the increasingly competitive Cloud Services industry. The cloud unit has seen eight quarters of growth and accounts for the majority of amazons operating profits. This diversification in revenue should help balance spending. Amazon added 22 million prime members, and its recent prime sale day event was its biggest ever. It was triple its average daily ecommerce revenue according to bloomberg data. Most prime members have helped amazons unbroken 20 year streak of doubledigit revenue growth, which shows no sign of slowing this year. We will be looking at that revenue number and margins in the earnings report. Amazon stocks went to a record high this week. We will be following the release after todays u. S. Closing bell. , welet for more on amazon want to bring in caroline hyde, who follows technology, and brad stone, head of Global Technology coverage for bloomberg news, who is also the author of the Everything Store jeff bezos and the age of amazon. A 10 ofe going to be questions on whole foods. This was a Game Changing acquisition for a ton of questions on whole foods. This was a Game Changing acquisition for the company. Expect to offer any illumination. The deal has not closed. We wont get much guidance on what their plans are. We still dont know if there will be any antitrust scrutiny from washington. We can only speculate that they will be adding whole foods inventory to their prime and fresh Delivery Services and try to experiment in 300 some stores, bring in Payment Technology and maybe automation. Still largely hypothetical. Amazon earnings can be disappointing for investors because the company does reveal less than one would hope. Scarlet less than one would hope, but more recently, we have learned more about amazon web services, a cloud division, the most profitable segment of the business. But they face a lot of competition. Everyone wants to get in on the cloud. Google has been really going for it in the Cloud Computing services area. Google has really been pushing into it, of course, along with ibm, microsoft. Amazon web services has been feeling the competition heat. As you say, 10 of their revenue coming from aws, but a huge 82 of their overall operating margin a profitable bit of the business, but also what really helps them invest back into the business. I think if you look at the numbers as they stand as a whole, revenue is expected to go up 22 , but profit is expected to drop 20 . Net income is expected to drop 17 . This is a company that promises jobs tomorrow by investing in the business today. And they are investing in things like grocery and for film and, another really key area of growth for them. ,ut grocery and fulfillment another really key area of growth for them, but it is really costly. The amazon ceo of worldwide consumers said recently that they have flow and cash shortterm quarterly profits. They are used to it by now. Talk to us about amazon spark and amazon prime wardrobe. These are two areas where they are catering to a prime audience that is seen as critical to their potential growth opportunities. Sorry, i realize i didnt say who. [laughter] i will go first. Prime is so central to the companys ambitions. Those prime members, in their first year, they spent almost double what nonprime members spend. Toan look at my own account illustrate the point. You can see amazon adding more and more free service is for prime members. Its kind of this addictive gateway drug to all things amazon, and its a great way for them to enter new markets. They just opened a business in singapore with prime now, there one day delivery. Its one of the major propellers of that older retail business. Scares herestion of a little bit because yesterday we heard that meg whitman stepped down as chairman of the board at hp inc. A lot of questions about what her next that might be or whether this is connected to a possible next step. What do we know about meg whitman and her possible connections to uber . Debate continues and it was illuminated by bloombergs technology group, headed by brad over there in San Francisco, that she could be one of the key players in a short list for the uber ceo. Wind or stand she has been meeting with them. Hp we understand she has been meeting with them. Be leaving she wont anytime soon. They are trying to rebut the rumor mongering going on out there. Meanwhile, she does step down from hp inc. Inc. Has been doing well. Which meg hpe, whitman is ceo of, has seen revenues declining. This is a company she has turned around the she needs to study. This is a part of the business she looks after. There have been moves there in terms of someone to perhaps take her role eventually. There was much speculation when , a longtime executive, became president of that business. Is he potentially looking to fill her shoes . Ooh, more speculation, we like it. Thank you both. Just to recap some breaking news we told you about at the top of the hour, a border adjustment tax is out of tax reform. This comes as paul ryan, mitch mcconnell, Steve Mnuchin, and other gop leaders released a joint date meant on their plans saying they hope to push tax reform through conger statement on their plans saying they hope to push tax reform through congress this fall. This is bloomberg. Scarlet we head to washington. Breaking news. The border adjustment tax is out of the attempt to overhaul the tax code. Kevin, this border adjustment tax was really something House Republicans were in favor of. Not much this and it or the president. There was deep divide within the Republican Caucus on the border adjustment tax. Paul ryan was an advocate for it and largely pushing for it, but Freedom Caucus members said they were against it. After heavy lobbying by Retail Industry groups, this is a big win for retailers who have evidently press the white house pressed significantly the white house as well as congressional leaders. Headlines crossing the terminal as we speak. The border adjustment tax will be left out of this latest version of a framework for a tax plan. Julia how are they going to fund tax cuts . They were hoping this would bring in more than a trillion dollars in the next 10 years. It looks like they are placing a priority on permanence, but how are they going to fund them is they are going to be if they are going to be permanent . Heaven steve bannon has purportedly suggested raising steve bannon has purportedly suggested raising taxes on the wealthy. There is a onepage Statement Released i the white house a couple minutes ago that lacks details. Being put out by the big sticks, as they are known, treasury secretary Steve Mnuchin was on capitol hill along with gary cohn and senator orrin hatch, but details are very thin right now. Julia guidelines. Scarlet a onepage document. Julia just bullets. Kevins grilli, chief washington kevins girly, chief washington correspondent for bloomberg news. From new york, this is bloomberg. Scarlet this is bloomberg markets, i am scarlet fu. Julia im julia chatterley. Kong Companies Shares slumped 14 after a warning about quarterly losses of as much as 1. 8 billion dollars. Noble group had less than zero value according to one short seller. Earlier. O him i asked him if there is any value in this Company Remaining after the restructuring and selloffs discussed by the company in the last 48 hours. To be fair,not, but i have not tried to model out the cash flow or really do analysis on this company. What i said previously was that i suspect a more sober look at agreements and other contracts would yield a value below zero. Wethink the company ing up tong toward tru that, but i dont know if we will ever true up to that level. At the end of the day, liquidity is going to determine how long this company survives. Julia jpmorgan has 1. 5 billion of debt coming to you over the next year. Systemice this as a issue, potentially . You have looked at all lamb, noble group. , noble group. Somebody owns those funds. Do you see the potential for a follow here . Mic i would be very surprised if it presented a systemic rest, even just to singapore. Olam happened and was bailed out, i think that was a situation where markets were not repaired for a large asian wall and run the out of liquidity. I think that situation is quite different from noble, which has had a heat glide slope, nonetheless a glide slope down glidere it is steep slope, nonetheless a glide slope down to where it is right now. Bankruptcyou think is going to be the end game here . You now, if i had to pick an outcome, yes, i think that noble. Iles i dont know if it files in the next two weeks or if it could take significantly longer than that. It is difficult really difficult from the outside to figure out how much value is in the company. It does not seem to be able to generate cash. Theother big piece of puzzle is how long the banks keep rolling loans. That is him thing you really have to ask them. Something you really have to ask them. Julia just for clarity, when did you close your short on this one . 2015 welose it in did close it in 2015. That was the year we went from internal capital to managing out capital. In 2015, we had to close our entire book. He also talked to us about snap, the parent of snapchat back in may. He was not short at that point, and i asked him why not. Why we were not short is a lack of comfort with really high data names. At snap,look regardless of if you are bullish or not, its value is based entirely on future expectations. Ismally, a company we short one that has debt and is not trading entirely on the future. We have real concerns about this company and we continue to feel that over the long term. Julia and it has continued to sell off, of course. Still ahead, the ceo of the bank hasinvestment Just Announced that it has been acquired by a japanese company. We will be discussing what this means after this. From new york, this is bloomberg. Julia from bloomberg World Headquarters in midtown manhattan, this is bloomberg markets, and i am julia chatterley. In new york, we start with sugar extending its rally for a second day on reports that a brazilian suspended a previous authorization to halt an increase in taxes. That is some justification for why we are seeing a sugar rally today. In metal, gold trading at its highest point in more than a month. Traders and analysts are bullish for a sixth straight week, the longest run since late april. There has not been a rush to raise joins the uae and promising to pump less oil. Scarlet. U. S. Securities expanding overseas, brokerage it is boosting its stake in stage and advisers. Expanding our companys m a advisory business continues to court our strategic growth. Corporate profits has thrown over the last 10 years. 24 exclusive interview from baltimore, the ceo. Thanks for joining us today. Congratulations on a transaction. Talk to us about why now, why wasnt the right time now and what does that tell us about the m a cycle in north america . Having me herer today. I think what we see is an opportunity to do something transformational, to create and build a global midmarket m a business that has balance across the three largest regions in the world. It starts with the desire to be stronger in the u. S. So by virtue of putting together signal hill, you have a scale platform which covers virtually all the industries people care about doing business with, the growth economy and tradition market. Scarlet i think its important you emphasize the middlemarket part. What does that say about where we are in the m a cycle in north america . I think what we all do relative to our business with clients is try and find the best homes anywhere in the world. And what we argue we provide is access, insight, and intelligence and judgment. We are augmenting that and enhancing that by virtue of having meaningful feet on the street in europe and in asia to be able to assist our clients. So, this is a good market relative to technology, everyone thinks about the growth economy, and i think its part of the reason why asia is so interested in being more serious about the u. S. Market. Think about a simple example, the automobile industry, mobility, the internet of things is rapidly changing the way things are done. Thats our Technology Solutions that are being disruptive and impacting industries, and combining sector expertise. Traditional and technology find thellows us to best homes and the best values for clients everywhere. And so i think this continues the m a trend as opposed to its the end. So this means for you more financial firepower, the ability to expand yourselves straight the suggestion from daimler as continue were going to to sell at some point. What would your role look like and this business thats been created to this point, how will that change Going Forward . I think this will transaction is about accelerating growth not just in our market in north america but around the world. We did a version of this in india with a joint venture we created several years ago when its been very successful, and so we know we can replicate it. This is about doing more and being more relevant. So if we did 40 transactions a year in the growth economy, daiwa aroundwith the world, d. C. Advisory, its probably 150 to 200. Thats an enormous leveraging effects for our people to be able to take advantage of and to do business. We see this as growth on the one hand, and in daiwas case its a smart build strategy. They thought about acquiring 2 businesses that were complementary in nature. Combine them, and allow us to continue to scale them and build on them in adjacent market. And so, i think its actually a very smart transaction for everyone involved. Tell me what this means for the broader sector for investments, the independent Investment Banks do you expect to see more consolidation . All the justifications youre giving me here sort of suggest that its going to be that much tougher for an individual, independent Investment Bank to continue to stand alone here. Should we expect more consolidation, if its just the beginning . I think like every market, there is darwinian consolidation. We chose to pick our partner as opposed to just simply go it alone. I think its really about shared visions and value. At the end of the day, we are all in the dreams business for our clients. And so, do i think there will be more m a . Of course. The investment, banking business shouldnt be any different. What we are trying to do is outcomes andright best opportunity for our client by virtue of this portfolio. As you pointed out, youve done this before elsewhere. You have a template in a sense straight what do you think will be the greatest challenge, both separation only, culturally, and working for a japanese employer . Its interesting you ask. Everyone we met from japan has made it clear that culturally they want to continue to maintain our unique identity. If you think about it, theyve already done that in d. C. Advisory in europe relative to the success of those businesses. A north american cultural identity especially around technology and growth economy, that they will live with, but for each, think about it as strong in the three largest markets, strong local presence, supercharged and accelerated by crossborder flows. From a japanese perspective, 95 of m a flows are outside of the country as opposed to inbound to the country. Part of that reason is theres less history and tradition of Portfolio Adjustments for corporate clients. But what they are doing and seeking, excess cash flows for growth and other markets. Thats not limited to japan. Thats about having a platform to be able to do that in any direction globally. I think with tnt and aerospace, retail,rgy, consumer and information services, we have a portfolio to be able to service those midmarket growth clients anywhere. Think is a much for coming on and talking to us today. Congratulations again on the deal. W, lets get a check on the headlines on the bloomberg first word news at this hour. Mark the border adjustment tax has been cut from ongoing negotiations to overhaul the u. S. Tax code. Thats according to a statement from the socalled big six today which says there are still too many unknowns associated with the policy. The eighth he would start at 20 levy on domestic sales and imported goods and be a centerpiece of the house gop tax plan endorsed by speaker paul ryan. Members of President Trumps own party are large and him to not even consider firing attorney general Jeff Sessions or special counsel robert mueller. The Nebraska Republican on the senate floor today. The floorve come to to keep my promise and to offer a word of humble advice to the president. Are thinking of making a recess appointment to push out the attorney general, forget about it. Andpresidency isnt a ball, this country isnt a china shop. Mark earlier South Carolina ehealth senator Lindsey Graham says it session was fired, there would be quote, holy hell to pay. Clashes arrested in caracas, venezuela between antigovernment protesters and security forces, as a 48 hour labor strike continues. The finding comes as days before sundays election for a new constitutional assembly. Meanwhile, venezuelas defense all Government Entities including the armed forces have been called on to cooperate with the National Electoral council. Government supporters and Union Workers also marched in caracas. Britains metropolitan police say there was quote, reasonable grounds to suspect corporate manslaughter in the tower fire, according to the Associated Press. At least 80 people died in the highrise last month. A criminal investigation is ongoing and could last until november. In the meantime, Officials Say the tower will be covered in a protective wrap before being deconstructed. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. I mark crumpton. Trump this is bloomberg. The exploration and the numbers, next grade from new york, this is bloomberg. Airline stocks experienced turbulence today on earnings reports showing weakness and transports overall. One of the stocks were focusing on this hour in our sector spiders report. Scarlet you looking at a broader sector etf, one that narrows it down a bit. The etf xli has a lot of different industrial companies, including some of the transportation companies. Then you get much more specific with the xpn, which just focuses on transportation. Its down 3. 4 today, in large part because of earnings from a host of different types of companies within the Transportation Industry that were disappointing. Lets look at some of them trait it is spread out between the airlines and different other types of transportation companies. Hubgroup, its earnings missing, a trucking company, Allegiant Travel and forward air, each of them airlines on the smaller sites. All of these Companies Either missing with her last quarter or their guidance for the Current Quarter coming up short, for a lot of concerns about the industry. Then there is spirit airlines, the Worst Performing Airline or transportation stock, for that matter, and today session. Spirit airlines, the lowcost airline, coming out with numbers that miss, but also theres a lot of concern with this airline about a dispute its having with its pilots. Last quarter some of those pilots at some point didnt show up for work. That obviously has an effect on the business and the company says this order that could continue. Its as revenue per available seat mile will fall in the Current Quarter. Even if you take out the pilot cost, it could be flat and down 2 . This is unusual. Most airlines are not guiding down for that particular measure, but here it is. Scarlet it definitely doesnt bode well great how does it compare to the other carriers in terms of performance . Julie were seeing concern among the other carriers. Southwest came out with its numbers today. It is seeing that same measure is going to rise this quarter by a percent but only by a percent. The Company Little bit more optimistic for the balance of the year. If you look at other airlines, they are down today also. I was just talking to George Ferguson on the phone from Bloomberg Intelligence and he , experience getting into a price war with united, united might be the one that comes out not on top of that battle. You on, thankve you. Lets get you a business flash update. The benchmark that underpins more than 350 trillion of Financial Products will be phased out by the end of 2021. British regulators and bank will try to replace it with a more reliable system. Pershing square has built in automatic data processing, a data outsourcing company. That is your business flash update. Sclaret . Scarlet wall streets top bosses have tried for years to boost diversity in their ranks but now it seems the number of black executives at firms is actually going in reverse. And bloombergs ongoing coverage of diversity and inclusion in the workforce, our own diversity reporter jordan hallman joins us in todays walk the talk. We looking at the percentage of black workers not just in middle and upper level management, but across the workforce declining. Yse. We look to the total workforce. Some of the largest Investment Banks on wall street, those numbers going down. Scarlet give us the reasons why. Its hard to pinpoint one specific catalyst. Among the different explanations out there, what rings true . When i talked to some current and former bankers and it toics, they attribute the lack of creativity in hiring young black talent and not enough people in retaining them. Scarlet the percentage of at banks like citigroup, jpmorgan, 13. 1 . Down from 15. 2 a few years ago. Of lipo pay a lot service to inclusiveness pretty look at the websites, it shows a very prominently. Jamie dimon has talked a lot about the importance of diversity in the bank. He did have a fairly candid admission recently. In his annual shareholder letter in april, he specifically said like diversity is a place the bank has fallen short black diversity is a place the bank has fallen short. Asserted a program to support the black talent. Scarlet the fact that he addressed his annual letter meets to some point hes personally assuming responsibility for this. Thats fairly encouraging as well. Are there any banks in which we saw the stature of blacks and prove . Improve . At wells fargo in their executive ranks, since 2012, it has picked up, the percentage of black executives. Course, im of thinking of firms like Goldman Sachs that have high profile black executives. Yes. Managementt the teams and operating committees of the big banks. Edith cooper is actually the only black executive within those small groups. And shes talked about the challenges of being a minority and the kinds of questions she faces, whether its explicit and a linkedin post last year, she actually talked about how sometimes people were asked how she got into harvard. Even mentioned sometimes she will go to client meetings and they accidentally ask her for the coffee, not realizing shes there to run the meeting. Scarlet its incredible how they ask how she got into harvard. Well, i applied. Tell us whether this is something mandated or whether firms are offering this stuff on their own. Is mandated that the firms send their data and diverse numbers to the equal Employment Office commission. Whats not mandated is that they publicly release them. About five years of data now to look at how well they are doing. Scarlet we will see how it shakes out in the next five years pretty jordan holman, bloombergs reporter for diversity and management. To reach ortons entire story, check out the latest issue of Bloomberg Businessweek which is available on newsstands now. Coming up, 70 of the s p 500 Companies Reporting this Quarter Results today. We will produce the charts with all the action from new york. This is bloomberg. Julia this is bloomberg markets. Im julia chatterley. Scarlet 70 of the s p 500 of race reporting today. This is a big day for earnings. Its also a big quarter because we just came out of a gray quarter, one of the best on the bull market. Lets start from the top at the macro level to we talked about the big expectations and living up to what analysts wanted to see for earnings in the s p 500. The talked about how there was a big get between fort expectations and what happened in the past 4 months. This chart should be encouraging to enter analysts and investors who were worried about living up to these expectations. The blue line is looking at the trailing 12 month earnings per share. Yellow is the forward 12 month. Gap between the two is down here at the bottom panel. If you look at the start of here, we were down at the highest gap between trailing and forward earnings, which meant there is a lot of room in terms of what analysts wanted to see. If you look down at the corner here, we are finally starting to take down the difference between these two lines is getting smaller. And thats important because thats basically telling us that we are actually getting to a point, not only trailing 12 month earnings, we are meeting expectations which were pretty lofty from the getgo. Thats going to be a big deal because what were seeing his actual valuations, flat to lower in a market thats already highly valued. Thats important because it shows people theres actions from fundamental strength high and high prices are paying for stock. This is the gf graph fundamental function on the s p 500. What i want you to think about is the yearly change here. Quarterly still in orange, earnings in green, than the margin percent between the two in the yellow. What this is showing is that we are seeing that earnings bump. We are seeing a slightly less that slightly smaller bump on the sales side. At the end of the day, margins that have gotten pretty high are actually a little bit flat to not quite as bullish as some people would like to see, especially because theres a lot of stuff going in between the top and the bottom line. Finally i want to look at whats going on with the sector reaction and what investors are actually doing in response to these earnings straight at the end of the day, what matters is whether your stock went up or down. This is a great function within the earnings analysis function on the bloomberg. You drill down into the actual surprise in the earnings analysis price reaction. Heres a look at what each dot shows in the sector. Energy, materials, consumer discretionary. The blue, the orange right here, all security. What were seeing is actual improvement on the earning supplies. Nedaythis x axis here, o price change, after is whats important and thats whats down. At the end of the day, that is what is important. Investors arent necessarily buying up all these companies. Julia also they are punishing the ones that miss. They are very sensitive on the downside as well, which is an important point that you make. Which is the one they are selling off more . Tech. What is more highly valued . Tech. Amazon the big one after today. Number one bezos on the list. Scarlet to what extent are you hearing commentary on the week dollar . So many of these companies rely on overseas sales . It has come back from, a lot of people talking about the weaker dollar could have an effect here. Theres a slight difference now, the weaker dollar calls into question whether the u. S. Can be that force for growth the administration wants it to be and that calls in the trump trade. A year ago, the dollar was good for stock. In direct contrast with europe. You so much. K oliver renick, and stocks market reporter. This is bloomberg. At three clock p. M. In new york, 12 00 p. M. In San Francisco and 8 00 p. M. In london. Im julia chatterley. Scarlet and im scarlet fu great 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. Battle for first place. Shares in amazon slipping up as ceo jeff asus held the top spot as the worlds richest man. Could todays secondquarter earnings propel him upwards . In politics, and all nighter at the senate could and the bill that needs to keep obamacare in place. Private equity market, the biggest funds ever rate fund, Apollo Global management amassed 24. 6 billion. We are one hour from the close of trading. Lets get a check on the markets with the julie hyman. Lie we see apple down, microsoft down. A lot of the large cap tech falling today and thats whats dragging down the nasdaq. The dow just holding on to its gains as we see now, a mixed picture in the wake of a lot of earnings reports that earlier took all three major averages to therecords, that the dow is last man standing today. If you look at some of the earnings movers here, and i said there was a lot of weakness in good cap tech, facebook the exception today. After that Companies Earnings beat estimates, sales rising 45 , more than analysts had been anticipating. Mark zuckerberg promising big things from the companys chat messenger as well as whatsapp. Verizon shares rising as well after Wireless Subscriber growth moved much higher than estimated. F5the earnings front we have networks, the companys numbers missing estimates. In particular its Product Sales is what we are pointing to as the source of weakness and whirlpools numbers also missing. As, people buying more lower price lower price appliances. Then there is still a lot to come after the close of trading, of course. We have amazon which briefly with high enough today to make jeff bezos briefly the richest men in the world above bill gates. Stocks gone back down again. Electronic arts, intel, all set to report. I wanted to point out that even though the s p is down today, it does tend to rise during earnings season. We look the boxes here are when Companies Report earnings, starting with j. P. Morgan. We have tended to see an upward trend over the course of the earnings. This a little bit of an exception. Even then, the s p went down and came back up. We will see what happens as we are at about the halfway mark here for the s p 500 earnings report. Scarlet thank you so much, at the halfway mark trade we will stick with earnings now. Ups coming out with its latest results. The biggest drop in about 1 2 year. Even though the Delivery Company be estimates for earnings and sales in the Second Quarter, and the Company Reported that revenue per package rose 3 in the u. S. , also topping estimates. Joining us now from princetons Senior Analyst for Bloomberg Intelligence. We just ran the numbers and it sounds like it was a pretty solid quarter. Whats the rush down here . I think if youre looking at what happened in the Second Quarter, it really was a great quarter for ups. They really executed their growth on the top line volume. Thats a great spot for the economy, accelerating. Theyre getting prices as well. Prices are increased in the low single digits. It was Even Stronger the numbers look because when you take out foreign exchange, i think whats happening right now with ups, theres a broader selloff in transports. I think investors a little upset, they are disappointed they did not raise their after beating Second Quarter by . 11 even though 10 sense of those . 11 are oneoff items. Thats really whats weighing on the stock today. Scarlet a lot of that will depend on the yearend holiday shopping, shipping season which is what everybody looks to for ups. Positioning itself to take advantage of the explosive growth in ecommerce . Is a great way to look at ups. You dont own ups for the next six months, youre really owning ups for 2018, 2019, companies embarking on a Huge Investment where this automation, technology, or new services that will help build them to an improved possibility. Tends to be b to c, which has lower margins. Going ups drivers doortodoor versus stopping at one often delivering 10 packages that once, theyre delivering one package 10 times. Theyre trying to build them to their access plans, or you can pick up their packages at a dry cleaner, the customer doesnt miss the shipment, which is important to them, and it also values guest drivers. That adds cost. They are doing all the right things today, for tomorrow. Julia great to get your wisdom on this, Senior Analyst for Bloomberg Intelligence also reporting. Decline in secondquarter revenue, missing estimates on lower trading, welltordrodden path. Shares falling the most in 4 months. Just 4 months into his new turnaround plan. Bloombergs matt miller asked cryan if cost cuts will continue and if theres more fat to cut. Continue to work on our cuts. You probably saw the hit counter started net to come down. The work weture of did to restructure in germany which is now almost complete. Also, internalizing our Technology People in particular. The headcount has come down to reduce costs in the future. We continue to try to modernize the bank. We between running expenses and investing. We want to keep up the investment because we do need to move on with the modernization program. Its a mixed picture. We have been focusing. Now we need to focus on the revenues. You brought remuneration down to some extent. In the last couple of years, for example. Have you started to turn that around . Surely if you want to get the best talent, you have to pay for it. We have, yes. Today,detail we put out you will see the variable compensation, the bonus accruals went up a bit. We are accruing to a bigger number this year. We only make the decision at the end of the year. We recognize that we have been in underpayer for a couple of years and need to rectify that. Mat is that one of the reasons equity trading revenue has not only been down but also underperformed here in the u. S. . I would argue against that in relation to fixed income. We were down 12 on the trading side. Thats in the pack. On equities we have invested in market share and we are down quite a bit. We think there are underlying factors there. We do need to invest more in electronic trading. In the cash trading, derivatives is ok. Weve seen ballots is coming back but theyve not been worked on yet. We have more potential to make revenues from the finance. Once activity levels pick up, we should see an improvement in revenues. How much market share do you expect to see . Even if the whole pie is strange and you still want a piece, right . A little bit. We never want to run the bank just going after market share. Is longterm sustainable profitability. We need to make sure what relevance we find. We need to invest in systems and people. We have been particularly on the advisory side, but also equity sales for example, trying to build up the numbers. Matt where will you build up numbers . Where is your business, because everybody is wondering, going to be focused based. On the advisory side and Corporate Finance we want to build up our industry sectors. London will obviously be an but went venue for us, will also try to focus a little bit more on Continental Europe and in particular, germany, where we have been investing because to some extent we strengthen the roots of the bancaire. Matt is it only a little bit more . The ideas that you will be moving what is the headcount, you will be moving from london to frankfurt . On the Balance Sheet actually already in germany theres this idea of a london branch, but the bookings are actually in Deutsche Bank ag itself. They need to move balances. Whether we have an adjustment to dependsr people are on what brexit looks like and what the rules are. From the perspective of contingency planning, we need to ensure we can do in germany in april 2019 pretty much everything we can do in london today. We know that means moving, adding at least some operations people in germany. Im not sure about moving. Certainly from the perspective of making sure the competences are the same, we do need to build here in germany. Theres a positive impact here. We dont know what the impact will be in london. We genuinely dont. Will want to tune into Bloomberg Television on friday. We will be bringing you interviews with a host of top thinking executives, including ubs, credit suisse, barclays. Lets get a check of headlines on bloomberg first word news. Mark attorney general Jeff Sessions tells the Associated Press he will continue to serve as long as President Trump wants him to. Traveling in el salvador, the attorney general told the ap that mr. Trump has every right to find another attorney general. He says quote, i serve at the pleasure of the president. Ive understood that from the day i took the job. Sessions acknowledges this hasnt been what he called the best week in his relationship with the president , but he says he and the president have a quote, harmony of values and beliefs. Saying quote, this is the moment, now is the time, Vice President pence says members of the senate should step up to do the right thing and repeal and replace obamacare, agani quoting. Again quoting. As the president said this morning, this and republicans after 7 years, this is their chance to shine. The cant let the American People down. The senate has an opportunity and obligation to rescue the American People from the consequences of this failed policy. Mark Senate Republicans are said to be attending to unite behind the socalled skinny repeal that would merely undo just a few of the most unpopular elements of the Affordable Care law. Rish Prime Minister theresa mays government will study the impact of european Union Workers on the british economy. Critics are asking why such a study wasnt conducted right after last years brexit vote. Mays strategy director has resigned. Top strategist quit after the conservatives lost their majority in parliament. New york passed deteriorating subways could get a lifeline from the private sector. Donor companies will get an opportunity to promote their brands at stops along the 700 mile system. Governor andrew cuomo announced the quote, adopt a Station Program today that pay for amenities like wifi and cleaning, for 250,000, a firm can join the Partnership Council to raise money for improvements but without its name attached. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. How about the julia chatterley 50 nine st subway stop . Julia got my name on it. Global management raises the biggest private sector fund ever. What it means for leveraged deals, when they will do with the money, and apollo, just one of the things in the mix here, nordstrom in talks on a potential buyout. The stock getting a pop higher on the news. This is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Julia im julia chatterley. Scarlet management has amassed 24. 6 billion for its private equity fund. Us now for that story and other private equity news is jason kelly, bloomberg executive editor for television. Lots of money streaming into pe funds. Whats so interesting is theres a lot of contact here, not only the biggest fund ever, but its coming at a time when the last quarter alone, 121 billion raised in private equity funds, Third Straight quarter, more than 100 billion has been raised. Theres a huge amount of money going to private equity right now. Where do they put the money to work . Question. A huge one of the reasons apollo seems to be joined a lot of money, because this is the second fun thethem in just 2 years, last fun came in to 18 billion straight a huge amount of money going to leon black and josh harris and, who as you know this is one of the storied firms out there. One of the reasons they have delivered the sorts of returns over the years is they do almost everything, and they really look up and down not just the sectors, but they look at all aspects of the Balance Sheet. They are not just equity investors, they are debt investors as well and they go into some ugly situations. Julia the obvious positive is the management that provides relative to the less stable performance boost. I just want to pull up here to show you the reliance of the likes of apollo. Illustrates quite cleanly, that is a far bigger chunk of their earnings in terms of performance. They had their earnings out today. What was their headline on their earnings . The headline is that they almost quadrupled their profit, beat all the wall street estimates, and thats largely based on their ability to sell a number of their stakes. As you guys know far better than i, shall we say a robust market, a lot of valuations out there. Private equity firms, even as this money is coming in there doing a lot of settling right now and in the case of kkr and their publicly traded brethren like apollo and blackstone, that is going right through to their earning. Julia its time to sell some things. Tough if youre trying to buy some things. Were justetail, we talking about how the Nordstrom Family said to be in talks to sell its stake or the company to private equity. Apollo and kkr came up. An unloved industry, you dont have to look far. Unloved indeed, and this is what private equity loves. Whatsoevers in about the private equity business is, it thrives in many parts of the cycle where they really do the best is when they can go in and buy things other people are willing to abandon, and other people are shying away from. And so, they dont have the sort of competition in a robust market like this that they would normally get from a strategic buyer, another retailer. Another retailer cant afford to buy nordstroms. They are figuring out how to stay alive themselves pretty will be interesting to see if this does go into private equity hands. Julia great to chat with you, jason kenney, bloomberg executive editor for tv. Still ahead, the bloomberg dollar index down a percent. 8 . How to capitalize on a potential bounce. From new york, this is bloomberg. Scarlet its time for options insight with julie hyman. Julie joining me for todays options insight is a chief options strategist at interactive brokers. I have been talking about there was a downturn in the markets, in the middle of the day. Some people were a treating it to a note from an influential who has been waiting a certain flag for a while. Highlighted it again today, saying some of the volatility strategies were seeing in the markets could be putting it at further risk. You and i were talking about this. Do you think theres something to this . Do you think theres a heightened risk right now with low, that solo so we could see a bigger one . I subscribe to that as well. Marco is certainly the strategist of the moment right now. I think hes getting a lot of attention which is welldeserved. I happen to agree with him very much on this one. I think theres a number of strategies out there that are being employed, which might be a ticking time bomb in many ways. We are getting a little too used to this lowball regime. Low volatility regime. Julie how exactly would that unfold . He talked a little bit about strategies. This is obviously very scary to hear about. How exactly when this happen . First of all, theres the smart beta strategies which has gotten very popular, which are not necessarily volatility damaging in themselves. Thatime you involve data involves correlation and correlations have a nasty way of breaking down at the worst times. Is also strategies of overwri ting, starting to see people playing heavily in the vix related etfs, many of which are shorting volatility. When somebody is shorting volatility, somebody is still vying that volatility. The person buying the volatility is hedging the moves of the market. That has tempted to dampen prices but if there is some shock, the people that are they arehis movement, going to back away a bit because they will try to hedge big movements and if you are short volatility, that gets very uncomfortable very quickly. Thee before we get to trade of the day, because i want to get to that, we may be very close to the turning point. How do you know if were close to the turning point . Do you think we are getting close to that point . I think things are certainly getting stretched. Were seeing an increasingly narrow leadership in the markets. Those tend to be worrisome signs. Whether this turns around tomorrow, whether it turns around and a month or two when the debt ceiling crisis comes in, and my business im always looking for the monster under the bed, rattle off a whole bunch of them. Whether thats tomorrow or next month or next year, thats where the crystal ball really gets tricky. Bank fore International Settlements is one of the new proxies for volatility or for risk is the dollar. There we see nickel back, down 8 year to date. The trade you are looking at right now is in a dollar index bullish fund, which is also down year to date. What are you looking at here . What could happen after the drop we are seeing . This is called catching befalling knife trade. The falling knife trade. Looking at the way the dollar has been a oneway trade, being anecdotal evidence of how its become a very crowded trade to short the dollar. This is saying, in the short term we are going out just over a week, very shortterm you can play this. Cang a call spread, you buy in the money options parity and ride that a little bit if you get a bounce. Julie if you get a bounce. We will see what happens. Thank you so much, from interactive brokers. Back to you. Julia still ahead, the ecommerce retailer secondQuarter Results coming after the bell. We will see if they ceo can take the crown. This is bloomberg. Mark it is first word news. President trumps pick to be wall streets top regulator conceded he should have been tougher on banks during his stint as the Treasury Department before the 2008 financial crisis. Are sayinglawmakers his past inaction makes him a poor choice. Facing criticism at his Senate Confirmation hearing today, he said with the benefit of hindsight, we could have been more aggressive. Secretary of state Rex Tillerson looking to freeze, working at the National Security council. This comes after a monthlong feud with the white house that undercut his way on foreign policy. Tillerson will allow as many as 33 state Department Employees at a time to work at the White House Office for a minimum of one year. A british judge has ordered that critically ill infant charlie gard should be moved from a hospital to a hospice where he will inevitably die. Tillersonthe order was made afta deadline passed when charlies parents on the hospital agreed to an end of life care plan
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