Breakdown six out of 10 are down. This feels like a delayed reaction to the minutes from the released thatting is sedated take more hold interns of investor psychology. Joe deathly a continuation. Todaye down one big loser with the financials which were big gainers yesterday. We had a steepening of the curve. Banks gave up their big losses. Alix european stocks fell the most in two weeks. The day looked relatively ugly. Now that we have closed off those lows it was an impressive seachange. To point out some changes. The s p is a Straight Line kind of down. ,hat orange line moving average you dont want to see it break a long turn moving average. Definitely a technical level to watch. What helped the markets has to be retail. In particular, walmart sing the best rally in seven years. Dding 40 points you can see how ups extreme it was. Macys, target. Everything going lower. Joe target earnings, that was a surprise. The Government Bond market. We saw a big jump in yields. Today very tiny reversal of that. Interns of currency it is trading on economic fundamentals. Result it is no longer the worst performing g 10 currency. A self recovery in the dollar is turning into a significant rally. If you look at the dollar yen it has climbed 3. 6 versus the yen since the start of may. It is picking up momentum. Weve seen better than expected economic data. That is giving the room more room to raise rates. Highlight a to couple ones here. Copper struck my eye. Point it was hitting its lowest level since the february selloff that we saw. The bottom when then february 11. That is a warning flag to me. I want to Pay Attention with what happens with copper. It was relatively ugly for these guys. Gold is about the future prices. Hard asices, not as hit the future price. That was interesting. Those are todays market minutes. We want to bring in some minutes. The chipmaking equipment coming in for the Second Quarter. The profitability coming in higher than anticipated. 42. 7 . It also see sales growth this quarter of 14 to 18 . Its coming in with a bead for its fiscal secondquarter and its outlook for this quarter is better than expected when it comes to sales and bottom line. Joe that is up to just 3. 5 . Whatd you miss . The data actually has to deliver. Good to see you. Last time you were on you said Global Growth looks better. You look at the chicago fed, National Activity index to gauge what is happening. Guest we used to call it greenspan this brain. Data,y data, weekly Commodity Prices. , the economy is growing around its trend. We just saw the french come out. Its a small positive. Nonetheless positive after being in that subzero territory. The First Quarter growth was significantly below trend. It is now suggesting we have a good start to the Second Quarter. Growth is picking up nicely. Joe where do you see the bar for the june rate hike . There is this view that the june the june rate hike is on unless it doesnt deliver . What would have to happen . Guest steve stanley, our chief u. S. Economist is looking for to handle. Their estimate of gdp growth is lower than it was before. Growth isotential gdp 1. 5 in the u. S. Has beenloyment rate averaging two and a quarter. The magic number is now 2. They want to normalize rates. As long as they get a to handle, it is that is where we go. Alix weve seen three years of firstquarter numbers only to head into the Second Quarter expecting a recovery. Have we figured out any theories . Guest some years it has been weather. This was not the case this year. One hypothesis that i have had is china is becoming a large part of the Global Economy. China closes down its production economy for a week. Wonder him you look around the world and you see data, all of it being unusually week in february. Maybe there is some impact from the fact china has this radiating effect around the world in terms of that shut down and what impact it may have. Alix what does this wind up meeting . Wind up meaning . Way to look at the yield differential is we look at fiveyear rates between the dollar and foreign countries. We actually wait that by the currencies in the dollar index. That has taken that differential a big jump upwards yesterday and could be consistent with another 34 rise in the dollar. That is one thing the fed will be watching to see how far the dollar does move but it is still about 4 below its ties. Joe when the minutes came out and they were pretty clear june is a live possibility, we saw selloff in equities, we saw selloffs in fixed incomes, how far offside is the market . Lets say in your crystal ball you knew for a fact june was going to be a rate hike. And far off is the positioning . Is still all. You look at the probabilities and they are in the 3540 range. There is still skepticism. The fed has talked a good game many times and they tend to find a reason not to move. Stanley fischer has had a big influence behind the scenes. I think he has been arguing for normalization. Think that he is starting to sway the rest of the members of the fed that it is time to get on with this normalization. It should be at least zero in real terms. Atyou look at core inflation one and a half it should be heading up to one and a half in the not too distant future. I think he has been having an influence on the fed thinking about normalizing if you get past this. Scarlet you started by telling us about the National Activity index moving in the right direction. What about the job data . April is not a great month when it comes to job growth. Why isnt that confirming the robust conditions . Guest we are getting the disconnect a bit. We had very good jobs growth. We didnt get the gdp growth. With the unemployment where it is, estimate suggesting we only need somewhere between 100 and 150 new jobs a month to take up the labor force, we could see a slowdown in jobs growth below 200,000 without the fed being too upset. One of the Things Holding back is available workers. We are seeing a shortage of workers. We are seeing the in the employment reports and the survey data. Right now with the impediment to job growth it is not necessarily gdp growth. It is actually supplied growth. Do we have the right employees to bring on board and to keep that job growth going . So its happening for the right reasons . Alix if youre looking for upset in the dollar, what is the impact going to be an emerging market currencies which tend to have a lot of volatility . We have seen some of that. Equally important for emerging market currencies are going to be the Growth Numbers coming out of asia and china. The last round of numbers were not good. We saw slow down in Industrial Production growth. I dont think thats helping them. Commodity prices are important. One of the drivers is the dollar. If we see it move higher we will see Commodity Prices soften a little bit. That is going to be a continued burden. The question is whether the fed in my view overreacts to that or just realizes i need to get on with normalizing and move forward anyway. That is where the u. S. Data takes on increasing importance. Scarlet great to have your perspective. Coming up, how much or how little should market see listing two fed speak . Of ross stores falling in trading. Authorities are trying to determine if wreckage found off the coast of greece is from the egyptair flight that appeared from paris to cairo with 56 people on board. Authorities say debris found close to where and egyptair flight is presumed to have gone down does not originate from aircraft. Reports are conflicting. For more details, lets get to carolyn. Good evening. This is going to be not very good news for the families of the victims. President of the Greek Committee of Aviation Security saying the debris may not belong to an aircraft. This is contradicting from egyptair earlier today four hours ago saying they had found the wreckage of the missing aircraft. Of course, the investigation is underway. We should hear more. The french and egyptian authorities are collaborating. The greek authorities with the greek authorities to identify where the black boxes. Mark authorities are not ruling out terrorism. What leaves them to believe that may be the case . Technically there are several things. Thefirst thing is that thing that cannot be ruled out is a devise on board, a small bomb that could have been ativated on board and create situation where the aircraft could have come apart while flying. That thefrom the fact Egyptian Military did not receive any distress message. Both engines are failing while the play is still in the air, this gives some time for a for a little bit longer and send these kinds of distress messages. This is why the authorities are saying they cannot rule out a terrorist attack and the egyptian civilian military said the possibility of a terror attack is more likely than a technical issue. Thank you. Scarlet, back to you. Scarlet breaking news, as predicted, comparable sales declined 5 . 3. 4 billion. Gap is adding that it is not confirming its earnings for sure forecast and says the trends in the environment need to improve to meet the consensus estimate of 1. 92 for the year. They will take restructuring and be closing 75 stores. Sales losses will be 250 million. Get making some changes. What did you miss . He welcomes a rising Market Expectations of a fed hike. Obviously we have sidhu depends on the economy. Looking at the Market Expectations. 13 androughly tightening through the july meeting looks like 60 . And the central bank is closer to raising rates in the summer. Joining us, the head of north american economics. Do you think there is a possibility for june but september is where you are putting your money . Financial this markets telling everybody they have it wrong. They are disingenuous. If you look at the minutes they are divided and remain divided about what to do. Dissidentsaid most if gdp growth was high. Then it would be appropriate to move in june. What do they tell us from march onward . We have a lot of risk out there. The Global Economy is risky. Only downside risk. Fewdid this change the next things . One data mark . Scarlet and one thing we have observed is several regional president s have been vocal on preserving the option of raising in the summer. Jeff blacker was the most recent one talking about the third mandate of the fed saying that a june hike is in order. He says i see risk from global and Financial Development having entirely dissipated. Strong words. Joe and there has been a lot of fed talk lately that he was surprised markets didnt pay more attention to fed seekers. There have been a lot of fed seekers saying june was live. What was the market surprised by the minutes . What do you make of that . Does the fed have a communication problem . They can say june is live, june the market isen surprised as if they had not been saying that . We have a failure of communication. What makes it even more of an obvious failure is when they try to convince the markets they were successful, that was in march. Ity said members agreed would be appropriate to move at the next meeting. The voting members. Participants, it is clear it wasnt in the statement when the meeting was finished. They didnt have enough of the consensus to put it there. It would have the same effect as in october. They would have repriced. Its hard to believe suddenly we hawks. Is hurdle of scarlet it does feel like the fed is trying to say listen to us, we have seen relatively volatility pick up. As the fed shakes the market up, does it wind up being selfdefeating . Very much so. Is of the many key features it is highly sensitive to the markets. Probably the most sensitive in the history of the fomc. If they start reacting badly, i bet they will pause. Especially in the event of all of the events of this summer, the geopolitical events that would likely raise the volatility. Scarlet you said all of them have to go under the fed. All that has to go on is the retails fed report. What would it take for june 2 be the month . We are going to have to see a sudden surge in gdp. We are not going to get that number for another quarter. We will have to see not just labor markets improving but we will need the expenditures to pick up. We dont see signs of that yet. That disconnect is still there. Most important, we have to see real progress. So far we dont have the labor market and wage pressure to justify its. Think it is there and it is coming but not between now and july. Scarlet we have talked about how all these regional fed president s have spoken. If they are options what do you expect janet yellen to say when she gives speaking engagements . If she says three magic words, at the next meeting, then everyone will come to attention the same way they did in march when she said not at the next meeting. Everyone will stop pricing it in. The chair has to make a case for why it is it is now more urgent to move. So far the data arent there. They need to show us the configuration of data that makes them move. Right now i dont see it. Alix it is a stark contrast. Its interesting to see the different interpretations. Why chinasing up, currency is starting to weaken. Alix im alix steel. Whatd you miss . One chart you have to look at, take a look at this. This is a chart versus the shanghai composite. Moves up, it is depreciating. Look at what we have seen. It continues to climb and go lower on the offshore rates. , we you see this divergence saw that back in january. What do you see . Another selloff. Offshore it is the most since january overnight. Joe it is just what we need, another devaluation. Just when it is about to go china does this thing that causes volatility. Hike because they didnt it helps china. Now they do hike they have the problems that were there before. Coming up our Investors Undervaluing or overvaluing spread performance. Mark lets get the first word news debris found close to where egyptair flight 804 is presumed to have gone down does not originate from an aircraft press. Ng to there are conflicting reports about that. Egypt is working with greek officials to locate the debris. It vanished from radar over the mediterranean near the greek island. The house of representatives have voted to allow doctors to recommend medical marijuana to their patients in states where it is legal. It marks the strongest sign yet that perceptions of pot are shifting. Soldiers and police struggled to find hundreds of people missing after landslides destroyed three central sri lankan villages. Fresh rain triggered smaller rescuers torced suspend their efforts. 220 families said were unaccounted for. More tensions between the United States and china over territorial waters. Two chinese fighter jets intercepted an american common sense plane over the south china sea. The chinese jet came within 50 feet of the american plane forcing the pilot to the send a couple of hundred feet. Powered by our 200 journalists in 150 news bureaus around the world. Thats eu. Scarlet now a recap of todays market action. It was down for the major indexes. We did close off our major lows. Alix walmart added 40 points to the dow. If you take it that you are looking at a selloff that could have been as almost 150 points. Could have been a lot worse. European stocks were at a two week low. You thought it was going to be a lot worse but then stocks were able to rally. It was an interesting market day. Scarlet a good point but the outlook is not so good. We had cap amounts with the results. They had preannounced a sales decline. It is rising because of an announcement it will shut down stores and pull out of its Old Navy Division out of japan. That is 53 stores in that country that will be going away. It did not reaffirm for the year saying the climate will have to read to improved to meet that target. Ross stores down by 7 . The forecast is missing analyst estimates. Is where it gets interesting. 5 . This is the maker of chipmaking equipment on a betterthanexpected outlook. Perhaps an indication they are pushing ahead with transitions. And the credit market is in pretty good shape. Goldman sachs is cohead of investment baking. Investors are cautious. There is no question businesses are doing fine. There are some exceptions. You look at the retail lines. There is no question that is a space that is under a lot of pressure. We have an industrial slowdown. When you look at it as a whole, things are growing slowly. As long as that is the case we could continue to see a robust network. Alix joining us now the head of highyield strategy, if you narrow down to highyield you are definitely bearish. Youre calling for a correction in highyield. How deep do you see it . Specifically in the noncommodities space, the market. 49, 50 ays at 48, barrel the energy portion of highyield is a big part of the market and likely not retest the lows when oil is 26. Couldncommodity portion easily trade back down to february 11. Scarlet which portion is most concerning . Retail is certainly the most concerning at present. Outside of commodities space of course. We worry about a few different factors. Consumer products, durable goods, anything exposed to the outside of United States is something we are looking to being a potential problem area. Alix what specifically about these issuers concerns you that the market isnt picking up . Guest the market is clearly trading on oil. More so than is justified. It has never been were sprayed leverage has never been higher. Joe highyield is also trading on oil. Guest absolutely. It really shouldnt be. Higher, a consumer that has been willing to spend as oil has fallen is not going to help a consumer as Oil Goes Back up. Many of these exposed corporates to the u. S. And Global Consumer could suffer. Guest bank of america has not so great price targets. Commodities are 30 . Levelechnical fundamental oil may not get up to 70 anytime soon. Its difficult to see where it gets to 70. If you go to 38, 39 not only will the energy portion selloff but the nonenergy portion is probably down at that point. Its going to look similar to the end of last year when the fed started to become more hawkish. It indicates december was going to be the day for the hike. Oil was 38, 39. Highyield underperforms most other markets. Scarlet we are at the end of the credit cycle. The end can be dragged out for a wild. It can go on and on. How long will it likely drag on for before the end comes . What will be the catalyst . I call that a rolling blackout. Individual sectors realize the moment of distress, while others see a degree of strength. That is what you are talking about. Things arent great. They may be pretty bad but you are not in a recession environment where you have doubledigit defaults for example. Anotherthat could last 1218 months. To say we could be in a situation where we are at keep not exactlys, it is something you look forward to. , maybeall the economy the fed is going to hike again, the tightening cycle, but the economy doesnt show any signs of going into a recession anytime soon. There was concern about that earlier in the year. Does your call for highyield performance, is that what you are seeing . We became negative on the market around 2014. One of our calls was not for a recession. We said you could have a poor market in highyield in particular absent a recession. 2014, thecember market traded out for 10 yield. It proved the point you dont need a recession to have a poor markets. In the world i am describing where you have this rolling blackout you can have decent growth. The thing i would say, whatever trend may ultimately be, it is fine for investment grade. If you are a cashrich company with a strong management team, not high leverage, you could get by. If you are in equity or in highyield credit, you need to have growth. You need to have growth and grow into a multiple to be evil to deleverage your balance sheet. Alix i was a Financial Leverage conference over the week. I was talking to the coheads. They said we are ok. We had to offload bad junk and lower it. We were able to offload most of its. He said there is demand there. What are they missing in what you see . Absolutely has been anemic. 11 of the market has actually financed the capital market. That is the worst since the crisis. Thetime less than 20 cap market, every single time that level has been breached, within 1620 weeks. Issuer you areod going to be oversubscribed. Everybody wants that type of deal. It is very difficult to get done. Not to say that it has not. We have seen some deals done. Solaris. Een they do get done but they are few and far between. Alix good to see you. 500,et coming up, the s p and trading strategies that runs contrary to buy low sell high. Scarlet its time for the Bloomberg Business flash. Gap says it is shutting 75 old navy and Banana Republic stores outside of north america. They try to come as refocus on north america and china. Change theed to earnings forecast. Alix tim cook has inaugurated an office in Southern India to develop apple products. It would create 4000 jobs. They announce plans to set up at by 2017. Bangalore they have a 2 market share in india. Scarlet two thirds of americans would have difficulty coming up with a 1000 emergency. Conditions are as precarious as ever. Even among the nation us nations wealthiest percent, 30 said they would have some difficulty coming up with 1000. That is the Bloomberg Business flash. For the s p losses 500 wiped out gains for the year. One strategy could be trend follow gene following. Here to discuss the strategy and what it means is side need , thank you very much for joining. Explain what trend following is as a strategy in high and how it applies. The saying of by a low, selling high is flipped on its head. You end up trying to buy that trend. At the moment we think of the close. A lot of them at the moment will be slightly shorter stocks. The idea you can profit from move higher and lower. Idea, it doesnt matter if stocks are going up or down. You captured the trend and ride that. What is the trend right now . At the moment if you think about a strategy they will trade multiple markets. Stocks, a mixture of the dollar. And commodities as well. Trades those types of will make money. Most of the money is being made in bond trades. This chart up. It shows how the strategies are doing. Bonds are a massive winner. It is an incredible bull market. We see Government Bonds especially going long. On the other hand, how bad does it get . Trends reverse themselves. If everyone is filing in, how painful does it happen when they revert . When you get a turning point you experience its not going to be the best time for that strategy. Joe what about overall for the market in terms of volatility . Weve seen an increase of these strategies. For any given investor, strategies work until they dont. Do you think the growing popularity, everyone piling into bonds are going short, it is all doing the same thing adds to volatility . There was some of that last august when we had the correction in spike of volatility. There is still a capacity for strength. What you want is enough people to run it. You have a selffulfilling element. If you are the only guy trading a trend it is not likely to persist. I would not say its very big but it is a significant part of the market. Joe how do you do find a trend . You could say local trends are up or at all time highs. Yet now you say strategies but mostly have you short. What is the trend . How do you know when you are in one . You want to apply a trend on many different time horizons. Look over the past year, the past six months. If you are building a type of strategy like this you dont want to focus on one specific time horizon. On longerterm time horizons. Do we expect to see a reversal . We pointed out that bond trend followers are having a gigantic year. Equity, not doing so well based on your model. You expect some of these to change . It depends on the underlying market. Whats going to be important is what the fed is going to do for the bond markets. In terms of what the fed is going to do i dont expect them to hike any time soon. That should be good. All right. Thank you very much for joining us. Diamond coming up, a discovered near the Arctic Circle. We show you where it was found. Alix whatd you miss . The largest gem quality diamond in north america. , firefoxet pendant will likely make someone pretty happy. As interesting as where it will wind up. 130 miles south of the Arctic Circle the ground is blanketed in snow and ice. The landscape is more water than land. Youd a full, pristine and 60 million years ago, i. E. A scene of utter devastation. There is ash everywhere. It looks like the apocalypse. There are these holes in the bowels of the earth. By rio tinto. Ted be goinggoing to kilometers in the aaron white everything out. Then it is just going to stop. When conditions are just right diamonds will hitch a ride. One of them was a whopper. It ended up where most in depth after glaciers scour the land, beneath a leg. We knew they were under there but we needed dry conditions. The only way we could do that is by building dikes around them and draining all of the water. Tons of orec are yielded. There has only been one foxfire since they began. A how long until there is diamond . Probably half a minute. The chances of a large diamond, you would have to stand here for a week. And in the case of foxfire you will have to stand here for 12 years. Because it was considered so unlikely to be found the mine is considered to crush anything over an inch. To end upto crushers in one of these buckets. Its a long way from a bucket in canadas north to fifth avenue where new york buyers are getting the first glimpse of foxfire. To clients were interested in the assignment. They wanted to keep it as a hes. The other is interested in making into a pendant. It could be more than 100 carats. It is a fraction of the 63 sold forhis diamond this month. With only a handful of diamond mines operating in canada, it is hoped buyers will pay premium for a piece of north american history. , a diamond like foxfire destined to be a beautiful indulgence could be found here beneath a frozen lake on one of the harshest landscapes on earth. Odds are it will not happen twice. Scarlet coming up what you need to know to gear up for tomorrows trading day, next. Scarlet whatd you miss . German pti numbers. Wholesale inflation. 0. 1 . Nsensus is a gain of we are looking just fine. Joe are you point to get up at 2 00 a. M. . Alix of course. Earnings for this company sold 27 . Joe i will check out existing home sales tomorrow. Expecting 5 million on an annualized basis. We are getting a lot economic home data. We will see if this continues. Scarlet and what the fed does afterwards. Alix that is all for whatd you miss . Joe have a great evening. Iaaem the exact details are still unclear. Officials in egypt today said an active terrorism was more likely than any technical issue. Before details were known, toald trump jumped out