The big loser yesterday has come roaring back today. We are looking at gains after a bit of a pullback yesterday. The nasdaq up nearly half a percent. Putting in a new alltime high. It does follow the more than 1 drop yesterday. The russell 2000 still about 1 below its record high. There are some strategists who think the russell 2000 shopping is could be a precursor for a nearterm pullback for the major averages including Katie Stockton of btig. We could see a nearterm pullback for the major averages. Would refreshs it a potential year and rally. Lets take a look at the small cap underperformance. Its a one year chart of the russell 2000 to the s p 500. Overall not doing much over the last six months. That going into september. Big smallcap outperformance. Lots of these companies are very u. S. Based. Very sensitive to the tax policy. Over the month of october really underperforming. This could be a tell on whats ahead for the s p 500 and the dow. Take a look at some tech stocks performing very well on the day. Nearly 1. 5 . Lots of positive chatter around the preorders for the iphone x. Usee said it may not qualcomm chips and its iphone. This on samsung comments around memory. Lots of good stuff here for technology. Lets take a look at companies that are higher on takeover talks. Rockwell automation of 8 . Earlier Emerson Electric made at 27 point billion dollar offer. Rockwell automation has rejected that. Is in play. Charter communications higher on a report from the nikkei. The tokyo newspaper since to have frequently impact stocks in the u. S. Scarlet stern to centralbank policy. Decision is due out tomorrow. President trump will make his choice for fed chair on thursday. The president is leaning towards fed governor Jerome Powell. Joining us now is steven englander. We will get to the fed chair derby in a moment. I want to start with the fomc meeting and decision. No drama here because everyone is priced at 25 basis points. And 2016 they gave very strong signals the meeting before december that they were going to hike. The fence problem or the fomc problem tomorrow is that you have brain heard evans, kaplan and catch kerry saying we are still up in the air. If they dont give that explicit signal that 85 thats priced in will actually fall off. Julia look at the core pce numbers as well. Coming in at 0. 1 month on month. Kind of had justification in some of the inflation data continuing. I think their noses will grow longer. I think thats the fence problem. They may have a hard time theing those to sign on to hike in december. If the market sees that they use the same language as last time that was pretty ambivalent. It was kind of data dependent. Thing to raisene concerns and not go along with the consensus. Its another thing to actually vote against the decision. India. It could be a going away present to fed chair yellen. Thats not what they are supposed to do. Theres nothing that forces them to be so focused on inflation. And then decide, it really doesnt matter right now. You are saying if we dont get this not in the language in the statement to suggest they are going to hike in december they remain data dependent. How much is repriced out by the markets if they dont get the nod you are indicating . Scarlet what does that mean for bond yields given we have reached this critical level . If you cant get the big consensus for december there is not that enthusiastic content consensus that they will be hiking next year as well. Lets talk about the other eagerly awaited decision this week. How eagerly are you anticipating the eagerly anticipated it is roughly 85 priced in. If they named Jerome Powell to the chair is predicted all these markets, nonevent. I think if they named taylor as vice chair at the same time whenever dovish impact how will have right now would be offset by having someone as hawkish as vice chair. If he just gets a seat on the board i think its been there, done that. We always have hawks on the board. It doesnt matter that much. Do either of these names compel anyone from the current fed to step down . Im not saying anyone would do so in protest but with they take the opportunity to save my term is done i think of going to move on . I dont think so. They are there to represent their views and make Monetary Policy decisions to the best of their ability. Unless theres something wrong with the process i think they would hang on. I have read so many articles thing theyre concerned. Bout the credibility do you think we are being too alarmist . I guess. With the respective getting named as chair. They are pretty independent. I think if you count on loyalty or someone toeing the party line once they are chair you are probably making a mistake. Scarlet it might look like a reality show but it generates a lot of debate and it gets people thinking about what different people would bring to the table. That cant be a bad thing. Steven englander, sticking with us. Well discuss the latest decision from the bank of japan as well. The bloomberg first word news. Trump has a timeline for when he will have a tax bill ready to sign. I want the house to pass a bill by thanksgiving. I want all of the people standing by my side when we get ready to sign by christmas. Hopefully before christmas. Republicans are trying to fasttrack the bill to deliver President Trumps first legislative victory. The white house says President Trump will not visit the heavily fortified border between north and south korea known as the hislitarized zone during Upcoming Trip to asia. A senior official says theres not enough time in the present schedule to accommodate the visit. Every president but one since Ronald Reagan has visited the dmz. Ahead of the yuan Environment Program is predicting that the United States will live up to the Paris Climate Accord despite President Trumps plans to pull out. Program executive director said today the question he is asked most often is what about donald trump and his reply is that Corporate America is going greener whatever happens in the white house. Kenyas Opposition Leader is criticizing the countrys Election Rerun process which once again declared incumbent making hishe winner, first Public Comments since results were announced monday. He says opposition protests will continue until the vote is nullified a second time in less than three months. The october 26 vote. He ended his supporters could appeal to the nations highest court. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im emma chandra. This is bloomberg. A programming reminder. We will have special coverage of tomorrows spent decision at 2 00 p. M. Eastern time. Bill gross, Jeff Rosenberg and our very own scarlet fu. This is bloomberg. Julia this is bloomberg markets. Im julia chatterley. Scarlet im scarlet fu. Steven englander is still with us. Also coming up this week the mark carneyand conundrum. The market is basically pricing a hike. I dont think you can leave the market at the altar again. I do think they will make it decidedly on hawkish in terms of the hike and make any kind of subsequent moves much more dated. Scarlet there is a boe landing page. It gives you a snapshot of everything you need to see. Right now the rate is at 25 basis points. Impliedlook at probability for the bank of england. This is different outlooks for what the boe is likely to do. I dont even know if there is a technical word here for this kind of chart. Certainly the options are there for him to raise rates. The data hasnt been great. Do you think he could go look . Cant leave investors at the altar. I will take back the emergency cut that he did in light of the brexit vote and then go, we are done for now. Well continue to watch the data. I dont think hes going to say we are done for now. He will suggest subsequent hikes will be tied to good Economic Performance and inflation overshoots and not as precommitted as this one was. Julia the problem is inflation and he has a problem that other Central Banks simply dont have at this point. It kind of ties to the note that you wrote recently about the importance of inflation for asset prices and at what point they secondguess themselves. I wrote in the note that the biggest risk asset market is that inflation gets to target because as long as inflation is below hikes will be tied tars your friend and you kind of have them over a barrel because if inflation is below target they cant be too hawkish because that would mean inflation was even more below target. Once you actually get the target and things are symmetric now i think were going to see them go back up to a much more normal range. Inflation is 1. 3 m not 1. 9. Scarlet how much of that depends on good inflation versus that inflation . In the case of the u. K. It is slightly different. Of thisight say a lot is coming from the Exchange Rate. We know its kind of one off. If you actually of this have homegrown wage driven inflation what Central Banks say they are looking for when they actually get it neither we nor they may be as happy with what they have. Julia Central Banks at this stage kind of tolerating the Wealth Effects of the asset Price Inflation in order to g up demand. They are not going to tank the economy just because they got like rich people. They may not have wanted this as an outcome. But it has been working in their flavor favor because it has been one of the sources of stimulus. Scarlet could the boe be the first brick to fall if it does move a little bit too suddenly for investors liking . I think so. If we begin to see any sign of second round inflation then all bets are off. How muchill debating of it is the Exchange Rate and whether any of it is seeping into the domestic environment. It actually does become classic embedded inflation. I think u. K. Asset markets will perform poorly and i think that we will be harking back to some of the papers we wrote in the 80s and 90s about what happens when inflation goes up. The downside scheme has been clamped down on by the central bankers. Because of this concern about doing damage to the market unit have quickly do they react to a pickup in inflation . The other risk is that they dont react soon enough. I think that they have talked so much about getting to their target. They think they would knowledge they have to move towards equilibrium if they get there. Julia asset prices investors would be accepting of that . I think we keep downward pressure. That downward skew that has been curtailed by the fact that we know there has been this central Bank Reaction function, that would come back into play. Julia maybe we can explain whats going on with inflation. Scarlet steven englander, thank you so much. Still ahead, the conversation around russias meddling in the u. S. Election continues today on capitol hill. , google and twitter Legal Counsel takes the hot seat in washington. This is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Julia im julia chatterley. Time for a look at the biggest business stories in the news right now. Is the firstnt executive targeted in a civil investigation for allegedly solution by generic drug. This according to a statement by connecticuts attorney general george jetson. The investigation is from 45 states and the district of columbia. Mylan said it fully stands behind him. The worlds Biggest Exchange operator cme group plans on introducing the coin futures by the end of the year. The Digital Currency surged after the announcement with the move could help professional traders and investors get more seriously involved in the cryptocurrency. With miss our interview the chairman terry duffy. Thats your business flash update. Scarlet breaking news out of washington. House Financial ServicesCommittee ChairmanJeb Hensarling will not be running reelection next year according to the dallas morning news. He has released a statement to the paper saying he is announcing he will not seek reelection in 2018 although service in Congress Remains the greatest privilege of my life i never intended to make a lifetime commitment. I have already stayed far longer than i originally planned. He assumed office in 2013. He was chair of the House Republican conference in 2011. Chairman of the house Financial Services committee. Lets bring in kevin cirilli. Another mainstream republican here stepping down. Yes, Jeb Hensarling announcing his retirement. He is also confirming it to me in a statement. Now all attention is going to turn on who will replace him. There are several names that this race will heat up between including congressman ed royce. He is chairman of the Foreign Affairs committee and you cannot be chairman of the two committees at once. It will be interesting to see whether he will keep his role within the Foreign Affairs committee. Includemes i am hearing representative himes again and luca meyer. This has been rumbling for some time behind the scenes. Right now bombshell report. Jeb hensarling leaving. Announcing his retirement from Financial Services and congress. Julia just looking at his statement, he said i never intended to make it a lifetime commitment to serve in congress and i have already stayed far longer than i originally planned. This is a bombshell. What does this mean for the Republican Party in light of the fact that we have already had a number of announcements . Jeff blake is the another name that comes to mind. Scarlet bob corker. If you look at his statement, this is not as this is not the criticism that you have seen like corker. This is very different. We are outside of the social media hearing set to begin later this afternoon. Chairman read from penciling statement. He says throughout this time my family has graciously sacrificed for my service as the parent of two teenagers my wife and i know there are only a few years left before they leave to make their way in life. He says, although i will not be running for reelection there are 14 months left in my congressional term to continue. Graham. Senator lindsey all the attention focusing on who will replace him. He was really someone who sought to build a bridge between the conservative movement of the tea party as well as the more moderate factions. He was an advocate of mike pence. He is someone who really brought in john taylor on the shortlist for the Federal Reserve and advocating for him to have more prominent role within the republican conservative economics. Im glad you mentioned the hearing that is about to take place. Big tech under the congressional microscope today. You had Chuck Grassley talking about this earlier, what he wants to hear from the tech giant. Lets bring in our tech reporter mark bergen from san francisco. Here in new york is marty shanker, chief content officer for bloomberg. Let me start with you. Techis the story that Companies Want to tell the senators . The narrative is we are in control of this, we are transparent, we realized there has been an issue in our platform we are taking the appropriate steps. In some ways they are telling congress dont overstep and regulate more than we need to be regulated great place in google both put out post yesterday saying this is the full reach of the event that we found russian trolls. Your the steps we made to find additional disclosures. Staying with us, kevin cirilli, mark berger and marty shanker. From new york, this is bloomberg. Julia welcome back to bloomberg markets. The Senate Judiciary subcommittee meeting is starting, and the room is filling up. Counsel has just entered the room. Questions asked about how the companies failed from keeping russians from exploiting their networks and using fake news in the election of 2016. To you onant to come this what are senators going to be asking here . Why didnt these companies intervene in russian interference . To create rest business is advertising, they do not have the proper vetting processes in place. What they have to do today is to line, to be responsive to the senators, and protect what they think is a core part of their business. Scarlet kevin, how aligned are democrats and republicans on these Tech Councils . We have technical issues with kevin, so let me put the question to you, marty. How line do you think democrats and republicans are wooden they grill these facebook, google, and twitter executives . Are when they grill these executives . There seems to be a thames to keep it from happening again. The question is what you do in response of that in terms of regulation. Republicans are very concerned about over regulating businesses. Democrats, more aggressive. Many of these senators use social media themselves to advance their causes, so they have to be careful how they come across. Julia mark, these Companies Want to use these hearings to say, look, we are aware of these problems and want to do more to tackle it. Give us a sense of what some of these Tech Companies have already said in terms of how they can tackle this. Companies, they will be happy if the hearing focus is just on the advertising. They can say, listen, we have