Transcripts For BLOOMBERG Bloomberg Markets 20160225

Undermine the basic security and privacy interest of hundreds of millions of people around the globe. Laws an argument citing all the way back to the 1780s and more specific and more recent cases that the government cannot compel at to do this. It is a powerful response. Off the record briefing even as we speak over this case. The rhetoric is eating up here as apple response to the governments request to show them how to break into an iphone with the fear that this would be the ability to break into all kinds of iphones. Apple is also citing the history of hacking and the u. S. Government saying by opening this phone up to the previously unknown ability to hack it, it would open up all kinds of phones to all kinds of risks to foreign governments and beyond, even citing the case when the office of personnel and the u. S. Thernment was hacked into private records of Government Employees opened up. A powerful response. On the not moving particular move as we anticipated. What is the next step . Cory there will be a hearing and they will have to respond to the spirit it will be an interesting fight. Apple is trying to have the fight out in the open not even in the courthouse but in congress. Is very in the World Enterprise technology, apple came from Edward Snowden about the u. S. Spying and nsa spying on the data held by these companies. About thee talked differences they have had in china. Foreign couples do not trust that their data will be safe and private. It is not just a privacy issue but also a big issue for their toiness and ability to sell the enterprises for big u. S. Companies. That is a factor Congress Might weigh a lot more than a court. Unchanged. Le thank you so much. Than one hour from trading and stocks, looking to trade higher for the second straight day. Julie hyman has more on an energy deal that may not now happen. Julie this news is breaking in the past 20 minutes or so. Stocks, weok at the are talking about Energy Transfers, a plan acquisition. According to the new york times, they are continually considering pulling out of that deal and then discarded the idea or did not go through with the idea offering a payment to walk through the idea. Have been plummeting this year and there have been questions raised about whether the deal will go through. We are talking about energy pipelines. Williams is down 6. 5 . Searcheds initially Energy Transfer after it said it was said to not go through the deal. The value has fallen sharply. To talk about other movers we are watching in todays session because these stocks are generally seeing gains today. At the overall averages. All three major averages are now trading higher at this point. They have been turning around with Energy Prices here. Vonnie thank you so much for that update. A very Interesting Development in energy. Mark crumpton is at the news desk. Marco president obama will hold Senate Leaders tomorrow to discuss Supreme Court vacancy. They will meet with Mitch Mcconnell as well as chuck will be of iowa, and joined by minority leader harry reid and senator Patrick Leahy of vermont, both democrats. Mentioned as as possible replacement for antonin scalia, is not interested in the job. The governor says he told the white house today he does not want to be considered for the nomination. Apple asked the judge to vacate in order that would enforce it to hack into the iphone of one of the San Bernardino shooters. It says the fbi is seeking dangerous powers. The director was asked about the legal battle by members of the house intelligence committee. This will require negotiation and conversation. But i am keen to keep the bureau out of the policy making business. Mark apple ceo tim cook tells abc news he is prepared to take this to court. Apple contends the u. S. Cannot force him to unlock the iphone. Republican president ial candidates swear off in houston in a final debate tuesday. Mitt romney is responding to Donald Trumps tweet, calling him a fool, after romney speculated on a possible bombshell for the tax return. He tweeted me thinks donald duck protect protest too much. A major policy shift in italy today, the legal recognition to civil unions. Passage of the bill is described as historic. Gay and lesbian groups are denouncing this legislation as a betrayal. Global news 24 hours a day powered by our 2400 journalists. I am mark crumpton. As we had to break, these are live pictures as Congress Members to is quiz the fbi. Speaking with members of the house. Lets listen in. To justify some of the actions of the government. I am saying as one person who has seen this kind of thing happen, we are very cautious about how we move forward. I understand the tragedy. I have mentioned in times of tranquility, our constitution is very rarely challenged. Trauma and tragedies, it is when we need to be vigilant and thoughtful about it. Through. Think it mistaket want to make a as a nation that believes in the rule of law. I agree completely. That is why i think it is so important that this be a national conversation. The stakes are too high and it affects how we will live and ourrn hours else for childrens and grandchildrens lives. I do not think it will be decided by one or another court case. The fbi or some company. The American People need to decide how we want to be. Thank you. Just to say, i agree we should have a national conversation. In the past, these kinds of things have always been rushed into. Thoughtful people will get together and half the things out. Rogers your request 646 million is for the building and the other is for other things. That is a huge request. At the same time, you are proposing significant cuts in fbi operations. Vonnie we will be right back. Vonnie u. S. Bid to break into the iphone of the San Bernardino shooter, lets get more from washington. Apple filed this in court in response to the fbis demand provide a way to get into the phone. What details did you garner that we did not already anticipate . Oppositionexpecting from apple and we see they are not aware of any precedent. We are hearing from apple that others filingng and support. What other Companies Might apple be referring to . When apple came out to the initial letter to the public regarding the issue, in about 24 hours, we saw a trade Group Representing google and facebook and twitter, coming out in support of apple to hack their own project. Rally around apple, even today on the hill, microsoft executives holding off an oldtime aegean machine to illustrate the laws the fbis trying to use to force apple to do this. What are we hearing on capitol hill today and what are you taking away from the hearing . It became more about apple than any of the other socalled threats. The fbi theyre saying they are not trying to send a message with the effort that they there could be precedentsetting, it is about getting to that specific phone, that they wonder stan want to understand what is going on the case, after the gunman, they acquired it and want to know for the terrorist investigation. They are also saying they know it is a hard issue and this is what they have to do. Vonnie thank you. Apple off after the filing was made. It cannot be forced to lock the terrorist iphone from executives saying they are not aware of any precedents and they expect findings from other companies. More on market rally gains on financials and staples overshadowing energy companies. Our guest is counting on it. Joined now. Alec, you were saying a moment ago to me there were interesting levels on the s p 500 here. We into the making higher lows every time we make a low. Something we should hear from . Yes. I think were looking for a little less macro volatility going forward. We have been testing on the upside in the s p for a few weeks now. Each time we got to the level, we had a big selloff. We might be ready to. The tentacles are looking better. The big for us in terms of what has been driving the volatility has really been about the fed. We have had global uncertainty even though domestically, were looking better. Global risk against the backdrop of fed tightening, i think that has exacerbated the market some of the risk, the fact that the fed is in the background where you raise rates. When the updated the plot on march 16, i think they are likely to bring it down and turned of hawkishness. Forecasting rate hikes, more in line with the dovish output the market expects. Election less hawkish tone could set the stage for better risk assets and this improvement inthe markets may be anticipation of the more dovish tone in a few weeks. Expressing much too much sensitivity in terms of inflation expectations. They are a little bit less hawkish in their outlook, a little more dovish and more in line with expectations, that should allow for better performance among risk assets. Relative to what we have seen year to date, we think we will probably have a smoother ride. Vonnie consumer and financials. And simmer perhaps, but we have seen a little bit of weakness in the Confidence Index recently. Sure. When it comes to the consumer, it is a crowded area but you have less fundamental challenge area. As far as financials go, that is more of a relative value. Risk,ms of energy credit, but to the extent the fetish that this gets more dovish, if that could reduce more of the credit concern around the banks, there is more for them to do together. The most attractive yields in the market are in the large financial companies. Are you constructive on energy or do you think it will not fall from here . Obvious the, oil has devised for the moment of is maybe until something happens with opec. Questions knowing that the body is in, it helps people forecast corporate earnings and forecasts the credit spreads and the overall credit of look so it could have a big impact on investors not making energy specific thats. At this point, i think hopes of a freeze because of saudi Russia Developments have put a floor under crude. There is potential given the demand for prices to go lower over the next few months. I think the focus is a little the on the positive from potential supply freeze. Given how negative psychology had been, how much commodities were falling and how quickly, it is all relative in the markets and i think flat is sort of the new up when it comes to oil prices. I think a lot of people would be very happy if they could just stay in the low 30s. Thank you. Still ahead, we will return to the breaking news on apple. The First Response to the fbi over demand of unlocking that phone that belong to the San Bernardino shooter. Vonnie fighting the response for the fbi demanding apple to unlock the phone used by the San Bernardino shooter. Just giving some of the headlines. It said it cannot be forced to unlock the iphone. Says it can be coursed to serve a very strong and robust a story apple used. Set other companies would find robust complains along with apple complaints along with apple. You have had the chance to go through the filing more closely. Vocal so far. They are saying the court order would violate their constant their rights. They are saying the government is trying to hijack the Important National debate that the government is trying to require them to create a government sanctioned operating system and that they would have to create a government sanctioned forensic lab and that they will face us. As you said, they want to fight it on the public fear, lets listen to tim cook on yesterday and saying his plan to talk about president obama on the situation had not exact happened yet. Take a listen. I have not talked to the president that i will. Do i think it is limited, no. You have talked to these issues before on privacy and security. Are you concerned there was not more of a dialogue before this swift action . Yes. I think there should have been. Just filing. We found out about the filing from the press. Cook wants to take this to the executive branch. Will he succeed . Chris this will play out in congress. You will see after Others Technology companies in the industry to in on the ministration to get involved. Industry already said they will look at legislation on the hill while this plays out in the courts, it often plays out in the administration and in congress. Vonnie one thing that was interesting is apples edited for this indent history. Is there something the ei could come up with that might show precedents . Chris the fbi said in its original application of the court order that has precedents writegetting companies to software to help meet the obligations of a court court warrant. That will be a dispute that will be one of the central issues in a court case. Apple is essentially saying the of is relying on the act 18thcentury law and in their legal filing today, they are saying it is unprecedented that you could use that to compel a Technology Company to help the government conduct surveillance by writing new software that does not is not available now. Vonnie apple is saying congress is not authorizing reports of an encryption service. It is turning much more into a broadcom topic of conversation. Made. At is where law gets it begins with one case. This will play out in the courts. Toyou see a defense there take this to the next level when it comes to public discussion . The case is much better much bigger than the fbi getting into one phone. Apple has argued this is an unprecedented government water and that the case would set a precedent that would affect not just apple that the u. S. Technology industry. What you will see is you will see it emerge into a Larger National debate. It has already started to do that, but now congress will get involved with hearing. We know apple executives will start testifying up on the hill. The administration will begin to look at legislation. Something that will be battled out in the public sphere. We do not know who will initiate the conversation, but tim cook definitely wanted to happen. Of 1 up about a quarter now. Up ahead, we look at retail earnings. Vonnie live, you are watching Bloomberg Markets. I am vonnie quinn. Apple his first court response. Cory johnson is in san francisco. I want to bring out some of the. Ther comments we are getting we know tim cook wants to talk to the president about this. The writing in my humble opinion is powerful. The case thats this is not just a regular request for law enforcement. Says just this once, just as iphone, but the government knows that is not true. It has multiple applications in other courts. It cannot be closed and the security apple has worked tirelessly to achieve will be unwound. James is sitting before congress right now. Apples saying they know that is not true. Since the case was filed, other local governments want to get into iphones for the same matter for what they think is important. A lot of colorful language and colorful in imagery like hacking labs. Will that win over Public Opinion and would that matter . Filing is intended for the judge. Cory it is a legal case that opens up an entire pandoras. Box and is not just one iphone. It accuses the government of tugging at the heart heartstrings. To cut itment sought off and circumvent thoughtful analysis. They bring up the point that it does not exist. Compellingent is apple to create a new operating system, effectively attack or for the iphone. Believes it is too dangerous to build, suggesting that they are indeed opening up an entire new problem that could threaten iphones all over the world and they would have to respond to the governments request overseas to do the same kind of thing and apple is specifically designed not to do this. You see the rest of Technology Document with microsoft, with filings and with the court. Tim cook speaking on roll news tonight and saying, it is not only the idea of backdoor encryption. It is extraordinarily dangerous also. Lets have a nation a listen to what he has to say. We need to stand tall on principle. Our job is to protect our customers and they have incredibly detailed information on their phones. There is probably more information about you on your phone then in your house. The smartphones are loaded with intimate conversations, financial data, health records, and they are loaded with the locations of our kids in many cases. Is not just about privacy, but also public safety. Vonnie we saw today apple is saying there is a robust response from other companies. As strong and being as we just heard tim cook there, or what will he just leave it . Franklythink it is really unusual for the ceo or and say to come out this is what they are doing and this is why. How many company ceos would we expect to say, we do not comment on legal matters and they will let their lawyers be the spokespeople. , a lot of the world of technology is glad he is standing up to do this. It could have been microsoft and it could have been Google Alphabet and there could have been any number of other companies here. They also recognize they have got the soontobe court of Public Opinion as much as they are speaking of this in the real court. You thinkw much do the issue matters for investors . Do investors in apple stock care . Cory i think they should take care of this. I do not think that they are, but the number of companies in the past cut couple of years who talk about the difficulty in foreign markets, u. S. Companies, because of what the nsa was doing in terms of collecting these private companies, the economic damages to them has been substantial. We have seen weakness in sales directly citing the issues that of hurt their ability to sell. Building data centers overseas as foreign customers will not use data centers in the u. S. , wondering of those are safe. There are substantial issues here as it relates to the economic and how these is this his work. Investors should Pay Attention to how what this means to there is a balancing act to between safety and the fight against terrorism. But i think when the issues are hammered out in public and we are able to discuss them here on television, i think that is how we will come up with a sensible conclusion that would not happen behind closed doors. Not just about the investigation. A listen. The San Bernardino litigation is not about us trying to end a message or establish a precedent. It is about trying to be confident investigating something that is an active investigation. I do not know how lawyers and judges will think about what is the principal on the legal side. I do not know. Vonnie what argument will they make . Cory apple flatout says it is disingenuous as an argument. They also go on to say, where does this end . I think none of us know. Let me read one more section from the filing because it is very interesting. Apple is saying given the interpretation of the law here, it is hard to concede any limits on the order of government in the future. Bypass se to buy what is stopping them from turning on the microphone in need of government surveillance, or serendipitously record conversations or turn on Location Services to track the phones user . Nothing. A very powerful language. Vonnie cannot wait to see how it plays out. Down head down to the nasdaq to check on shares of apple. Abigail doolittle is there with the latest. Apple is saying it cannot be forced by the u. S. Government to unlock the iphone the shooter in the San Bernardino terrorist attack and it would be an undue burden. It is important in this situation to separate the story going around a company and what is happening with the stock. The stock is little changed and it would probably take a lot story to push to have a big ones on the stock. Stock trading will be influenced more by earnings and revenues, and investors are likely to focus on river whether or not ,he growth forecasts technically speaking, apple has grady in recent weeks, holding the support of last years low than 90. If apple can stamp of 92, it is probably bullish. Below 92, there is probably quite a bit of downside for apple and the biggest waiting for the nasdaq, perhaps overall. Vonnie thank you so much, Abigail Doolittle down at the nasdaq. Still ahead, we are getting ready or the market close. A look at the major averages right now. Points. P 159 the s p 500 is holding above the level alex was talking about. Vonnie reporting after the close, jcpenney reporting tomorrow morning. Expecting jcpenney to post a fifth straight quarter of sale games sales gains. I next guest initiated coverage, a target of eight dollars or around there. The Senior Equity Research analyst, welcome. We do not expect this a couple of years ago. It is executing the turnaround. That is true. It is a lot better than macys and there are Good Strategies in places here. Has labels and brands the American Public really likes. They also have a nice concept, beauty is about 10 of the business. Those are powerful trends. Vonnie about one abbvie to stores, it will now be in one in every four or five. Vonnie it did not exactly work out for jcpenney before. I would say eliminating coupons altogether was not a good decision but there are big benefits jcpenney put in its store. There is a good presentation. Of leverage here and that is a key point of the story. 4. 1 net dollars of net debt. Is one reason the stock has held back despite all of these things. He does he does. Has been a tough road. The other major focus here will be online tomorrow. Jcpenney, the online business, other departments or peers have a better online interface and that is something we think hard about over the next 25 years and amazon. There are five cells on the stock out of 25 analysts. Yesterday, they said it is your relevant now. Would you go that far . I would not. I still think it has a place in america. A set act is a set up for a comeback. There are product errors there. We are looking for returns of the businesses. There is a big opportunity and old navy. Manage them credit, they credit well. Their success or lack thereof does not depend on the consumer. That is a good question. We are more bifurcated. The stronger dollar as well as the wealth effect, s p has been off to a rocky start. Including lower gas prices, lower unemployment, and rising minimum wage. Pero has been tough because of the weather has been so unfavorable. That is challenging. Much. thank you so very do not forget to look for those thelts tomorrow before opening bell or the other way around. Time for a look at some of the biggest is the stories in the news right now. Longterm u. S. Mortgage rates slowed the exact the and the economy exists. The average rate slipped to 3. 62 . Dropped. Ge rate also the company that operates sears the fourthell in quarter. Samestore sales fell 7 . The Hedge Fund Manager selling and spinning off assets. It also invested heavily in Online Rewards programs. Seaworld is admitting employees did pose an Animal Rights activist. The Management Team says it will end the practice because it is not consistent with company values. The ceo says steps were taken to maintain the safety and security. Seaworld was accused of the practice last summer. That is your bloomberg is this flash. It is not too long between conversations with our guests. Thanks to weaken the economy, the ecb, boj, and banks among others embracing negative rates. We were talking about in the u. S. For a while. Toit is incredible how reason go, Central Banks are all racing into this disastrous, negative Interest Rate policy, and that is why markets are itling off, and here we are, is completely erased, the losses we have seen a couple weeks ago ever since the banquet negative or we see a lot fewer people freaking out about it. To be fair, it did start almost as a hypothetical. Negative territory. He might have been jpmorgan who said, but would happen if the fed decided to do this and the Economic Data was pretty weak. We got negative data. Bank of japan, the bank of sweden cut deeper into negative race after that. What has changed since then . Maybe a little better on the Economic Data. I do not think the data the fed looked at has changed in one direction in any meaningful way in the last two. The Services Data we have gotten yesterday has not been that good. That just always the case you see these market moves and people come up with stories, like, this is the market, registering its displeasure with negative rates, and the market rallies, and then people drop the story. Vonnie one was coming out and saying, much too much sensitivity regarding oil prices and expectations. And one thing that is interesting, janet yellen, she had her hearing in front of congress a couple of weeks ago during the peak of the turmoil. Opportunity to walk back and say, maybe the fed will not raise rates at the pace we indicated before. Sheets not take the opportunity. She said, we are still looking at the data and the market now does not into mind. There is a lot to be said for just being steady and not getting too worked up about whatever the new panic is at a given moment. Vonnie i want to direct everybody to what shows us how the of the world at sovereign bonds are in negative territory. You will be able to see that later on. Joe weisenthal, thank you. That is coming up at 4 00 p. M. Of trading is just minutes away. Here are your major averages right now. The Dow Jones Industrial average 100 84 pointss, there. The s p 500 is at 1 . The nasdaq is the laggard today but still off to theres 1 . Two thirds of 1 . Vonnie stocks are gaining tech and julie hyman has a look at apple. There has been latebreaking news as well and that company is coming up with earnings early and it was supposed to come out with them after trading. The stock has been halted, penny news, though it will explain why it happened before the close instead of after the close. Companys thirdquarter earnings forecast below estimates that the Sales Forecast is above estimates and its past quarter numbers Beat Estimates and that explained the initial drop and again in the shares, there was a bit of mixed information there. Whenll bring you an update we hear from a company directly. Apple is in focus and we have been watching it as the Company Comes out with an extent of filing with a defense against releasing security information with the government. The shares not doing too much on this day. With the u. S. And the fbi, the shares of not see much reaction. Other latebreaking news, the we trying to york times figure out how to get out of its , so it does not appear to be any significant , equity is actively trying to get out of the deal and some white. Also, lets rot and it out and look at the major averages and see where we stand at the bell. We are all at the highs of the session. You look at s p over the worst of the day. We have seen it gain steam gradually as it has gone on. You see the climb as the day has gone on and it has mirrored to some extent the chart of Oil Prices Today though it is a broadbased rally. We see the list and oil. Markets are ag and commodities is not oil but natural gas. It will get following to its lowest since 1999 after the latest inventories report showed there is still essentially a glut of natural gas that is not going away. If we look at gas and oil over the past year, we have actually seen natural gas natural gas be the under server underscore. Natural gas is feeling a lot of pain as well. Vonnie thank you so much. Emerging market stocks are rising more than u. S. Shares. An equity strategist believes this rally will continue. It is time to purchase stocks and develop the economy. Joins us for more. Emerging market stocks are outperforming now and suddenly they are the darlings question mark is that what we will here . I do not know if we will bring out that topic. I will tell you it has been a tough quarter so far for emerging market stocks funds. Bloomberg gadfly notes just how badly some of the biggest of those funds have done. On the other hand, we have a story that talks about how Money Managers see large stocks and how bonds, also an opportunity. A couple of funds for pimco, talking about them as the treat of the decade. Vonnie if you look at the index youour bloomberg of course, can see it has been rising that index but not every emerging market is created equal. Marketse the emerging performing well that are making up for those performing poorly . You look at costs across the spectrum. Deviations know question about it. No question about it. The ratio of the emerging market index to the u. S. Index so you of how these developing companies are performing on relative terms and that term higher fire police ago five weeks ago and it is something citigroup points to perhaps as the shape of things to come. Vonnie would you call this smart money . Black rock andut some of the other investors looking at it, you could argue it is smart money. They aret, citigroup, talking about with the dollar means in this equation, that strategists focus on the market rush, and has been considering the shares to be attractive or a while. It is that you have been struck with a stronger dollar. City sees it they are not so concerned about that possibility. See in the char that is stalled out in the past year or so. Perhaps a it is better time to buy into the share. They raise the rate overweight from neutral. Dave wilson, a wonderful report you can email him and get his chart of the day every day. That is it for Bloomberg Markets p what did you miss is next. The majors, less than four minutes from now. The dow is up 1. 2 . Unbelievable rally. U. S. Stocks heading higher into the close. The question is, whatd you miss . Is the panic over highyield european banks justified . Joe plus is all the recession banter all point . The data shows the economy may be right on track. Alix we will dig into the legal argument over unlocking the iphone. Rallied into the close, we talked about the s p 500 erasing it loss for the month. Holdout was chevron but it has closed in the positive. One dow is more than 1000 points above its low. Joe