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tv   Bloomberg Markets Americas  Bloomberg  December 30, 2016 12:00pm-3:31pm EST

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we are at bloomberg world headquarters in new york. we will cover stories from illinois to france. u.s. stocks are on track for the best year since 2013 and the russian ruble on track for the strongest year ever against the u.s. dollar. we will take a look at the biggest stock and currency movers. donald trump has a tough choice after president obama imposed sanctions on russia for hacking emails related to the u.s. election. will he rivers course or jeopardize his -- will he reversed course or jeopardize his relationship with vladimir putin? we are halfway into the trading day. us.ail doolittle joins do not be too distracted by the wine. abigail: we have the dow, s&p 500, and nasdaq all lower.
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the dow down .02%. canill see whether the dow turn positive. we have the three major averages down for the third day in a row. in fact, the dow is on pace for its first weekly decline since the election. a bearish finish to the year, but a great one. the dow is on pace for the best year since 2013. the nasdaq is down more than .5% and this is the intraday chart. the nasdaq opened slightly higher, but has been down ever since, being waited on by -- weighted by the big tech shares. underperformance is down for a third day in a row. taking a look at currently on the year, we have the bloomberg dollar index up 2.6%. we have the euro down 2.8%. interestingly, that decline
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pales in comparison to the decline last year of more than 10%. 16.5%,tish pound down the lowest level since 1984. we have a massive decline in currency. that is the worst decline since 2008. not even the worst on record. i would like to highlight that we have the yen trading higher on the year, up the most since 2011. that could be important because it could be a safe haven tell that investors see something from a macro perspective that .hey are parking more money in when we take a look at the pound, a deeper look, this is g #btv 5476. we have the 10-year british yield. pounde, we have volatility and we see that it absolutely skyrocketed after the
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brexit as the pound groep. coming down, though. suggest the year ahead could be different. perhaps we will see a reversal. taking a look at the russian ruble, on pace for the best year ever against the u.s. dollar and this largely could reflect, recoveryd vonnie, the in oil. that is important to the russian economy. vonnie: thank you for that. it is time to check in on bloomberg first word news. great on a home courtney: vladimir putin has overruled his foreign minister and decided -- courtney donohoe has more. the russians were kicked out of the u.s. in retaliation for interference in the presidential election.
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the kremlin says the obama administration is trying to sabotage president-elect donald trump's operation to russia -- outreach to russia. steven mnuchin -- they plan to accuse him of praying on the middle class workers that helped donald trump win the race for the white house. democrats will focus on steven subprime purchase up a mortgage lender. choicen donald trump's for secretary of state. tillersonl ceo's rex testimony is set for the day after the inauguration. exxon has joined the government in fighting the lawsuit. forecasters are warning of a high risk of wildfire in part of the southern flank -- southern .lains in florida
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the national weather service is issuing red flag warnings for much of oklahoma, southeastern ,ansas, southwestern missouri and northern texas. a warning is in effect in west central and southwestern loader, which has seen -- florida, which has seen little rain. global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries. am courtney collins. this is bloomberg. oliver: thank you. the russian ruble is on pace for the strongest year ever against the u.s. dollar. it fell yesterday on the news of u.s. sanctions against russia. it has rallied back. your to talk about what is next for the currency and the wrapup of the year that was in the --ity market you mentioned the ruble. is this going to be a political
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driven story or is there fundamental backing with oil? >> i think there probably will be more of a political story. we are seeing it really settle down and will probably trade between $50 and $60 a barrel. saudi arabia will probably cap it. it is going to be politics. it will be how the president-elect can negotiate with russia and deal with the essential sanctions that have been put on by the obama administration and it would move him to move -- before him to move quickly in that direction. it is going to be difficult to make a transition to the economic gains that he wants if he is still dealing with political issues. vonnie: we saw a massive strengthening of the ruble in the last few days. if you look at this function on the bloomberg, the ruble is the best performing, up 20% for the
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year. mr. cignarella: i think traders are looking at it from a standpoint where trump's comments are let's move on and let's live and let live so to speak. that is an indication that he will step back from the current sanction situation. he has shown an affection toward no reason tore is believe that will not extend into 2017. be time tot going to work on his economic agenda if he does not get past politics. he will need to move in that direction quickly in order to get on with the growth expansion plan we are looking forward to. >> the energy element will be important as well. we know that trump's cabinet will be friendly to russia's energy industry. >> it goes hand in hand. it is holding well above 50 and will most likely settle in the 50 to 55 range.
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7 what surprised me most was the resilience that the banks showed. back in february, we have the they start to the here and were the third worst performing in the s&p on a five-year trailing basis. now they are the best performer. we have seen a huge rally in thanks and they will be the big story here. all the money managers and traders are keying in on the financials because they check multiple boxes. they will be responsible for a great deal of earnings growth, supposedly. that is one reason why bullish.t are so monetary tightening by the central bank and higher rates should improve interest income. they are looking at it from the perspective of maybe are these stocks are you -- overvalued and do we need to keep selling? anticipation the of higher rates and better performance already priced in at this point? true, --i: that asian
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that is true, but it is the reality of when it actually hits you. it checks the box of trump's's policies. he has said he wants to deregulate the financial sector. that should be good for letting them operate as they please, not under as much scrutiny. they really are the bellwether industry that people will look at going into next year. vonnie: when you look at the bifurcation --oliver: when you look at the bifurcation of the market, we could probably divided up by the market. you look at this sector shift. what does it tell us about next year? we talked to strategist and analysts, is the trump trend a long-term thing? mr. ciolii: i think it will be and i think it will continue. the reason why we saw such good performance in the defensive shares and the high yield is in the first half of the year was really because of the lack of a rate hike and people not having confidence in the fed.
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as they continue to signal a rapid raise of rates, i think they will sell utilities and phone stocks and go into the places where they can get more growth. vonnie: taking a look outside the u.s., would you go to the places where the currencies will be the weakest? mr. cignarella: you could say the currency is the weakest or maybe the strongest. if the trade issues with mexico and china do not come up to the levels that were at the pre-election levels people are talking about. the mexican peso has come a long way and has a good opportunity to gain at least into the first half of the year if trump backstopped this wall and etc. and trade is not become such a nasty issue. >> look at how boring the mexican peso became. it is flat. it was all speculation and now since the election it has pretty much been flat. mr. cignarella: this is just a
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market year end settling down and waiting to go into 2017. in the euroness overnight, the market went insane overnight because of the lack of liquidity issue. assess in the first quarter of next year, early on as to where the political rhetoric is going to go and where the value will be. vonnie: vince cignarella and joe ciolli over here, thanks a lot guys. vladimir putin says he will not kick u.s. ambassadors out of the country. how will incoming president donald trump handled the situation? we have analysis. this is bloomberg. ♪
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-- oliver: this is "bloomberg markets." vonnie: but get back to tension between the united states and russia over the hacking attack. not retaliate by expelling american diplomats. president obama expelled 35 russian diplomat as punishment for spying on the u.s. election. here is what is next for u.s.-russia relations. andllow at the think tank joins us from washington, d.c. what do you make of the severity of president obama's sanctions yesterday? expelled and economic sanctions as well. was it too harsh? mr. cohen: not at all. my question is, why now?
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any questions -- any country worth its metal would react if the pillars of democracy like dnc and rnc were hacked and we know russia did even worse things enough past. they hacked the joint chief of staff email account. wayobama administration was behind the curve and did not do anything when that happened. yes, it is good to send a message. congress, republicans and democrats want to punish russia for that malicious hacking, but why now? why three weeks before they exit the scene? why restraining trump -- president-elect trump's freedom of action as he tries to open a new page in the relationship with vladimir putin? vonnie: to that point -- oliver: to that point, is this kind of a jabber by the administration to
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make things more difficult for incoming president trump or did they think we have to do something on this regardless of what it means for the incoming administration? mr. cohen: clearly they had to do more and they had to do more a while back. now they are slamming the door as they exit the scene and probably trying to catch trump's fingers in the door jamb. what i know from my recent trip to moscow a few weeks ago is that the russians are eager to try and rebuild of the relationship with the united states with great implications for markets. they need investment very badly. ae russian economy was in tailspin, not just because of sanctions, but because the drop in oil prices. to really get the russian economy great again, they need massive foreign investment and sanctions lifted. vonnie: why is it nothing but good for donald trump?
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all he has to do is have russia inviteu.s.'s debt to some of them and the russian diplomats back into the u.s. mr. cohen: if the diplomats that were kicked out were intelligence operatives, i am not waking up in the morning hoping to see them back. good riddance. what i think trump is trying to do is to negotiation new understandings with putin. he wrote "the art of the deal" and the question he should be the sanctions,th what are we getting back as americans? putins it that russia and are going to get back to us? vonnie: --oliver: how do you figure out what sanctions to administer based on a cyber attack? is there a president for this? it is a new -- is there a
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precedent for this? is a new sort of thing. mr. cohen: 21st century thing. what airspace was, when we figured out how to conduct air war and americans invented aircraft carriers, that was a revolutionary development in world war ii. we need to invent new modes and modalities of battle and for of.ia, i would go offense i would go tough on both russia and china and others who have cyber capabilities. north korea, iran, you name it. we cannot afford that the russia's -- russians or others hack the joint chiefs or congress or the cia. it is good that mr. trump is meeting with intelligence leaders and gets a full briefing. i am pretty sure the russians did it. vonnie: you asked the question of what we would get from russia
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if we were to undo the sanctions or the incoming president were to. what should we want from russia? mr. cohen: we need russia to stop throwing its weight around in the middle east like we saw in syria. obama was so weak on syria that russia is pretty much through a book at them, through missiles and tanks and now took aleppo, killed thousands of people, and caused many hundreds of thousands of of refugees. that needs to stop if the russians want to fight terror with us, we need to talk to each other about that and they need to leave ukraine alone. ukraine was badly damaged and violated by russian proxies and groups. that needs to be a part of any future understandings. vonnie: thanks to ariel cohen atlantic council senior fellow. oliver: find out why some
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critics say it is a bad combo. this is bloomberg. ♪
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♪ oliver: this is "bloomberg markets." i am oliver renick. vonnie: and i am vonnie quinn. one of trump's energy advisors has an idea, combining the department of energy -- e and thepa. rebecca kern,n is she covers nuclear energy. she is with us from washington. what exactly is the proposal here? you just stick one energy agency, the epa and they will be synergies?
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rebecca: i spoke with representative kramer and he pitched this proposal to donald trump when they met earlier this month and he thinks there is synergy between the energy department and the epa by combining them into one agency. there are some critics of that who say that the missions of the two agencies do not really matchup. the energy department has a large responsibility with our nuclear arsenal and waste cleanup and that is not something the epa has a lot of expertise on. there is a bit of pushback from legal scholars and question as to whether there will be support for this on capitol hill. where with the overlap be with the epa? i was under the impression that it was the goto for the nuclear energy and policy. doe thatit is actually
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is responsible for nuclear matters and the epa is the environmental agency and they are in charge of clean air and clean water regulations. the overlap is not very clear. also, there is this nuclear regulatory commission, which is an independent agency and i asked kramer about that, if you thought it could reside in this one large department he wanted to create and he thinks that the should remainnrc separate. it is a little unclear what he is trying to get at. vonnie: is there evidence to suggest the epa would have more sway if it were part of the department of energy? rebecca: some of the people i spoke with think it could actually cut some of the power that epa currently has on regulations. it could be a way to kurt tell
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power, if anything, which is something we have heard trump wanting to do with repealing the clean power plan. amer did not get a yes or no from trump, we know that he does not love the epa, so this could be some way to cut back the power. rebecca kern from bloomberg bna. thank you. oliver: president-elect donald trump's white house victory has driven up the expectation for bank profit. experts at morgan stanley says that will not keep wall street from cutting jobs. they will keep cutting away at cost to using technology to replace traders and branches. a few top executives follow jamie dimon's example this year in buying stocks.
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most corporate executives and directors steer clear of u.s. stocks as they become increasingly expensive. six of the 10 companies with the most insider buyers, the chief executive was the single biggest purchaser. that is your bloomberg business flash update. oliver: the vix is rising --vonnie: the vix is rising. down .4%. the dollar index as well, coming off of size. oliver: you are looking at a dowt of the best-performing stocks. we will tell you what it is and how it made its way to the top. this is bloomberg. ♪
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♪ oliver: live from bloomberg world headquarters, i am oliver renick. vonnie: and i am vonnie quinn and this is "bloomberg markets." hourney collins is an
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newsroom. according: the u.s. has released its most detailed report yet, backing that russian supported hackers interfere to me u.s. election. it's the first time the u.s. has specifically tied intrusion to the dnc to hackers with the russian civilian and military intelligence services. the report says russia was involved in an ongoing campaign of cyber enabled operations directed that the u.s. and its citizens. in syria, the cease-fire is holding despite minor violations. russia and turkey worked up the truce between rebels and syrian government troops. they are hoping it will lead to talks to end the civil war. senate armed services chairman john mccain scheduled a hearing on thursday. it is scheduled the same week
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that president-elect donald trump plans a briefing with the intelligence community on the russian hacking charges. police say an initial autopsy of george michael has been tests areve and more needed to establish a cause of death. his death on christmas day is unexplained, as but not suspicious. the manager said he died of a parent heart failure at his home. global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries. i am courtney collins. this is bloomberg. oliver: stocks are on track for the first three-day slide since the election. still poised well in the green in the year up about 10%. jonathan golub has been one of the biggest cheerleaders of the bull market. the s&p already surpassing his year and target. he is still optimistic for the
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year ahead. julie hyman and mark barton asked for his 2017 playbook. >> i was bullish last year and we surpassed my 2225 target and we have a 2500 target to the end of 17 -- 2017 cleared the way you -- 2017. the way you play within the market is different than a year ago. it has become much more procyclical, taking advantage of trump policies and the fact that the labor markets have become much tighter and are pushing interest rates up and that was not the case this time last year. julie: something i found interesting was everyone trying to game out the incoming administration and what they are going to do. one of the things you talk about is what corporate tax cuts could add to profit in the coming year. let's say there were no corporate tax cuts. what does the backdrop look like for-profits even if you are not looking at a stimulative
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administration? mr. golub: in our expectations we are adding zero to 2017 earnings from anything trump will do. the only thing that is happening is because interest rates are jumping up, it is productive for bank earnings. one dollar out of every five dollars in the s&p. -- big jump in hurling's earnings growth is we have a dragon energy prices. higher energy, higher interest rates bailing the banks. that is probably the biggest benefit and that gets you 7.5% eps and about 2% of that is buybacks, that means you are about 5% or 5.5% of plain vanilla earnings. it is not a crazy number. the following year, in 2018 is when you have the chance to get these benefits can, whether it is taxes or the like and then it
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starts to matter. mark: why is it that investors are quick to respond to incomplete information when they are talking about trump and policies whereas analysts are slow to adjust?estimates thinking that analyst will catch up. mr. golub: i think you raise the most important point right now, the job it -- of an investor is to say with what i know at this moment, and it is always incomplete information, what do i do with my money or my clients money.- client's they have to take all of the options and weigh them and jump in the water whether they like it or not. analysts have to be much more specific. they do not have enough information to assess something, they are much more likely to leave numbers stale and then you have a p that goes up and an e
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that is waiting for more clarity. they may wait for months or years before they know the details on regulatory plans, tax plans, spending proposals, and therefore, what appears to be happening is the stock market is getting more expensive and it , butrs that pe is rising that is not really the issue. you have one group acting with partial information and the other waiting for complete information. you have a timing cap, not a valuation problem. golub: that was jonathan vonnie:. quick check on vonnie: u.s. stocks as we head toward the final trading portion of the day for 2016. we have the dow jones industrial average reversing. the s&p 500 down a quarter of a percent and the nasdaq down .7%. let's go to abigail doolittle for a look at some of the year's
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biggest winners and losers. abigail: it has been a bullish year for stocks. we have a year to date chart and we can see a beautiful uptrend with the dow up nearly 14% on the deer -- on the year. outpacing both the s&p 500 and the nasdaq. -- someall been waiting of us at least have been waiting to see if the dow could achieve 20,000.,000 --dow this is g # btv 2310. dow to -- years for the double. for anow, we are on pace 18th year before the dow has doubled. if it does, it will be the second longest period of time it has taken the doubt to double. we are looking at a few
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different stocks. caterpillar, unitedhealth group, and goldman sachs are the top percentage performers of the dow . caterpillar, higher cost cutting despite weak demand from a revenue perspective. united health is higher as the company is planning on exiting affordable care exchanges. es aren sachs's rat rising. on caterpillar, we have one last chart. g #btv 5354. we see a big move up this year. in orange, we have revenues which have been declining. demand is expected to be week for 2017. they may just be ahead of themselves. vonnie: we will find out now. oliver: for more on caterpillar, we are joined. we talked about the -- let's talk about caterpillar because
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what has been happening? >> before the election, industrial and machinery stocks were up a lot and then they took a second run postelection. caterpillar is an even near the bigger -- biggest mover in the machinery space. the deep cyclicals are up 60%. a lot of smaller names were up more. it is the anticipation of a recovery. people looking at the bottom on energy and they do not want to miss the upturn, and the election gave the extra kicker. oliver: let's jump into my terminal. a great day to go on the terminal because your default year to date, you do not have to change anything. one day a year that happens. up 16%, caterpillar up 36%. i would say maybe i want more
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exposure to industrials, this job -- dropped roughly 10% going into the election. how much risk do you have to take on to be in caterpillar next year? mr. ubelhart: i think some good things have to happen to support the next move in the stock. earnings are expected to be up double-digit, sales down 2%. iss are that 15% eps probably too high. the largest companies are energy and mining companies. capital spending is down 60%, 70% from the peak. last -- next year people are thinking flat to up a little. vonnie: just briefly give us an explanation as to the difference between revenue and sales of equipment for caterpillar. mr. ubelhart: revenue simply includes their finance hub as well, but revenue is similar. there is a number that comes out at,y month that people look
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that is the dealer sales and market retail sales and then caterpillar sales are separate. they are down in every market. they have three business segments and every segment is down. oliver: you are talking about valuation because it is long. the earnings backdrop is not effective the greatest. .r. ubelhart: no you can kind of tell a first half and second half story. in theipment markets lag big heavy equipment buildings. up,- even if spending goes it may take a year before people are comfortable buying. parts move early, so we are starting to see signs of that. vonnie: there was a lot of talk about how cars were 10 years on the road and finally people got around to replacing them. is that what is happening on farms around the country? are they making the equipment last longer?
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mr. ubelhart: they are. the agricultural equipment market has been down for years. we had a seven-year upturn prior to that which was unprecedented. i would argue you will start to see replacement demand in agricultural equipment, but i would not say that the equipment is old. karen huber heart -- ubelhart, thank you. oliver: we will tell you which champagne to buy without breaking the bank. this is bloomberg. ♪ ♪
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vonnie: you are watching
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bloomberg. i am vonnie quinn. this is your global is this report. inflation in russia is hitting the lowest year and level in modern russian history. how did the government will it off? is china about to abandon the economic growth target. we will tell you how low china may lower the forecast -- gdp forecast. a look at how may change u.s.-israel relations. a report out today shows inflation in russia has set a record low. the price index is up 5.4% this year, less than half last year's increase and the lowest in rotterdam -- modern russian history. the banks have maintained interest rate. a new report says china is ready to abandon the 6.5% target by next year. chinese leaders will push to contain asset bubbles and financial leverages.
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-- could lower their goal to 5.5%. asiais the chief economic strategist, david man. david: we have seen so many repetitions of the commitment to double real gdp by 2020, versus the basis 2010 and it is very hard to do anything other than deliver that and that is what we have seen all along. all policy has been aimed at stabilizing growth, not trying to reignited and that is a big difference from what we saw in reaction to the global financial crisis. i would expect next year, 6.6% and it should stay stable. vonnie: japan wants to start weekends early's. they are asking companies to let workers finish early on the last friday of every month. the goal is to curb excessive work hours and to get people to
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spend money. a new report says the outlook for the british labor market is bleak. be slower growth, lower wages, and increasing uncertainty. the human resources group says brexit could lead to a shortage of workers from the e.u. here is courtney collins. bloombergtime for our click takeover we provide context on background on issues of interest. u.s.-israel he relations have become strained. not kerry and benjamin not -- benjamin netanyahu have traded lame over the stalls. here is the situation. the u.s. declined to block a united nations resolution that israel considered hostile. american officials have been unusually harsh in the criticism of israeli settlements in the west bank.
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an earlier flashpoint came in 2015 when netanyahu encouraged the u.s. congress to kill a deal that was eventually signed with iran over the nuclear program. twothe first time in decades after the birth in 1948, israel was a close ally of the u.s., which declined to sell it arms. france was the original patron. the u.s. grew israel close hardly as a result of the cold war. the u.s. airlifted supplies to israel during the 1973 war, sraeli critics argue that the pro israel lobby skews foreign policy away from the national interest by reducing israel's need to make compromises with
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palestinians and others in the region. they say u.s. support breeds anti-americas and -- anti-americanism in the middle east. is volatile and unpredictable, supporters say israel is uniquely transparent, accountable, and reliable. you can read more about israel and all of our quick takes on the bloomberg. head to for more stories. ♪ ♪
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vonnie: i am not sure that looked like the final day of the year. oliver: they looks a little warm for new year's. vonnie: this is "bloomberg markets." i am vonnie quinn. oliver: i am oliver renick. the holidays is time to pop champagne. it can withstand more than just a toast. beingre are many myths challenged in the world of champagne. starting the meal with champagne and carrying on with champagne meat --l -- even with because of its versatile in the and because of the acidity, it is a very good one for a lot of
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dishes. oliver: joining us with more is belinda chang, the director of wine and services at a steakhouse. thank you for coming to new york. apparently champagne is not just for the end of the meal. a sad and someis bring statistic that the average american drinks less than one glass of champagne a year and we have been fighting really hard to change. i think people consider a champagne a beverage you can take -- drink to post new year's eve or some kind of celebration. it is made with grapes that we use all the time. anywhere that you would use chardonnay or pinot noir, it is appropriate to use champagne as well. vonnie: how does it become
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champagne? belinda: there is the real estate and there is a method, you take these three great and they undergo what we call -- these three grapes and they undergo first fermentation and .hen second fermentation by law, it has to happen in separate bot -- bottles, that is how the carbonation is trapped. vonnie: are you talking about champagne that isred when it has chardonnay? mr. ubelhart: if you --belinda: if you remove skin, you get white wine, which is what we are used to see in champaign. ose styles.
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your wine credibility just went up. oliver: when we talk about champagne, the stuff we buy at the store, $30, is that all you need to look for? belinda: there are a whole army namewyers that protect the champagne that will attack you if champagne is on your label. you can put champagne method on the label, that means you do the special process. these days, there are fantastic champagne method winds made all over the world if you do not want to pay high real estate prices oliver:. oliver:you basically infringe on champagne rights if you call it that. belinda: there are a few people that are grandfathered in from back in the day. champagne is a luxury product, as it should be. costs: i would imagine it white a bit to buy a vineyard in champaign. we brought some fun
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things because i think there are great alternatives if you are not feeling the champagne budget. we go anywhere from eight -- eight dollars a bottle all the way up to $25, which is easy on the pocket books, all the way to -- on your side oliver. this is from the burgundy region of france which has extraordinary chardonnay grapes. oliver: i would never drink champagne from a different region. belinda: we will call this sparkling wine so nobody sues us. you will pour it into a beautiful wine glass and your friends will be none the wiser. oliver: this is actually really interesting because we are sitting here thinking that someone left their flask here. belinda: i always thought nixon was smart because he always had the best wine.
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oliver: that is a classy move, champagne in a flask. thank you so much. vonnie: for more, check out pursuits, your destination for the finer things in life. senator ben cardin, democrat of maryland will be joining us. he is a ranking democrat al me for a -- foreign relations committee. this is bloomberg. ♪ vonnie: we will hear from the of -- capital on the u.s.-russian relations. this is bloomberg. ♪
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good afternoon. welcome to bloomberg markets. ♪
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we are covering stories out of washington dc. here's what we are watching. u.s. stocks are on track and the final trading day of the year in the red. but heading for their best year since 2013. will the rally continue next year? plus senator ben cardin, he on president obama's sanctions against russia. we are halfway into the trading day and bloomberg's abigail doolittle is here. abigail: we are looking at some pretty decent the kleins. kleins -- decent
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declines. this is the third down day for stocks in a row. its -- is on paste for on pace for its worst weekly decline. it is a bullish year, big gains on the averages. the dow, the smp, the nasdaq all .igher look at the russell 2000, up nearly 20%. what makes this remarkable is the volatility. in official bear market territory. and the s&p 500 have had official corrections. this is a great function that shows us the growth and returns in the sector.
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see a lot of green, two sectors in real estate. energy getting a boost by oil having its best year up 40%. of 60% on a year. as for health care, the real sector is down 4%. drug prices may be forced to drop. ever soate down slightly, perhaps curbed by rates rising. the best and the worst was the s&p 500. the graphic chip maker up
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nicely. delving into the auto sector. we have a gas stock doing quite nicely. this is a look at the s&p 500. while of her bed thank you. let's check in on the bloomberg first word news. courtney collins has more from our newsroom. president elect donald trump does not have any communications with moscow. the priority for president elect is getting an update from intelligence officials next week. more details from that briefing could come as soon as today. meanwhile trump is meeting with with russia is urging the un security
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council to quickly adopt a asolution, endorsing cease-fire agreement in syria. council needs to participate in the process. he says the agreement also commits the opposition to enter into direct talks in late january. as aew year is arriving deep freeze descends on north america, and asia. while the u.s. can get hit with the brutal cold, russia will probably bear the brunt. taiwan has confirmed its president will make two stops in the next month while on a trip to central america. china has repeatedly urged they not be allowed to transit through the u.s.. beijing argues it sends the wrong signal to tiny's best to
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wrong signal to taiwanese independence supporters. i am courtney collins, this is bloomberg. ux -- u.s. stocks had the biggest annual gains in two years. 2016 saw volatility driven by political events. investors should focus less on political news and more on political data. as much as that seems reasonable, it would also help the stock market because the economic data has been coming in pretty good. >> i think what we are seeing, some of the weakness is related to the economic data. also the chicago pmi number is disappointing.
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this is somewhat foreboding about what we might see next week when we get a little barrage of data releases with the manufacturing. perhaps we are going to see a little bit of weakness. >> it was a little bit lighter on the survey. >> year-over-year is fine. there was a significant movement up, when we saw mortgage yields move up. to play outs going over the course of a few months.
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it is more of the new orders component i am interested in. is that going to be a headwind to export orders. will we get a lot of headwind with the issa manufacturing number. could cause some weakness going into starting the new year. >> when you look at the number four interest rate expectations, some say the market has gotten ahead of itself. what numbers would you want to see next year that may be the rally would be substantial? >> i think the key thing is that we continue to see employment gains of 125,000 or higher. and butter of investing, with corporate profits. the proof is in earnings per share of the company. i think that is going to continue to improve.
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is for next year we will see a 7% year-over-year over q4. a lot of it has to do with the energy sector not being a drag on the headlines earning number. attention to the competence -- to the confidence surveys. is pointing to continued economic strength. a little bit of relief when president trump is quite as radical. we could see the s&p 500 trade between 2100 downside to 650 on the upside. >> that's quite a range.
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traded withinhas a 16% range on average going back to the 1800s. we will old into a sense of complacency with a tamed sense of volatility. you get a markets next year that rallies without multiple expansion? can you get and earnings growth story strong enough? >> i don't know if you can get a market rally without some pe expansion. it kind of depends on semantics here. you can get that on the back of earnings with out any multiple expansion.
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i don't think the bull market is ends with a usually massive expansion of multiples. i think that is on the horizon as opposed to in the rearview mirror. >> there may be even a fed interest rate increase in march. what is your best case scenario for the rate increase? could it happen in march? >> i think it could happen, but it is more likely it will happen in june. the voting members are mildly more dovish. are going to be inclined to wait.
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make the case as opposed to march. at the stars will have to align just right for the fed to hike in the third quarter -- hike in the first quarter. vonnie: i wanted to point out we got the count before the week ended. 658 now. the rebounding oil industry. banks arctic and donald trump to loosen regulations, but we will explain why bigger profit could lead to more job cuts. this is bloomberg.
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>> this is bloomberg markets. >> time for the bloomberg business flash. apple will trim iphone production. based on data from apple suppliers. models7, iphone 7 plus have sold more sluggishly than expected. china's major technology will .ay the company will defend intellectual property in the world on the biggest smartphone market. it is big-time qualcomm has asked -- china, france, germany and here in the u.s..
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deal settles this patent conflicts. following jamie dimon's example of buying back your own stocks. jpmorgan ceo shut up, sturdy $7 million for his company shares in 2016. most corporate executive steer cleared as u.s. stocks become increasingly expensive. the chief executive was the single biggest purchaser and a good purchaser it was up 30% on the year. that is the bloomberg business flash update. >> bank stocks have been surging. up about 12%. doesn't necessarily believe the job cuts are done. joining us now is the owner of bloomberg news. we -- you're telling us
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we are not done. not get these amazing jobs back. even 2007 they started cutting. it has been going on for many years now. onis not going to be going as a bloodbath as it has been the last several years. cost-cuttingbe that will keep on going because that is how they can eat out profits. eek out profits. they need to keep cutting costs and u.s. banks have more slack. better profit by higher interest rates.
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>> it is new year's eve eve and i thought you brought up some good news. if donald trump does indeed usher in an air of -- of dotion area regulation. perhaps they can sort of expand and bring people on. data haslike a lot of been suffering from the past year or so. >> that can happen in the long run. the regulation making big changes. be able tot going to do these things fast. a lot of these are on regulators. >> ultimately if you cut your fixed income you are not going
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to suddenly say this becomes a profitable business? >> it has been profitable. it is such a secular decline, not just cyclical. they hire more and the year that it is not great, they cut some. there has been a secular decline since the crisis. there might be some improvement. they still have enough people to do it. can't trip over a bank executive these days without talking about it. >> it is causing job losses because so many things people had to do can be done,
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especially with back office stuff. their ceo was talking about thousands of transactions that have to be approved by people one by one. they don't need that many computers. >> i will try. biotech has seen major declines. are investors looking to change in the next year? this is bloomberg.
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this is bloomberg markets. vonnie: all week long we have been looking at what 2017 holds
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for the various industries. biotech had a rough 2016 with major declines in large stocks. joining us now is the biotech reporter doni bloomfield. we had a to mulches with biotech this year. >> it has been a hard time. dump with theig election of donald trump. i think people will be looking for a combination of whether he andkeep raising the prices whether there could be something like a tax holiday that would allow some of the larger companies to swoop in and use toe of their overseas cash keep up m&a. some of therough numbers in terms of what cash they have overseas.
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a lot of these companies do have money over there. any idea how much they have over there? large players have tens of billions of dollars overseas. a number of the large players j, these arej n companies that make a lot of money overseas and hold it a broad. i know investors are looking to make a deal, given that there main drug really has seen declined in sales. about $12 billion next year. and folksbig fall off are looking for a deal to make that different. >> i know you had a story in bloomberg. as we just saw, they are getting
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crushed. >> they have treated a big segment of the market. there has been a lot of price competition. what they are doing as they are actually stepping in. spending very little money to's -- money to fight this deadly virus. players are actually stepping in in order to bulk up those sales. >> we were speaking this morning about health care and the affordable care act and so forth. is that too far in the distance?
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>> i think that will affect the outcome look. it really is the hospital that is worried what could happen with obamacare with the potential a lot of people. >> is there any clarity on where trump stands? >> it is unclear what he is going to do, but it says he wanted to do something about these really high drug prices. would that couldn't tail is really murky right now. that many bills on the table.
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some of those things that could happen could be speeding along and making sure the fda approves things faster so there could be more competition, especially in those generic categories. in terms of those high-priced drugs, that is unclear. >> coming up vladimir putin has overruled his foreign ministry and has decided not to retaliate to president obama's expulsion of russian diplomats. the latest on that next.
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a beautiful midtown manhattan on this december.
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live from bloomberg world headquarters in new york i am thought -- i am vonnie quinn. oliver: courtney collins has more from our newsroom. has released u.s. its most detail report yet. it is the first time the u.s. and's into theth dnc for hackers with the russian civilian and military intelligence services. president obama is making his version of a hail mary packed to save the affordable care act. he plans to meet with democratic lawmakers to develop a strategy to block republican efforts to dismantle his signature legislation. republicans have made repealing the law a number one priority.
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andeast 10 workers are dead one dozen more may be trapped after a collapse in eastern india. injured workers are being treated at a nearby hospital. and a u.s. coast guard official is in search and rescue mode, not recovery mode. they disappeared overnight shortly after cleat -- shortly after takeoff. late thursday night and disappeared from radar. so far searchers have found no sign of any debris or people aboard the plane. news 24 hours per day powered by 2600 journalists and analysts in more than 120 countries. >> after president obama is ejected 35 russian diplomats,
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vladimir putin rolls out a retaliation. comes after u.s. intelligence agencies accuse russia of interfering. we hear from senator ben cardin in just a moment but joining us --bloomberg's follows bloomberg's policy reporter. what was your reaction to this move by president putin to say we don't -- to say we won't do anything. door foropening up the donald trump and laying a challenge. you have made these commitments to improve ties with us. i'm not going to retaliate, i'm not going to expel american diplomats. if he expels those american , he would leave donald
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trump really no choice but to respond in a more hostile way. he is very much looking forward to january 20 and saying we want to clear the's plate that clear the slate for president trump. slate for president trump. vonnie: he making something. what could the president to do for him in return for this kindness he's showing the >> from an image standpoint he gets to look like him, steady hand, while president obama looks like he is lashing out, hotheaded, like he has a bit of a temper. it was michelle obama who says when they go low, we go hide.
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vladimir putin even used language saying they would say the high road -- they would take the high rolled in dealing with this. he's very much trying to take the cool and calm approach to make obama look hotheaded by comparison. when we are talking about what happened today, we have two different opinions from russia. make of putin overruling the earlier statement that they were going to do something about it? difficult to know if he is overruling his foreign minister. lavrov is a diplomat. master of theed a craft. it is difficult to know whether he actually overruled him or whether that was part of their optics and a grand strategy by the government.
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>> thank you so much. >> he joins us from florida. our thanks to you. did president obama just hand the president-elect elect a gift by imposing the sanctions such that the president elect can rollback should he wish to? guest: realized this was russia that attacked us. the actions that president obama took were required. hope the president trump would recognize it cannot be business as usual with russia. introducing two bills.- two how we can prepare ourselves. and additional sanctions that ,an be imposed against russia
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trying to influence our elections, but trying to deal with what they are doing in crime area. vonnie: why did it take so long? >> i think he calculated what the appropriate response was. has indicated that may not be the end of the actions taken. i can assure you congress will want to weigh in as an independent branch. out theo you figure gravity of such an attack? a pretty new sort of realm we are in. you say there must be sanctions. how do you gauge the degree to which the sanctions should go over something we do not have a lot of history of.
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guest: i think the commission whatd look into how -- to russia did to us, how they were able to attack us, how we can prepare ourselves against attacks of a similar nature, and what would be the appropriate response in regards to russia's attack. vonnie: the president has decided what the appropriate responses. why would you be introducing a bill to take that further? why take a more hawkish stance when really do we want to provoke russia any further? >> we have our own responsibilities. we are the ones who set the president can do. i think it is important for congress to weigh in to be sure that we speak, as well as the administration come against a
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country that attacked us. >> today have insight on to whether or not trump will repeal or undo whatever sanctions are put into place? done -- what im will be done in a bipartisan manner. we felt the sanctions were imposed is -- impose with invasion ofussia's ukraine. now we have russia complicit us to war crimes with regards to what is happening in syria. all of that is happening on a bipartisan basis to ensure -- we have heard this before. russia has said this many times.
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the next thing we know humanitarian convoys are attacked and people are killed. we have not seen russia deliver. we heard we were going to have a cease-fire with ukraine area you can't believe what they say. want a cease-fire. yes we need humanitarian access to help people who are in desperate need. we will do everything we can. but we must tell you, we want to see action and not just more words. >> you have been quoted as saying you are deeply troubled by the fact rex tillerson stance on russia. maybe i am a simpleton. comey figure out why we wouldn't want to have improved relations. you look back at the cold war and the hallmark was a lack of communication. >> mr. tillerson will have a
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confirmation hearing early in january. obviously his experience in dealing with foreign powers is important. but can he separate his previous commercial interests? these are questions we are going to want to ask during the confirmation process. a matter of concern as to whether he can differentiate between a responsibility as a ceo of a major energy company, and now being the secretary of state, our top to the mat. -- top diplomat. see his tax want to returns, he has a complicated financial circumstance. he has never been vetted for a public office. i agreeator corker and to do was wait until we see his financials, and then i will make a judgment as to how important the taxi terms are. -- tax returns are.
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vonnie: we had jonathan gruber on this morning, one of the architects of -- price andgarding tom his appointment to the cabinet, there are no republicans that would join democrats in blocking this appointment. any republicank has spoken up against tom price. he would be a terrible appointment in the sense that he made statements that are really --orrect and show it back show a basic lack of understanding of how health care works in the u.s.. >> what would you do to stop the repeal of obama care? cardin: i will have a chance during the confirmation
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process to question him. before the care act has been a success. the republicans are going to try to repeal all or some of it. how are you going to stop that you won't beg when able to stop the appointment of tom price? >> by our voices and votes we are going to do everything in our power to protect the progress we have made. in my own state, i have heard from our state health officials as to the impact if we repeal the affordable care act. to hurtt only going those who are able to get affordable health coverage, it is going to hurt those that had insurance because they are now going to be required to pay more. it's going to have a major impact. >> republicans will fight this.
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>> if they attempt to repeal the act it is going to become more apparent. now i think people are starting to understand this may become real. if you are worried whether you're going to be able to get affordable coverage in the future. if you want to go out on your own but you have a spouse that has a health care issue, these are real problems. millions of americans are going to be asking the question, why are you doing this to us? >> thank you for joining us from florida. from the ceostory of capital management. the mostilt one of successful investment funds in russia. now he is fighting human rights abuses in the country. this is bloomberg.
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>> this is bloomberg markets. >> we continue on our top story. bill bauder. by one of the kremlin's fiercest critics. we were talking about russian etf's for etf's filled with russian stocks. will that change now? will relations get icy or? bill: we are in a complicated situation.
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the sanctions that have been puts trump into a corner. has happened is these sanctions and the information released with the sanctions have made it clear that russia interfered with our democratic process to get trump elected. trump is going to be in a tough position when he decides to repeal the sanctions and other sanctions. these are effectively trading up on the probability the sanctions will be lifted. certainly this action taken puts trump in a difficult position. >> we can talk about russian companies. we can also talk about u.s. companies that have close ties to russia. companies have the
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biggest stakes and connections to russia. a lot of them blue chip companies. how do investors need to go in and reassess where the money comes from for companies they own? building i would urge a bit of caution into seeing how much impact this has on u.s. companies. russia has gotten a lot smaller in recent years since sanctions were imposed on russia and they invaded crimea and ukraine. it is not that material of a place for about anybody. market, it isock highly material what happens to these sanctions and u.s. russian relations.
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these sanctions prohibit russia from getting western finance. and putin's desperate to do anything he can to get these lifted. trumphoping that donald will give him that big gift. it seems like he had taken a little step accurate away from the last week or two. >> if you look at trump's atuation, he has about 25 good, things on his list that he wants to do. most of the things appeal to his base,. of becoming friendly
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with russia doesn't. people weren't cheering in stadiums in ohio about warming relations with russia. personal issue that doesn't come from his base, his party, from anywhere. if he decides to push forward with the sanctions or other is going to be at war with the republicans in his party and the democrats in congress. he is going to have a problem achieving the other things on his list. is he ready to sacrifice his legitimacy and effectiveness for his one set of issues? i don't know the answer to that. we are all going to have to wait and see. lot up in the air for 2017.
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thank you so much for joining us. >> a look at the year's biggest stocks. those stocks in 2015. this is bloomberg.
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this is bloomberg markets. vonnie: we want to take a look at this year's best performing tech stock. blue joining us with a look at what ibm is doing right. cory johnson, ibm was always going to get it right. >> is that true? look at the stock price. maybe it had done so poorly in the past.
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that shows a very solid year. if you look at the stock prices, you can see it in the chart. it is kind of dramatic. i think we have a chart of the stock price that will show you the performance over time. >> remind us how we got here. ibm had quite a run. we had a pretty big decline. how do you figure out this fundamental change? segue for the fundamental. look at what is happened to the business. 21% over the year. the business is doing a lot
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worse by any measure. it has been in a steady state of decline for years. growth is the best this company has done in four years. taking out nonsense like tax changes and structure and buyback of shares. the business is shrinking every single quarter. if you see what the strategy had been. moving toward sales. is too early to criticize her tenure at ibm? told that she was dealt a tough hand to deal with. the strategy was lower revenues and higher profits.
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revenues are down 20% over the last five years. lower.fits are 30% it is still a dramatically shrinking business. we certainly wish them better. perhaps we will see some business results that can match the stock results. >> happy new year's to you. can hear more from cori in half an hour when he is joined by caroline hyde. on bloomberg markets bloomberg radio. oliver: coming up, perspective on the year ahead. chief market strategist with oppenheimer. this is bloomberg.
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>> it is 2:00 p.m. in new york, 11:00 a.m. in san francisco. i'm betty. >> welcome to "bloomberg arkets."
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betty: covering stories out of moscow, washington and san francisco. here's what we're watching at this hour. russian president vled mir putin overrides any u.s. diplomatic expulsion out of russia even though the u.s. imposes similar diplomatic sanctions against moscow. we'll have the latest on this developing story. plus, we look at some of the dow's best and worst performance this year. how is caterpillar, coca-cola, disney all poised to do next year? and golds -- gold's gaining. how high can gold go? that, plus a look at other commodities best and worst performers so far this year. in the meantime, u.s. markets are closing in just two hours. we keep pairing back the gains we've seen in the last several months.
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abigail. abigail: well, we are looking at declines in the last trading day of 2016. they are trading lower. these three major averages are now down three days in a row. that's the first time that's happened since the election. the dow is also on pace for the first weekly decline since the election so we're ending the year with a little bit of a bearish note here. all three major averages are nicely higher. in fact, the dow is up about 13% on the year for the best year since 2013 but returning to today, we see that the nasdaq is underperforming. down .9%. and here is some of the biggest drags. we are looking at apple, amazon, alphabet. the other three stocks are having their first day in about three weeks. not a lot of news here but it seems like we're seeing some year-end selling. as for apple on the year, apple's had a nice year. backup 10% on the year but has not been a smooth ride.
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if you recall at earlier in the year at one point apple had been down about 15% on concerns of demand issues around the iphone 6-s as revenues decline for the first time -- in more than a decade and that dragged the stock down. hopes around the iphone 7 and terestingly, when we take at 3363, this is not the only time we've seen them see this. back in 2012 and 2013, we saw a big drop on margin issues, around earnings. they were able to work through that. there was a period of bullish congestion, volatility that led to big gains. they were up almost 150%. we have a similar technical setup suggesting while apple may have volatility to work through, perhaps 2017 will be kind to the sharers of apple, ramy and betty.
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betty: thank you, be a gain. what's ahead in 2017, right? ramy: there's nothing to look backward on anymore. moving on to the main thing we're looking at right now, the latest on the tensions brewing between the u.s. and russia. president obama and vladimir putin are forcing president-elect donald trump to pick sides under sanctions u.s. imposed due to hacking or to improve relations with moscow. joining us from our washington bureau is nick, foreign policy reporter for bloomberg news. so nick, bit of a surprise here because putin's actually coming out saying he's not going to retaliate. what's the possible motive here, is he trying to be the bigger guy? nick: well, i mean this very much plays to an image that he wants to project. it's very popular among his supporters in russia, and it's an image he wants to project internationally so he gets to sort of play the role of the experienced statesman, calm, cool, collected and he gets to
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portray president obama as rash and making a sort of hail mary pass, last desperate attempt to go after russia just weeks before he leaves office. whether or not that's true is for others to decide. but certainly this is something he wants to do for image concerns. on the other hand, he is also sort of clearing the slate for president-elect trump. so i would assume the calculation is if he were to expel american diplomats, i mean, that would leave trump no choice but to respond or to retaliate on his own or at least sort of come in with a more hostile attitude. by doing this he's sort of saying, hey, clean slate for january 20. betty: nick, is it possible he's saying one thing and he's actually doing other things? nick: yeah. there was a background call where administration officials were talking about the fact they -- there was the public side what the u.s. was doing and there was likely to be the
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covert side. what they say is this is not the totality of everything we're doing. you can assume that the same thing applies for russia. in his statement yesterday, in the sort of group of statements that came out, the obama administration made clear that russian attacks and russian hacking had continued well after the election. so presumably there's sort of tit for tat covert action happening as well. ramy: nick, members of congress have of course been coming out. paul ryan, lindsey graham had been talking about this. we had senator ben cardin on air. let's just show what he said. senator cardin: first, let's realize russia caused this. they attacked this. it's an attack. so the actions president obama ook were required. ramy: so those were required, he said. but we're a few weeks ahead of a trump presidency. he could reverse this what is
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an executive action. nick: yeah. there are a few things. one is the sanctions that president obama instituted were done by executive order, so that could just be undone with the stroke of a pen. the other thing, obviously the expulsion of the diplomats. they won't be sort of turned around and brought back. but the other important thing was the f.b.i. report that came out yesterday that sort of was an attempt by the trump administration to detail some of the evidence or reasons why they believe russia was responsible for the hacking so that does put trump in a more difficult position. he previously said one of his concerns was there was not consensus among the international -- excuse me -- among the intelligence community about russia's role. so the f.b.i. coming out and doing this sort of does prevent -- present a more unified response from the intelligence community. betty: but is it possible, nick, that president-elect trump can take office and undo all this and what is the image?
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nick: with ben cardin on, it's a very interesting angle, because if he does that, that would put him in conflict with republicans on the hill because they believe actually that the problem with obama's action was not that he acted but that he didn't do so more quickly so they're sort of faulting him on the other side saying it's not that you took action. the problem was it wasn't strong enough and wasn't fast enough. so the current in congress is very much in the opposite direction of what donald trump has promised throughout his campaign. they want tougher actions. they want more sanctions. they believe vladimir putin is not a friend. i mean, john mccain called him a butcher. so if he does sort of ease off the gap -- gas, he's going to face opposition from even republicans on the hill. ramy: tensions continue between the u.s. and russia as well as the g.o.p. in washington. betty: earlier this afternoon, we spoke to ariel cohen who
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specializes in u.s.-russian relations. we talked to him about the sanctions on russia. ariel: my question is why now. it's too little too late. any country worth its medle would retaliate massively if its pillars of political establishment, pillars of democracy like d.n.c. and r.n.c. were hacked and we know that russia did even worse things in the past. they hacked the joint chiefs of staff email accounts, and the obama administration, as usual, was way behind the curve and did not do anything when that happened. so, yes, it's good to send a message. congress, republicans and democrats, want to punish russia for that malicious hacking, but why now, why three weeks before they exit the scene? trump's -- ng
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president-elect trump's freedom of action as he is trying to open a new page in the relationship with vladimir putin? >> to that point, ariel. is this sort of a last kind of jab in some sense by this administration to make things a little more difficult for incoming president trump or is it, we have to do something on this regardless of the incoming administration? ariel: clearly they had to do more and they had to do more a while back. now they're slamming the door as they're exiting the scene, and probably trying to catch trump's fingers in the doorjamb. what i know from my recent trip to moscow a couple weeks ago, that the russians are eager to try and rebuild the relationship with the united states with great implications for markets. they need investment very badly. the russian economy was in a tail spin, not just because of
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the sanctions, but also because of the drop in oil prices. to really get the russian economy great again, they need massive foreign investment. they need sanctions lifted. and trump -- vonnie: ariel, why is it donald but good for trump? he could invite some of them or other diplomats back into the u.s. ariel: well, if those that are kicked out were intelligence operatives, i am not waking up in the morning hoping to see them back. good riddance. on the other hand, what i think trump is trying to do is to negotiate new understandings with putin. he, after all, wrote the art of the deal and the question mr. trump should be asking is, if we lift sanctions, for example, what are we getting back as americans? what is russia and putin going
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to give to us? that is a question i would be asking. betty: a lot of questions around. that was atlantic council senior fellow ariel cohen. expect more on bloomberg tuesday. we look at the top risks. om will be joined by dominick, larry, former u.s. treasury secretary. look for that on tuesday at 6:00 a.m. in new york and 11:00 a.m. in london. ramy: great, great lineup there. let's check on news on the last week-day of 2017. courtney. courtney: activists are reporting a first death in syria since the nationwide cease-fire began. a man has been killed by a sniper fire in the eastern suburbs of damascus. but there's been no word of major violations of the cease-fire brokered by russia and turkey. democrats are preparing a case against donald trump's nominee or treasury secretary steven
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mnuchin. they say he preyed on the middle class workers. that's according to "the washington post." they'll focus on his purpose of a subprime mortgage lender who has repeatedly been accused of wrongful foreclosures. a federal judge has denied a request to delay a confidencey hearing for dillon ruoff. he killed nine african-americans in a charleston, south carolina, church. the judge asked for a psychiatric evaluation taking place this weekend. attorneys acting as hi stand hi been counsel asked for a delay, suggesting one week. the judge said no. and forecasters are warning of a high risk of wildfires in parts of the southern plains and in florida. thanks to gusting winds and especially dry air. the national weather service has issued red flag warnings for much of oklahoma,
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southeastern kansas, southwestern missouri and northern texas. a warning is also in effect in west and central southwestern florida which has seen little rain fall in the past month. betty: global news powered by more than 2,600 journalists. ramy: thank you very much. coming up, there are 30 stocks in the dow. which ones were the big winners of the year and which ones were the big losers? coming up. this is bloomberg. ♪
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betty: this is "bloomberg markets." i'm betty liu.
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ramy: and i'm ramy inocencio. it's time for the bloomberg business flash, a look at the biggest business stories now. cheap natural gas has helped dow and exxon compete against companies abroad. the rising prices for gas are squeezing that cost advantage. frigid weather will push natural gas prices about 60% this year, cutting the cost for u.s. chemical makers to the lowest in almost five years. meantime, apple will trim iphone production by 10% in the first quarter of 2017. that's according to nikkei setting calculations made based on apple suppliers. iphone 7, 7-plus models have sold more sluggishly. and cuts on both models will come in the coming quarter. new year's day means a bigger paycheck for more than four million americans minimum waging -- making wage. in new york, fast food workers
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will have to be paid at least $12. the biggest increase will be in arizona where the minimum wage raises to $10. one out of nine workers there will get a raise. and that is your "business flash update." betty: a tumultuous year for stocks. caterpillar's for turns took a turn for the better in 2016 and now tracking by its peers on the dow jones industrial average, up 36% and the best dow performer of the year. it's not the only company that made a notable move up. here to discuss some of the biggest winners and losers is mike, editor for bloomberg news. so let's start with cat and what happened this year. mike: well, caterpillar is like the poster child for this animal spirit that's taken over the markets since the election. you look back to the campaign. donald trump referenced caterpillars a number of times saying they were losing business because of the weakening yen. obviously if you are going to
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build a wall at the border you are going to need caterpillar. any infrastructure, you will need caterpillar. there are reasons to be optimistic about caterpillar. it's interesting, if you call up the earnings estimates for caterpillar and you look at next year, they just keep going down and down. they perked up a little bit for 2018, but for 2017, here you can see here the red line. betty: why? mike: so the white is caterpillar's stock is its earnings estimates. there's this notion that investors react a lot quicker to incoming news and information than analysts do so maybe the analysts are a little late in raising their estimates but still it makes you wonder had people gotten ahead of themselves on this stock with this optimism of everything trump plans to do. i see it as a little vulnerable there. until we see more concrete plans what this infrastructure is going to look like. again, trump is complaining about the weak yen. the yen has weakened further
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since the election. i am not knowing what geopolitically you can do to change that without getting strong against the other central banks. that's going to be a risky thing. ramy: mike, let's flip to the other side and go to the worst. nike is down. what happened there? mike: remember, nike was one of the powerhouses of the bull market. up more than 400% since the market bottomed in 2009. basically now what was double-digit growth slow into single-digit growths. a lot of competition from under armour. lot of competition from adidas. and maybe in tiger woods started playing better they -- blame tiger. betty: he could put them back up. mike: right. it's hard to see their for turns reversing too much given that strong gain they had coming into this drop. ramy: you know, talking about
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analyst recommendations. have they not called up -- i want to call up the recommendations for nike. there are 23 buys and only one sell here. you can see that there's no -- basically no red here, all greens. have they not caught up to what we're talking about here? mike: to some degree. sell recommendations are rare on wall street. a hold is considered more of a sell. you can see the green bar at the bottom there, the buy recommendation, is still high but has come down quite a bit. you would expect if people were looking for value in nike, it's not necessarily a value stock yet. it's not quite a growth stock. it's going to -- i would guess plot along the middle. betty: mike, i watched less tv in 2016 and i certainly watched no football on tv. did that hurt disney? mike: well, i think this cutting trend is the story with disney. the new "star wars" movie,
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great sort of bumps them. espn is the biggest draw. losing a lot of subscribers. i don't see this chord cutting phenomenon going away. just an dotally, i was hanging out with friends. all guys that make pretty good money. you would think don't have to be cutting nickeling and diming their monthly expenses. literally everyone was talking about their cable bill and all these new options. i think the millennials are way ahead of the cord cutting. betty: people hate their cable company. mike: and it's a big bill every month. how much do you really watch? that said, the big question with disney is, what do you do with espn? there's a lot of speculation. will they spin it off, separate somehow or maybe make a strategy? it's still something people want to watch. if they can make a strategy to get it in the internet age a little bit better they'll be all right. betty: all right, thank you,
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mike. i might know some of those guys. ramy: all right. we got to keep on going, guys. still ahead from stocks to bonds, we'll look at the bonds this year. taking a dramatic turn. lower after the election of donald trump. this is bloomberg. ♪
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betty: welcome back to "bloomberg markets." i'm betty liu. the bonds market closed at the top of the hour. the final trading day of 2016. they suffered a fifth straight monthly loss, the longest stretch of decline since 2011. what's ahead, let's bring in brian of bloomberg news. he's been covering the good, the bad and ugly. particularly treasuries. you say this year was kind of like the year to have, right? brian: tale of two halves. it started off treasuries could do no wrong, like sovereign debt across the country. yields rallies.
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$10 trillion of sovereign debt had negative yields. you're paying essentially to hold these bonds. and then just a slow grind reversal towards august, september, october period. and donald trump's election just sort of jump-started everything. yields jumped higher. terrible month in november. worst month since 2009. so we basically end up after 2016 sort of right where we started just not exactly the path that most were expecting to get there. ramy: now, in terms of the real winners of the year, credit fundamentals helped to drive those, huh? brian: yeah. when you look at some bonds that end up outperforming, it was the debts that paid off as far as credit. you look at oil-related bonds, you know, they did well because the price of oil stabilized. natural resource companies. and puerto rico had a fairly good year as well. all things considered. it was not so much an interest rate focus, which was sort of the first half of the year. when you look at the year as a
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whole, it's the bonds. betty: will interest rates be the big focus next year? brian: oh, yeah. the fed is projecting to hike a few times. we'll see if that ends up happening. betty: all right, brian, thank you so much. brian of bloomberg. our bonds reporter. ramy: all right. still ahead -- the commodities close. gold gains, but will it keep its luster in the new year? this is bloomberg. ♪
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betty: from bloomberg world headquarters from midtown anhattan, this is "bloomberg markets." i'm betty liu.
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we look at gold. if you hop inside my terminal, btv 52464. at g # the median forecast rise to $ 1,350 an ounce. that is a nearly 13% boom from the current print on gold. ramy: you know, it's really interesting, though, because a lot of people, even yesterday people were saying they expect a 10% rally in the s&p. so if you think that people will be pushing into risk assets, you think the opposite is for gold. maybe there's a lot of hedging going on. betty: if there was one asset that's hard to predict, i would say gold would be at the top of that list or near the top because you had, what, some gold bugs predicted the rally
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for years and had not been right. ramy: and the high was at 30%. now it's up about 8.5%. let's bring in tina davis who is more on the commodity markets. looks modest when compared to the boom in iron ore. hat's happening with iron ore? tina: iron ore is interesting. the new building potential for more steel being built, it really rose substantially. it's up 81% on the year. however, going forward, it's a little bit unclear about whether or not those price rises are sustainable, at least one analyst at citi group has called the rise a fluke. ramy: in terms of the consumers driving that demand, china, the u.s., japan, how are they fairing or what's the outlook for them for consumption? tina: well, china is always a bit of a black box in terms of consumption numbers. there was some concern earlier about the factory closures for pollution reasons and what that
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might do for demand. again, there's the feeling from several analysts is that you're going to see some cooling in the chinese property market and that's going to be bad for iron ore for 2017. betty: let's turn to our favorite commodity here, oil. oil prices and natural gas. so where are both going to go? tina: well, oil as you know is having the best year since probably 2009 at this point and everything that oil needs right now is for opec and non-opec to stick with their agreement. and also not to sort of spur anything new to come on in terms of shale development. that really is going to set the tone for what happens in 2017 on oil prices. natural gas is maybe even a more interesting story because we saw the price that's eaten through the huge glut we saw from u.s. shale production here in the united states. betty: could we risk for another one? tina: we talk about companies like chesapeake energy who was teetering, having a lot of people concerned earlier this year, now are stronger, has
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more access to capital. throw the rigs back out there essentially. ramy: so what degree is natural gas really also weather dependent? we talk about el nino, la nina events, colder summers, warmer winters doing a number on consumption. how is that playing into the effect now? tina: natural gas markets need weather, right? it's so fundamental how the commodity is priced. however, what we've seen at least this year is we have the a acity to export now from new l.n.g. facility on the gulf coast. that is turning things around for demand. you mentioned some of the demands from folks like chemical makers and other folks who are using the natural gas for those kind of processes, so that offsets somewhat of the need for weather. ramy: all right. and very quickly. orange juice had a stellar year. up some 40%. more people drinking more? tina: actually, no. the demand for orange juice has declined. the reason i love to talk about
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orange juice is not because of trading places, although that's the primary reason, but, no, orange juice has suffered a lot from production problems. the state of florida is going to have its lowest harvest in probably 50 years for orange juice and that's because of a tiny bug that's been really decimating nair -- not the weather but -- betty: not the weather. tina: it's an infestation. brazil had a bad harvest. it looks like next year the harvest will increase so maybe we won't be talking about orange juice. betty: so o.j. is on the decline? tina: yes. ramy: drink a little more. betty: we're probably watching our waistlines too. tina davis on the commodity markets. another trend of 2016 was a surge of demand for light trucks. americans bought up larger vehicles much faster than cars. julie chatted with bloomberg intelligence's kevin to get his 2017 outlook and she asked about the surge in truck and s.u.v. sales can continue even as gas prices climb.
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kevin: it is and it is going to continue but what's interesting ght now it's not about gasoline prices anymore. what is a truck today and that will include crossovers and s.u.v.'s and pickup trucks. when we look at it are very different than what they were in 2008 which is the last time gasoline prices spiked, but if you look at the chart of segment mix, truck versus carks it's very dramatic. it's very prolonged and it's not going to reverse, i believe, regardless of the gasoline prices. julie: so if it's not gas prices specifically that's driving the interest in trucks or truck-like vehicles, what is it? the safety component, the idea that we americans just love a lot of space? kevin: yeah. it's partially that. there's also a lot of new technology. people like the higher ride height in a lot of cases. even the smallest of crossovers, you're getting all-wheel drive as an option.
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they're easier to load things, including people in and out of. so being built on car platforms in a lot of cases, the driver dynamics are much better than they used to be. they're quite car-like, and fuel economy is very comparable as well, which is why we would say there's really no reason to trade back to something smaller, lower to the ground regardless of where gasoline prices were to go. julie: just quickly here. quick follow-up question. we just looked at this chart that showed a much higher percentage of sales are light trucks versus cars. when are we going to get to the point on the road where there are more cars -- more trucks than cars? are we at that point already? kevin: yeah, we're way past that. we're 60% truck for 2016 which is about where the year will end and it will be the highest ever. and if you look at that chart that you had up there, those two vertical red bars are the recessions and even the period in between there was a lot of
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truck demand. so basically barring some government intervention, which is that spike was cash for clunkers, and the other spike was the spike in gasoline prices, in america we wanted to buy trucks all along. now we had this period of freedom since 2010 and that's what the consumer has been doing is buying trucks. julie: what about electric vehicles? i mean, there's been a lot of hype around that, certainly. i'm thinking of the chevy volt, tess la, various -- tesla, various cars. will we see as many electric vehicles as trucks on the road? kevin: it's very interesting because there's such a disconnect in what you're seeing automakers announce. the coverage that e.v.'s are getting, including tesla, relative to where they are in terms of share in the space. so if you look at what we're expecting for december, probably do about 1.6 million vehicles in the u.s. in
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december. and i would say roughly 50,000 of those would be hybrids, including hybrids, gasoline hybrids, not just plug-ins. plug-ins will be about 15,000, 20 units relative to 1.6 million of everything else. you're seeing all the automakers investing in that space and i think it goes back to the prerecession period where certain automakers, domestic automakers got out of small cars because they were not profitable which is the case with e.v.'s right now. and then as things shifted they really didn't have anywhere to go, anything to offer. so automakers don't want to be left behind on e.v.'s when they do catch on. >> kevin, quickly here. there is a matter of how people are buying their cars. it looks like increasingly they're leasing? kevin: yeah, leasing will be bigger as more trucks means higher transaction prices and leasing will create that affordability for the consumer. the thing to watch, though, going forward will be all those
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lease vehicles coming back and depressing prices of new cars. betty: again, that was bloomberg intelligence kevin speaking with julie hyman. ramy: all right. courtney collins has more from the newsroom. courtney. courtney: thanks so much, ramy. president vladimir putin is condemning a new round of sanctions against russia. ariel cohen is a senior fellow and e atlantic council spoke about president-elect trump's view. ariel: what he's trying to do is negotiate a new understanding of putin. he wrote "the art of the deal." the question mr. trump should be asking if we lift sanctions, for example, what are we getting back? courtney: president obama's move puts trump in the position of having to decide whether to roll back the sanctions once he takes office.
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meanwhile, senate armed services chairman john mccain has scheduled a hearing for -- hacking re cyber from russia is supposed to be the theme. and president obama returns from vacation in the new year with less than three weeks left in office. first on his agenda, a strategy session with democratic lawmakers on blocking republican efforts to dismantle his affordable care act. the president will also hold a live interview next friday with the new headquarter legislation. the following week on january 10, mr. obama heads to chicago for what's expected to be his final farewell address as president. powered more than 2,400 journalists in more
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than 120 countries. i'm courtney collins. this is bloomberg. betty. betty: ahead, trump takes office three weeks from now. we'll hear from chicago professor luigi gonzalez, next. this is bloomberg. ♪
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ramy: this is "bloomberg markets." i'm ramy inocencio. betty: and i'm betty liu. with 2017 on the horizon, the united states is preparing for a presidential transition. the bloomberg surveillance team talked with university of chicago professor luigi gonzalez about the changing of the guard and asked him what his biggest concerns are about trump's first 100 days. and just a quick note, we just
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have a tweet out now as we are apt to get from donald trump saying, quote, a great move on the delay by vladimir putin. i always knew he was very smart. so seems like no love loss here between president-elect donald trump and putin. let's see what gonzalez had to say. >> first of all, where he positions himself and where he positions the united states in the global world, right? and very worried that he's a cease-fire in syria that does not include the united states and maybe just because we are in a position phase but still i think it's the first time a major decision in the middle east, the united states is absent. so i think that's my first worry. second, of course, whether trump will do something about his talk about protection so far has done a lot of talk and very little proposal. i suspect this will remain the
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case. i think the world is worried -- t sort of whether ties quality control or what else and that is going to be disrupted. and there is, of course, the tension that we just discussed out involvement of russia in the u.s. election, the meddling in the u.s. election. m actually surprised if -- i expect the united states retaliate with a tit for tat and they start to reveal stuff about putin. we know putin has a lot of business dealings. if they meddle with our election, we should do the same with their political process and the best way is to expos or start exposing the -- expose or start exposing the problem of put ib. i don't know why that was not done. it's not because we don't have
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the means to do that. >> luigi, at the end of the day is this a new world order? i want to tell you from george soros. he said trump will have allow some dictators to reach an accommodation with the u.s. and others to carry out on without interference. trump will prefer making deals to principles, unfortunately that will be popular with his core constituency. again, it seems like the real check in terms of check and balances in the balances will be his own party and probably the only check and balance. luigi: i agree with that. now. the cabinet of trump is mostly -- has mostly been on the conservative side of the g.o.p. g.o.p. will at the carry some influence. we shouldn't underestimate trump independence. we are in for a new order, i think. >> how much does -- what's the
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balance, do you think, in terms of influencing the markets here in terms of politics, not just the u.s., but we have a lot of elections in europe and the possibility of fiscal policy in the united states? luigi: i think in the united states, of course, the fiscal policy will be the main driver. in europe we'll have a combination of two things. the trickle down effect of the u.s. fiscal policy which i suspect will be sort of a high interest rate in the united states and the pressure to have high interest rates in europe as well. we know that the situation in europe is to begin with high interest rates that will make it more fragile and also two, possibly three major elections in the euro area can be traumatic. ramy: all right. that was university of chicago booth professor luigi zingales.
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abigail, it looks like markets are at the session lows as we head into the last hour, hour and 15 minutes before the end of the year. abigail: yeah. we have stocks at session lows. we have stocks nicely higher and let's not forget about the rally after the election. we have a chart of the s&p 500 since the election and we see the s&p 500 is up about 4.5% since that time period. really half of the year to date gains. up almost 10% on the year. optimism that trump's administration will bring growth. we take a look at the sector since the election. we have the financials up on top benefiting from that growth outlook. plus the fed did raise rates. energy also benefiting as opec agreed to a supply cut deal. the first in eight years. but on the bottom we have the fand. the merrill lynch fang index negative. we have discretionary not doing so well. as for individual stocks that have just moved up in a huge way since the election, we're
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looking at transocean, united rentals, absolutely big gains. united rentals is up 45% on the year. so actually down -- up a little bit less over the time period since the election but its best year since 2013. betty: abigail, thank you so much. abigail with the markets. as you say, only an hour, little over an hour left. ramy: until the end of the year. all right. coming up, the tech sector overall turned into strong performance in 2016, but some of the names like google, facebook and apple, there were a few bumps in the roads. we'll discuss the hits and misses for those companies, next. this is bloomberg. ♪
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betty: welcome back to "bloomberg markets." i'm betty liu. it's been a wild year in tech. we'll break down the highlights and low points for apple, facebook and google, caroline.
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caroline: we have the three musk ears, the key performers who tackle all the three top stocks here in san francisco. sarah is with me. of course, alex and mark and thank you very much indeed. sarah, the hits and misses. let's start with the hits. let's go positive on facebook. sarah: it's more than the facebook app. it's -- it saw amazing growth for instagram. robust platform. facebook messager has become popular and very good at copying snap chat. a lot of things on messager and instagram also introduced instagram stories which had become stories that snapchat has. it's almost as popular as snapchat itself. caroline: and they have the people coming. they have the money tiesation coming. let's go to some of the misses
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because that swept a lot of key players. twitter, i know you cover as well. but at the end of the 2016, it just crescendo for facebook. sarah: technology companies like facebook are realizing now or should be realizing now that they can't just sit back and say we are these neutral platforms, we have no baring on what our users do. no, people are saying, you are responsible for the information that you distribute on your increasingly popular networks. and we saw it with fake news. we saw it earlier in the year with trending topics. facebook has to start to take seriously its roles. caroline: mark, this is something google, the owner of youtube had to be dealing with. caveats? ome of the mark: it had less pressure than facebook. there's been an issue with google. with controversy if you search for something for a while, if you search around the holocaust, you get like obvious
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hate and racist sites that pop up and there are issues with quality control. and an issue that facebook had. you have results that aren't necessarily true and verified. caroline: and they can't be all things to all women and men. they doubled messages. instagram, snap and the like. mark: the issue that will go forward, especially the election, things get sensitive what is fake news and the issues are removing conservative sites or progressive sites. google just like facebook has been reluctant to play an editorial role. caroline -- talk to us a little bit about some of the wins for google and indeed alphabet and the fact they saw this new operating way, seems to have helped them out with the separation of the company and also a.i., what a winner towards the end of 2016. mark: right. they shifted all their
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attention towards a.i. a.i. first company and it's paid off for them in pretty significant ways. alpha go was an algorithm that was a big win. it was an impressive feat. they beat this game what people didn't think they could accomplish for a decade now. and then a library of machine learning and they really have shown they're ahead of the curve there. alphabet the structure, more in a phone but in 2016 showed -- more in 2015 but in 2016 showed they're a lot more confident in google's ad revenue. caroline: and google photos. mark: yeah. messaging has been a mitt. alo is the app they put out which i don't think any of us use. they're still behind on facebook in messaging. sarah: well, facebook messager, instagram has messaging now. they're everywhere. caroline: alex, the juggernaut that's apple, it's the most
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valuable company in the world. what are the misss? . ex: can't take it a miss apple have had their biggest -- saw revenue decline since 2003. iphone sales declined. and s.b.i. and privacy and their desire to protect users. and the messages. and the stock has been in line with the market. they have managed to plump up the shares with buybacks and dividends and a lot of expectation going for next year for the next iphone. caroline: back to you, ramy, in new york. ramy: all right, caroline. ♪
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ramy: i'm ramy inocencio. betty: and i'm betty liu. welcome to "bloomberg markets."
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ramy: we're live from bloomberg world headquarters in new york in the final hour of trading of 2016, plus covering stories in chicago, washington, london as well as moscow. here's what we're watching -- president-elect trump praises vladimir putin in a tweet moments ago. mr. trump said mr. putin is smart holding off actions following u.s. sanctions. and the s&p is expected to close 10%, returning to a green after a slight dip in 2015. which stocks will power the index next year? and bank stocks have soared since donald trump defeated hillary clinton for the white house but we'll tell you why bigger bank profits won't mean less layoffs. where will stock fin ishes, abigail has the answer for that. abigail: i don't know if i have the answer but we have a strong
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suggestion here which is that the last hour of trading here for stocks in the u.s. of 2016, we're looking at declines. not so modest declines either. we actually have stocks at lows. dow, s&p 500, nasdaq are lower. the nasdaq as you can see, by more than 1%. really being dragged on by technology shares. now, this does represent the third down day in a row for these three major averages. the first time since the election. we're looking at weekly declines too. this will be the first weekly decline for the dow since the election. so we're ending the year on a bearish note but on the year itself we do have stocks nicely higher. all three major averages up. the dow in fact up about 13% on the year for the best year since 2013. now, taking a look at an average that is less looked at, the dow transports. up about 20% on the year. so really outperforming the dow itself in a big way. the biggest percentage performers within the dow ransports, landstar systems,
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c.s.x. landstar, a trucking company, a prospect of a strong 2017. and numbers going in the right way for c.s.x. and union pacific. companies rewarding those companies. now another index outperforming, the s&p 500, the mid cap. the mid cap, the s&p 500, 400 we see is up about 19% on the year. the s&p 500 itself is up about .5% so nice outperformance for steel, advanced micro devices and w.p.x. advanced micro devices, a nice turn around is in play with the stock up 293% this year. really a stunning turn around considering that stock was less than $3 at the beginning of the year. and then finally, take a look at some of the metals. we have the metals trading higher on the year. this includes gold, copper, tin and zinc. now, gold is up about 8.5% this year, on pace for the best year since 2011. copper is also having a great year, the best since 2010. and tin and zinc having
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fabulous years. 40% and 60% respectively, betty and ramy. ramy: all right. abigail on the markets. thank you so much. betty: and first word news this afternoon. courtney collins has more from our newsroom. courtney. courtney: thanks so much, betty. president-elect donald trump has tweeted out a comment on russian president vladimir putin's decision not to retaliate for president obama's expulsion of 35 russian diplomats. trump saying, "great move on delay by v. putin. i always knew he was very smart." earlier today putin said he wouldn't be expelling anyone after sergea urged that 35 american diplomats be forced to leave russia. they were kicked out in retaliation for interference in the presidential election. ukrainian president pour schencko met with a delegation of u.s. senators headed by john mccain, lindsey graham and amy lobuchar meeting in key eve.
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poroshenko gave them awards for their contributions to the enhancement of ukraine-u.s. relations. president poroshenko: it's symbolic given the last 2 1/2 years, we have a strong bipartisan support of the united states congress and the administration in our fighting gainst russian aggression, territorial integrity and our independence. courtney: mccain has scheduled a hearing for thursday on capitol hill to discuss cyberthreats and russia hacking allegations. that's according to "politico," citing a source familiar with the committee's planning. president obama is making his version of a hail mary pass to save the affordable care act. he plans to meet with democratic lawmakers on capitol hill on wednesday to develop a strategy to block republican efforts to dismantle his signature legislation. republicans have made repealing
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the law a number one priority. and police say an initial autopsy of singer george michael has been inconclusive and more tests are needed to establish a cause of death. michael's death on christmas day is being treated as unexplained but not suspicious. the singer's manager said he died of an apparent heart failure at his home. global news 24 hours a day, powered by more than 2,600 journalists in more than 120 countries. i'm courtney collins. this is bloomberg. betty. betty: courtney, thank you. now let's get back to the narkts with less than an hour of trading to go for stocks in 2016. it doesn't look like the dow will hit the 20,000 level. we thought it might last week. says the s&p will from o 2450, about 9%
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right now. where is the optimism? john: indeed i have been one of the most bullish and continue to be so. it's about improving fundamentals. the economic data, especially r where is stateside, has been consistently been getting better. modest, albeit growth overall. but with the potential for stimulus on back of that to offset the need for as much intervention by the fed. should be a good thing. betty: there's not going to be intervention by the fed but there are going to be interest rate rises, right, so that's a major head wind. john: we don't think so. if you look at the last time the fed raised rates, it was the end of june, 2004, to the end of june, 2016. it was a 20 -- june, 2006. it was a two-year period. they raised rates 17 times. they went to 1% up to 5.25% of the fed fund rate in those two years. the s&p was up 11%. and the mids and smalls were up about 20% apiece.
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ramy: what will get us to 2450 in terms of your strategy? john: i think what will get us to 2450 will likely be improved earnings for the standard & poor's. we think not as much as some -- s&p 500. we think about 15% earnings growth and that even with some head wind from a stronger dollar but a moderately stronger dollar that we're seeing here. and with expectations that dollar may actually begin to weaken some as we already saw. we just got a little bit of a relief here. once people get the idea that the fed is raising rates, the tendency is the dollar weakens. it usually strengthens in anticipation of a fed hike and then weakens once the fed actually does a hike. ramy: it's interesting looking at your strategy here in terms of being overnight and underweight and with donald trump coming into office, he's definitely bullish on a couple of things. energy. explain this. john: related to energy, based
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on the s&p 500 weightings, we are about 5.5% versus a 7.7% weighting, the actual market weight of it. we are not out of energy, but our biggest concern with energy was the supply. just look at the bakers used rig count. way, way up. the guys in the permian basin and the frackers, when will they start producing? it's just a matter of time, we think. ramy: if opec holds. john: and we like industrials materials and they need to be more efficient in getting nair products. betty: what about outside the u.s., are you more for emerging markets? john: betty, related to emerging markets and developed markets, we'd have to think the emerging markets, when you
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actually get on the ground in the emerging markets, they look so much more like developed markets than they used to. betty: how so? john: it's the secular trend of the consumer, and it has to do with domestic economies that are strong and becoming more independent, not independent yet but more independent by the year in terms of exports. and more to the domestic economy or interregional. so we still like the emerging markets. we think the dollar's strength will have less of an effect on it than many think. if you look at it, the emerging market index lost about half of its gains from this year. at one point it was up about 14%. now at 7%. but still those secular trends to carry forward and also there's a global economic recovery that's in process that's following the u.s. economic expansion. betty: but some of that had to do with the stronger dollar, though. john: some of it did in terms of the decline. betty: right.
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john: in those markets, most certainly, but we can't help but think if the dollar would moderate some or at least not strengthen the way it did in 2014 and 2015, this will have less of an effect on the emerging markets. many of which do not have the dependency on trade with the u.s. as much as they did 10 or 20 years ago. ramy: with your specific likes for e.m., what are you looking at, for example, on day break asia we often hear about india and indonesia, what do you think of those? john: i particularly like india at this juncture. i think there's opportunity to see infrastructure spend there. we also see just take a look at what ofle's planning to do. they want to begin -- what apple's planning to do. they want to begin to manufacture. in addition to that, we continue to like markets that some aren't looking at much. we like korea and taiwan, for example. indonesia, we're a little bit concerned because of the exposure to energy in particular there.
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betty: ok. so if you were to look at one area, though, that you would avoid, what would that be in 2017? john: well, i think one area i would avoid would be -- i wouldn't want to go overweight utilities at this point and overweight bonds. betty: is there anything better out there? john: i think you have the process of normalization is in place as the fed continues to raise rates, albeit modestly, that will be a market worry for the sectors. so you'll have eb and flow in and out of it -- ebb and flow in and out of it. they gave up half their gains in the third quarter. now are beginning to do a little bit better that -- now that things are settling down. tell could hes looks like technology and they have rebounded very well so far in year. betty: all right, john, good to see you. happy new year. john: happy new year indeed.
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betty: john stoltzfus is from on hiemer. loss in the stop of jobs in the financial sector happen? ♪
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betty: this is "bloomberg markets." i'm betty liu. ramy: and i'm ramy inocencio. time for the "bloomberg business flash," a look at the biggest stories. apple will trim iphone production 10% in the first quarter of 2017. e.k. says the iphone 7 and iphone 7-plus models have sold
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more sluggishly than expected and information on production and global sales suggest cuts on both models in the coming quarter. g.m.c. is limping to the finish line since it went public in 2011. they're battling slumping sales and online competition. -- es plunged 64% this year g.n.c. is limping to the finish line since it went public in 2011. they're battling slumping sales and online competition. they're boosting loyalty programs and running its first-ever super bowl ad this february. and few top executives follow jamie diamond's example this year in buying their own company stock. the jpmorgan c.e.o. shelled out more than $27 million for his company shares in 2016. most steered cleared as u.s. stocks had become increasingly expensive at six of the 10 companies with the most insider buys. the chief executive was the
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single biggest purchaser. and that's your "business flash" update. betty: banking shares have been on a tear following the victory of president-elect donald trump with goldman seahawks and -- goldman sachs and jpmorgan. that may not stop the layoff. we were joibd by bloomberg news -- we're joined by bloomberg news senior writer, yalman onaran. yalman: they lend money, they make bigger profits on the money they lend, they make bigger profits on the trading which is important. trading has started to make a comeback. it was so horrible and sluggish for the last four, five years since the crisis, really. so things are maybe going to continue doing well and that might reflect -- be reflected
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in stocks. betty: but not the payroll. yalman: not the payroll. not just the cycles but their secular downtrend in profits, in revenue, in trading and everything. and that's not going to change that fast. it's cutting cost. technology has replaced people in carmaking. we don't have thousands of people making cars anymore. same thing in finance. a lot of back office jobs are being automated. even algorithms. we talked about them. this morning we were talking about why did the euro fall several percentage points in 10 minutes? because some algorithm probably went hay wire. but a lot of trading is being done by algorithms. there are financial jobs being automated. there are so many trends against them. ramy: speaking of jobs, brian was on bloomberg tv earlier and at what he look
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had to say. brian: we will have more management people in the branches. more in the commercial banking business. and more on the cash management business worldwide. commercial banking and stuff a little bit more -- u.s. domestic hiring and so it's all the relationship businesses. ramy: all right. so it's not all bad across the board. not all cuts are going to happen anywhere. yalman: some areas they have been hiring. compliance had one. he didn't mention it but compliance has gone through the roof because regulations, as you know, basel and dodd-frank and a million other regulations hey really had to hire for compliance, for regulation. and those areas keep going. risk management. risk during the 2008 crisis, they don't want to do that again. those areas are still growing. and i guess personal
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relationships, you still need people but many other things you don't need people. they're being replaced slowly. and also, you know, all these regulations we just talked about, they have increased capital requirements for the banks. so capital is twice, three times more than it was before the crisis which means there's returns on equity which they look at and measure and is important part of the bank is low. even though they had been making more profits, the profits had been improving, the returns on equity had been low because interests' so much more capital. they have to keep -- because there's so much more capital. they have to keep the costs low to get returns. that might be good in 2017. but the layoffs aren't going to stop that fast. betty: so what about the european banks? speaking about layoffs, they have just been decimated. yalman: they started later too. the u.s. banks did this really fast even before the crisis. i remember writing stories in 2007 when things weren't that
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bad, things were looking fine and u.s. banks already started laying off thousands of people as the mortgage business started to look shaky. european banks kept growing their payrolls until 2010, 2011, 2012, some of them. deutsche bank hasn't cut any jobs. they made a lot of announcements but it hasn't happened. it's a slow process. it's harder to lay off people in other countries. they will do some of those announcements. we are going to see germany, france, other countries where it takes a while and we are going to see those people actually lose their jobs. betty: yalman, on that note, thank you so much. our senior writer there on the banking industry globally. now still ahead, options in sight. today's trade's volatility index has seen a significant rise over the week. how to play it? next. this is bloomberg. ♪
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ramy: this is "bloomberg markets." i'm ramy inocencio. betty: and i'm betty liu. it's time now for "options insight" with abigail. abigail. abigail: thanks so much, betty. russell rhodes is the director of education for the cboe options institute. russell, thank you for taking the time and happy new year. russell: happy new year to you, too, abigail. abigail: when we talk about the dow 20,000, it hasn't happened in 2016. will it be a 2017 event in your view? russell: it's getting farther and farther out of reach and a lot of market participants feel like we're -- it's as far as we can get in the bull market we are in right now. so the fact we missed it late this year, it might be one of those things that they're going to have to put those hats away. abigail: very interesting. relative volatility at the
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beginning of the year. you said people had big expectations for volatility. it really hasn't happened. can you tell us why we are not seeing it? russell: this time last year, and we are supposed to be making our market projections for the following year, you had a lot of commentary in the volatility space about moving from a low volatility regime to a higher volatility regime. typically we have average low volatility for about three years, and then we move into a two or three-year period of high volatility. with what has happened in 2016, we are now in the fourth year of low volatility regime. so much like the bull market and stocks is kind of long, the bear market in volatility is as long as we got going back to 1990. abigail: that's pretty interesting. i want to put you on a spot. the year-to-date. it's 5439 and it shows it trading in a wide range which to me looks like volatility and on today's decline, we have
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them above the 00-day average for the vix. do you think we'll start the new year off with a bang? russell: it's possible you will start the new year with a bang. if you pulled up a two-year chart, the range is even wider because we have vix up in the 40's back in 2015 which is usually that kind of spike is usually a precursor to a higher volatility regime. it's one of the reasons people expected 2016 to be the year that we moved to higher volatility. if 2017 experiences the same sort of markets that we experienced this past year, there's nothing in history to compare with going from high to low volatility environment. abigail: hmm, very interesting. your trade, you're looking out to february relative to the vix. can you talk about your trades? russell: absolutely. the reason we're looking at february, we were supposed to be going through kind of a calm period until we get the
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inauguration of donald trump. nug ration date is january 20. january vix futures index expires on the 18th. if you're looking for extra volatility for the new president, you will be looking out at the february contracts. this morning somebody came in and sold a bunch of the february 13 put for 25 cents. abigail: good stuff, russell. we have to leave it there. thank you very much and have a wonderful new year. betty, back to you. betty: abigail, thank you. and "what'd you miss" is coming up next. we are half an hour away from the market close. ♪
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♪ >> on taylor riggs. let's get to the first word news. talking to democrats on the floor, expecting congress to take action on russia beyond white house sanctions. he spoke today. >> obama waited for the report
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from advisors and it was just obtained. i think he calculated as to what was the appropriate response. part of it has not been made public and he indicated that may not be the end of the actions against russia and architecture you that congress will want to weigh in as an independent branch on the issue. tillerson would separate his role as the ceo from exxon mobile -- mobil. and blocking a new republican backed law over control of election boards. the judge ruled that it justifies stopping the law from taking effect this weekend and he plans to review the law on thursday. the governor elect suit earlier to block the law that was passed two weeks ago. he takes office on sunday.


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