scarlett: we are live in new york. here are top stories. house to the new fed chairman takes the hot seat on capitol hill, saying he feels more optimistic about the economy. we speak with the top members of the house financial services , jeb hensarling and california democrat maxine waters. and a vent do it. ben bernankejoins for a conversation at the brookings institution in washington. we will listen in. u.s. markets closing in two hours time. let's get a check on where stocks are trading with julie hyman. the new fed chair speaks and stocks decline. is because we saw an increase in rates after jay powell gave his testimony, talked about the strengthening economy. that led some triggers to increase their bets the fed

would be more aggressive raising rates. that is hurting interest-rate sensitive groups. the sale is also starting to other groups as well. there are some stock specific stories as well. all three major averages are selling to some extent after the big advance yesterday. take a look at yields as we talk about what's happening in the rates market. five basis point increase in the 10-year yields. 2.91%. still not above the recent highs we have seen or that but still hovering around those highs from january 2014. the advance very clear when jay powell was giving his testimony. we have the market implied rateility of four increases this year. that has been increasing, now at its highest at 30%. still only a third of a percent of a chance that it will be priced in. 34%, to be exact. nevertheless, an increase.

some company specific stories we should talk about as well. they have to do with deals that may be will not be happening. america source bergen and walgreen foods, there were talks. reporting that deal talks have fallen apart. both of those stocks trading lower. acorn, which is set to be acquired, that deal could now be in jeopardy after fresenia sparked an investigation into data sharing, possible breach at acorn, a cancer drug developer. 37%. plunging almost we are also watching auto-parts stocks. autozone, advance auto parts. lower thanported

expected forecasts and that is pulling down the rest of the group. a quick check on lions gate. a report that they came close to being bought by hasbro last year but those talks fell apart over price. shares spiking, hanging onto a gain of 3%. huge coincidence, then bernanke he yellen are speaking right now in washington. we will bring you those highlights. let's get a check on the first word news with mark crumpton. mark: house republican say they don't plan on pursuing new legislation to ban on assault weapons or to expand background checks for gun sales. speaker paul ryan said he is more interested in protecting the rights of "law-abiding while majority with steve scalise, himself a victim of gun violence, focused on the

lack of preemptive action on the alleged florida shooter nikolas cruz. >> i think the most important thing we can look at is what about all the laws already on the books that were not enforced , that were not properly implemented? what angers me the most is when i see britain downs with law enforcement. the fbi had this guys name on a silver platter. house previously passed legislation making modest fixes to the gun purchase and background check systems but the package installed in the senate because it also expands other gun owner rights. in the days following that shooting at the florida high school, administrators turned to someone who knows all too well what they are going through. the principle of marjory stoneman douglas high school spoke with rick deangelis, the former principal at columbine, where two gunmen killed 13 people in 1999. deangelis said he gave administrator some advice including making sure there are no balloons at the schools welcome back ceremony.

some balloons had popped at the columbine reopening, sending students diving for cover. students at the florida school are expected to return to class tomorrow. puerto rico says delays by the u.s. treasury department in getting disaster release -- release to the island has put the island in a dangerous financial dilemma. the governor outlined his complaints to a letter to congressional leaders. that letter was reviewed by bloomberg news. he says the treasury imposed restrictions that made it difficult puerto rico to access the funding it needs. as you saw live on bloomberg, jerome powell today delivered his first testimony as fed chairman before congress. he said fiscal policy has become more stimulative and indicated the fed may consider four interest-rate hikes in 2018, thanks to the strengthening u.s. economy. he also plans to re-examine the volcker rule which restricts u.s. banks from making certain

types of speculative investments. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i mark crumpton. this is bloomberg. stick with monetary policy, a big day for fed watchers. janet yellen is at the brookings institution in washington for a conversation with her predecessor ben bernanke. we will be bringing that to you very shortly. earlier today, as mark mentioned, jerome powell expressed optimism about the economy. outlook or the economy has strengthened since december. again, each member of the fomc set be writing down a new of projections and estimate of appropriate monetary policy as we go into the march meeting which begins three weeks from today and so i would not want to prejudge that new set of projections. we will be taking into account everything that has happened since december.

julia: we may only have one and a third hike priced into 2018, but there are those that are looking at his tone, saying it could open the door to a total of four rate hikes this year. joining us now is jim mcdonald from northern trust. you actually think they only go twice in the next 12 months. what do you make of jay powell's comments today and the reaction in the markets? >> it's a reaction to his more of the view on growth. the phrase that headwinds have become tailwinds is a reflection the economy has gained steam. we thinko for times, it will only be for the right reasons, which is that growth is good, inflation is not out of control, and in that environment, that would not be that for risk-taking. scarlet: would that change financial conditions? the new chairman made clear that he has no interest in changing the plan or gradual reductions in the balance sheet.

a lot of people say any change in that schedule with tighten financial conditions. >> i think they will stay to their preprogrammed plan on balance sheet adjustments. the reason for them to alter the time of that. it only raises uncertainty. the good news is there will not be any inflationary pressure that will be viewed as a sustained risk that would cause it to accelerate off the balance sheet. julia: we were looking at a backtracking slightly of the u.s. 10-year yield. we talk about it approaching this 3% level as being key. forhat extent is that a cap the 10-year yield, talking in a demand from outside of the u.s., with the likes of the ecb and japan still stimulating their economies and people still requesting yield? cap we think there is a over the next six months, a big interest differential with overseas markets. it is expensive to hedge the dollar, not as clear as big of a differential as many may think.

we have seen and expect to continue to see good demand from overseas investors for fixed income. eyelet: we are keeping an on janet yellen speaking with ben bernanke, a conversation at the brookings institution. bit oft's talk a little the risks going forward. the fed chairman mostly avoided any debate over what the tax overhaul, what fiscal plans the administration has, will mean for the u.s. economy. he did say that the u.s. was not on a sustainable fiscal path. how do you see him folding that into monetary policy when the time comes? jim: i think he was careful not to prejudge what the committee would do. he did a good job getting out of the hearings today without making great news about changes in outlook. they want to assess what the increased fiscal stimulus

actually does to growth and whether there is any risk to inflation. we think the core pce, which is their favorite measure of inflation, is unlikely to have a big uptick here. that is what would cause a change in their pace. julia: a lot of the discussion we are having is to what extent rising wages, if we see a pickup in wages, filters into the inflation picture. to what extent, if we look at companies and the rising profit ,argins they are achieving actually can they absorb the rising wage cost without passing them on? jim: it's a great point. the last three weight cycles we have seen in the u.s. have been incident with rising profit margins. it is our view that companies will only give sustained wage .ncreases if profits are rising in that environment, the economy does well, profits do well, the stock it does fine. scarlet: put it all together. what is the strategy here, how do investors position themselves

for the next month, for the rest of this monetary tightening cycle? from a bige moved overweight in the u.s. to equities outside the u.s. being increasingly favored. cheaper markets, have not had a level of performance that u.s. stocks have. we think market globally will do well but even better outside the u.s. in the bond market we think it will be a coupon clipping environment. we don't expect people to lose money. the current yields are not a bad proxy for what you should expect. we are still positive about taking risk over the next year. a and,overweight underweight the short end? jim: we want to be overweight credit and underweight treasuries. scarlet: jim mcdonald, thank you so much. we willntioned, continue to monitor and review headlines from janet yellen and ben bernanke's conversation in

washington. they have been talking about productivity and efficiency. you can watch the entire event on the bloomberg at tv . from new york, this is bloomberg. ♪

scarlet: this is bloomberg markets, i'm scarlet fu. julia: i am julia chatterley. let's get back to washington where janet and ben bernanke are speaking together. >> how did that happen? i have heard it does happen but interesting transition. chairwoman yellen: it's a good question, i never had any policy experience although i had a

stint working as an economist and international finance division at the fed. always been interested in holding a policy post of that sort. phone rain, its was the spring of 1994, there were several divisions -- decisions on the board of governors. it was someone from the treasury asking if i would be interested i asked them to hold the phone for a couple of minutes and decided maybe i should talk to my spouse and see how he would feel about moving to washington with my son. said, of course we will make it work, this is something you probably would like to do. i got back on the phone and basically said, if you offer me the job, i would be delighted to take it. waited a couple of months, lo and behold, i was nominated, along with alan blinder, who was nominated at the time as vice-chairman.

i thought the research i have , you the background i had know, were reasonable basis to try to contribute to monetary policy. during the time i spent there, of course -- and i'm sure you had this experience as well -- learned a lot about other responsibilities at the fed including supervision and regulation, some of the operational responsibilities that the fed has. delighted to be offered the opportunity to do it, learned a lot when i actually assumed the job. chairman bernanke: when you were there it was peter greenspan. what was it like working with greenspan? chairwoman yellen: i did work in 19 94, leftnt and then went to the council of economic advisers at the beginning of clinton's second

term in 1997. i did not know alan before i went. with hislly impressed intellectual strength, with his originality. no one knew the data, understood the idiosyncrasies of the data, and could make better use of it to provide insights on the economy than alan could. i thought he was a very original thinker. i enjoyed talking to him, i found him to be very open to debate. i did not agree with him on everything but i did agree with him on a lot of things. i guess i had the opportunity to debate with him, the question of whether or not that should adopt an inflation target, and if so, what that target should be.

he let me do that in the context of an fomc meeting, so it went into the permanent record. i was on record than saying i should we should adopt a numerical inflation target, and i thought it should be 2%. i think i articulated the reasons about the zero lower bound and nominal rate rigidity which later became central to our decisions. alan's view was that we should not adopt an inflation target at all. of course, he was successful in nothing that from happening, until you and i worked together. had long been your desire to see this happen, as it had been mine. coming we knew especially proud, that you are able to put in place -- continue towill monitor and review headlines generated by ben bernanke and

janet yellen's conversation at the brookings is tuition in washington. still ahead, waters on powell. topill stick to the democrat on the house financial services committee on the new fed chairman debut. this is bloomberg. ♪

julia: this is bloomberg markets. i'm julia chatterly. scarlet: i'm scarlet fu. powell made his debut on capitol hill today, sound and up the note on the u.s. economy, signaling the central bank may review the rate hike and that inflation concerns. we are joined by maxine waters, the ranking democrat in the house financial services committee. i want to get from you, first of all, the biggest difference you saw, that you took away from the new chair from his predecessor janet yellen.

>> let me say, we had chairman powell in committee today and he answered all of the questions that were asked of him, he talked about carrying on in the manner that janet yellen had done. he seemed very comfortable, and i think the members felt that he was cooperative for the most part. a lot of the questions that were asked of him were questioned that were not exactly monetary policy and he was able to try and help people understand what they do have the power and influence to do, and what they do not have the power to do. i think he conducted himself very well. i'm looking forward to working with him. of course, i will be interested in whether or not he is going to implement dodd-frank reforms. that is what i think our charge and challenge is. scarlet: you had a specific line

of questioning for the chairman, you were seeking to widen the perspective of candidates for the fed board, for the presidents. what does the ideal candidate for the new york fed president look like? bill dudley will be stepping down to. rep. waters: let me just say that i've been interested in diversity, and all of financial services, but particularly with the fed. the question that i asked today is about the opportunity to do some outreach and seek out people of color, folks who have not normally seemingly have the opportunity to have that kind of a position. i wanted to know would he be supportive of that? if it did not appear that they had done the kind of outreach that they were looking for, the kind of people that would help bring about some diversity, would he reject it, not support it?

he talked about the fact that he believed, even in the past, they have done outreach that considered people who came from various backgrounds. i challenged that a bit, asked about whether he could share with us the kind of outreach may have done. i also asked if we could make recommendations. he agreed to both. julia: i want to talk about some common that you made over the weekend, speaking to california democrats at the party's annual convention. you said it was time to get ready for impeachment, that you were waiting and counting down for robert mueller to connect the dots here. i see democrats frustrated about the talk of impeachment and they want the party to focus more on its own issues rather than continuing to batter the republicans here. your response? rep. waters: i think what you are talking about is the approach that i have taken

dealing with this president. i started early on identifying the kremlin clan, that we call them. flynn, them, manafort, wilbur ross, all of these people were very key to what we felt was some sort of interaction with the republicans and with the russians. we also talked about the possibility that they had been involved in some collusion. we even talked about all the money laundering, we brought up , whatsue of deutsche bank we thought had been money-laundering through the cyprus bank, etc. we have been on this for a long time. my staff, even though they are not equipped to do extensive investigation, have done quite a bit, learning about what we and thehe kremlin clan, individuals involved in the

trunk campaign, some of whom are now in the cabinet, etc. i talked about that at the democratic convention and i did say that i am very pleased with what dollar is doing, that he is doing a good job. i believe he will connect the dots and it will lead to not only the revelation that there was collusion, but also obstruction of justice. julia: thank you so much for joining us, congresswoman maxine waters of california. we will be joined by a top republican on that committee, jeb hensarling, just ahead. from new york, this is bloomberg. ♪

scarlet: from bloomberg world headquarters in new york, this is bloomberg markets. i am scarlet fu. julia: and i'm julia chatterley. let's get the headlines on

bloomberg first word news with mark crumpton at this hour. mark: a hearing against the suspect in the for the high school shooting has been canceled. the broward state attorney's office says the hearing has been canceled because an agreement has been reached for prosecutors samples, dna, and photographs of nikolas cruz. the 19-year-old is charged with 17 counts of order for the massacre at marjorie stroman high school in parkland news two weeks ago. attorney general jeff sessions says justice department officials thanks they cannot ban bump stock devices without action from congress. session's said he believes gun accessories like the ones used masker year's las vegas can be banned through a mandatory process.

they allow semi automatic rifles to mimic machine guns. south korea is calling north korea's six tests and ballistic launches a blatant affront to the united nations test ban treaty. the nation called on other nations to help compel pyongyang to change course. the united nations humanitarian chief is warning that conditions in yemen are catastrophic after three years of war with 22 people needing eight. the u.n. envoy is accusing shiite rifles -- rebels of prolonging the conference. they warned that famine remains a real threat. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. scarlet? scarlet: thank you. let's take you to the brookings institution in washington where former fed chairs janet yellen and ben bernanke are speaking.

let's listen in. janet: with a huge decline in check volumes, covering cost was an extraordinarily difficult task. so, for my first couple of years there i was involved in essentially having to shrink the operation. my first week in the job i had to send out pink slips to employees in two of our branches that were involved in check that we were going to close, and i had never really been involved talkat, and had to go and to them and explain to them why it was they would be losing their jobs, and try to help them adjust to what that was going to mean, which was, for me, a very different kind of experience. with no surprise to them, they could see every day the volume of work coming into their operation was plummeting. you know, the fed during that time, during those years, went

from something like 52 places in which we processed check down to one, so it was a substantial cut. we also were very active in community development. the community reinvestment act is something that is designed to ensure that the banking banks serve the need of their communities, including low-and moderate -- low to moderate income areas. was figuring out a form that would be available and i became involved in the community development part. ben: it departed talking to leaders in trying to get intelligence. janet: yes, trying to get that intelligence. ben: and you were pretty early in identifying problems in housing, banking. tell us about how you saw those

issues. janet: i was in san francisco starting in 2004, and then came and join you in washington in 2010. so, i was out in an area that was the center of these problems developing while that was happening. and i have to say, i saw a lot and i reported on a lot that was very worrisome. day one, when i walked into the bank, i met with our banking supervision folks, and they told me how concerned they were about commercial real estate lending. so, we had booming housing markets. the supervised many small commercial banks, and there oversight for land acquisition and development was growing at a rapid pace. their lending was growing more rapidly than their deposits.

they were beginning to rely heavily on brokered deposits. they had very high concentrations, often in small lending in small, geographic areas that were the center of, you know, what became the housing boom and bust, and quite a few of them ended up failing later on. my staff was very worried about that. that focused me. i had many directors and other business contacts who were involved in housing. and, of course, in san francisco you couldn't go to a cocktail party without people telling ey e-popping tales on deals that have been struck on housing and with housing prices going up. i heard all of that, and my contacts were white concerned. our super -- quite concerned. our supervisory folks were alerting me to underwriting practices that were of huge

concern. julia: interesting to listen to janet yellen speak about the run into the housing crisis in the united states. we will bring any headlines from janet yellen's and ben bernanke's conversation from the brookings institution in washington. you can watch the event at tv if you want to. we will speak to the top republican on the house financial services committee about the fed chairman's big debut. from new york, this is bloomberg. ♪

this is bloomberg markets. i am scarlet fu. julia: and i'm julia chatterley. time for the daily tongue twister, or the sector spider report with abigail doolittle. abigail: we are looking at the

xl wire and the consumer discretionary sector etf. it is the first down day for the xly in four days. the etf is steadily trading lower. right now it is on pace for its worst day since the last day of the big selloff at the beginning of this month. big selling and consumer discretionary. this is a big piece -- media names, comcast, disney, along with fox. there is the process of a bidding war. comcast making a surprise bid for the sky assets, a 22.1 billion pound offer. ceo bob iger of disney has called fox's sky assets the crown jewel. they have had a bit in there for a well. it will be interesting see if it does iraq. another big -- you rock. another big drag, autozone. shares are sharply lower, on

pace for the worst day's 2005 they put up -- worst day since 2005. they put up a bad quarter. they are unloading two units. last year was difficult with uncertainty driven by tax refund delays, weather, among other factors. these shares really down sharply. the stock of the hour -- let's take a look at macy's. this is an outlier to all of the laggards in the consumer discretionary space. the stock is up in a very nice beat, a surprise comp s forng up positive comp the first time in 12 quarters, up 1.4%. it seems that the turnaround plan is really in play. he is getting consumers in stores. we had the holiday season with strong cold weather. they are benefiting from that. they are also talking about the idea that momentum will

continue. scarlet: the focus will be on the look ahead and whether they will keep the momentum going. what reason is are to believe they can maintain the momentum? abigail: the first is we are looking at very easy comps. we had 11 down comps, so it should be easy to beat. the second is and the toy -- they were down 1.4% -- excuse me, down 3.5%. versus sales been up 1.4%. 158 -- republican g #btv 158. you see the uptrend out of the financial crisis. buyers in control. you see rebound rally in the downtrend. that is buyers thinking maybe they are getting it together. will this proved to be another one of those? today we had the stock breaking up against the resistance, telling us buyers may be ready to take it out, but it will be a

matter of whether or not they can continue to put a positive comps. right now the trends seem positive. julia: do we see a break -- we will watch it. abigail doolittle, to record time for the bloomberg -- thank you for that. time for the bloomberg business flash. jpmorgan is banking on the federal reserve. the company sent high interest rates and recent corporate tax cuts translate to an addition -- additional $7 billion in pretax profits. revenue's to sources of are expected to balloon to about $55 billion this year. twice a rest is in talks -- toys "r" us is in talks to sell its expanding asian business to its local partner. the struggling chain is negotiating to offload its 85% stake in the unit to the hong kong billionaire -- brothers. the value could be ventured -- the valve -- it could be

ventured -- the venture could be valued at $1 billion. millennials may be creating a distaste for credit cards. only one of the three carrie plastic compared to the majority of older americans. 18th --survey noted the 18 to 24 demographic prefer cash. that is bad news for the networks that earn fees for credit card rather than debit card transactions. the millennials showing responsibility. scarlet: they have gone through a lot, those millennials. let's get back to the brookings institution in washington where you have former fed chair janet yellen and her predecessor ben bernanke still speaking. let's listen in. what we did were communications to try to shape what theinking about likely path of short-term interest rates would be that

would then have bearing on longer-term interest rates and asset purchases. read think, you know, my -- through a lot of papers, people will study it for a long time. i know the paper that was presented at the u.s. monetary policy forum cast doubt on the effectiveness of asset purchases, but i think my reading of the full -- you know, the literature on this -- i think the overwhelming set of mind documents that long-term purchases of large-scale asset purchases were effective in lowering the term premium in longer-term rates and ringing it down. -- bringing it down. exactly how much, i am not sure. it is hard to tell. there is very limited evidence, and the event studies people typically do -- they capture

-- scarlet: we'll continue tomorrow to monitor and bring you headlines of the conversation the brookings institute in washington. you can also watch the event on bloomberg at tv . this is bloomberg. ♪

scarlet: this is bloomberg markets. i am scarlet fu. julia: and i am julia chatterley. lawmakers on capitol hill getting their first chance to question fed chairman jerome powell. kevin cirilli is with the chairman of the committee that held today's meeting. kevin, take it away. kevin: thank you. we are here with jeb hensarling. chair says the economy is doing pretty well and as a result there could be more confidence for another rate hike. your thoughts? jeb hensarling: it is nice to have the affirmation of the federal reserve chairman, but i hear from my constituents every a long way.es

it is not crumbs, not armageddon, and it is not unpatriotic for people to be able to pay their bills, not live paycheck to paycheck, send somebody to college, start a small business. it is nice to have the affirmation of a new fed chairman say that. yes, the economy is rosier than what the federal reserve anticipated. you heard the federal reserve chairman allow for the possibility of a fourth rate hike, and we always knew, kevin, one day we would be here. when the economy was stuck in low gear, said policy did not matter as much. now that it is moving into high gear, they are walking a tightrope. one side is recession to the other side is inflation. it is a tough balancing -- recession. the other side is inflation. it is a tough balancing act, but fortunate president chose someone. kevin: it is a tough balancing act when you look at the balance sheet. what you make of his comments on where that stands? i am a littleg:

concerned. i do not believe in an opec fed. i believe in a transparent fed, and the fed committed to that, but we are left transparent on the wind down sheet because right now they have insufficient mortgage-backed securities on the schedule they put out. it is still unclear after today's hearing what the size, much less the composition of the balance sheet is. the fed is not supposed to be in the credit allocation business. they are supposed to be in the money supply business, but by purchasing mortgage-backed securities they have been in the allocation business. we want them to wind down those mortgage backed securities. we want to wind up with a treasuries only balance sheet, but i do not think that is where we are headed and that concerns a number of legislators like me. kevin: summary things came up in the hearing -- one of the things that has gripped the investment community is whether the economy can handle public-private partnerships on something like

infrastructure. the white house said that could contribute, in their estimates, to .3% of economic growth. federal reserve experts have said we are not sure this type of stimulus is something the economy could handle. your thoughts on this? you think the fed is wrong, or they could handle the type of economic stimulus on infrastructure. it was yield a barrel who said predictions are dangerous, especially about the future. the fed has been wrong on a number of predictions, and it is not to slap them upside the head. it is a tough business. it is economic forecasting. for the entire obama administration, eight years, economic growth. i am not sure they have this correct. we are in the very early stages of the president's infrastructure plan. there is a lot more detail that has to come out. it could potentially have a productive impact on the economy. we just don't know enough about

the plan quite yet. kevin: back to policy, you asked the fed chair regarding the volcker rule and whether the fed would be inadequate regulator in the enforcement of it. what did you make of chair powell's response to your question? rep. hensarling: i was encouraged by what the chairman said. we have a number of regulators interpreting the volcker rule differently. there shouldn't be a volcker rule. it had nothing to do with the financial crisis yesterday. it will not have anything to do with a financial crisis in the future. you essentially now have to put dr. phil on your trading desk to find out how did you feel about that trade? what were you thinking? it is an impossible task. have seen incredibly high levels of volatility. it's an incredibly high levels of illiquidity. the fixed income markets -- ultimate us as a dampening impact on the economy. i think he wants to rationalize that.

so, if i had my way we would simply repeal the volcker will come up with the next step is to have at least have one unified regulators, and then -- regulator, and then to exempt our smaller regional and community banks from the volcker rule. that is a fallback position. kevin: that is what i was going -- follow-up on -- you think the fed chair is rated to delete the lead on enforcement and in some ways reworking the volcker rule? i do believeng: that. on the monetary side -- it is the very early days chairman powell has been on the job, three weeks now as chairman -- i sent as being on the board of the -- i sense that being on the board of governors you will censor a lot of continuity between he and chair yellen. on the regulatory side, i hope you will see a new day dawns. the regulatory burden on our banking system has led to one of

the contribute in factors to 1.6% g-v growth, and other regulatory beatings have ceased under the trump, -- gdp growth, and under the trump administration, regulatory beatings have ceased. i think chairman powell wants to make sure we have sensible regulation. we want to measure the financial system is secure, but inherently the financial system does have to take risk. you have to have risk to have greater return. he understands this. he has been in investment banking in private equity. with him and governor corals -- vice chairman corals, hopefully you see some balance in regulation. kevin: jeb hensarling, where for coming on bloomberg. we touched on it all -- if a structure, the volcker rule, and even dr. phil. who would have thought? scarlet: thank you, kevin cirilli, and jeb hensarling of texas, chairman of the house

financial services committee. in washingtony and get you back to janet yellen and ben bernanke at the brookings institution. they are taking questions from the audience. let's listen in. janet: i am not saying that is a full solution, and their still can be situations. -- there still can be situations. what more would you do -- you could raise inflation target. what led to 2% was based on estimates of how often you would hit the zero lower bound. we probably would come out with a higher inflation target now if we were starting from scratch, but moving to a higher inflation andet is a tricky business, , number one, i am not sure that congress would regard it as consistent with their mandate of price stability. i think the transition from a lower to a higher inflation target would be a difficult one and could succeed in unanchoring

inflation expectations that i interpret as reasonably well anchored around 2%, and i think that has been a tremendous advantage to monetary policy. and there are some costs of having inflation running generally at that level. me, it is certainly worth considering the cost and benefits, but it is not a clear " yes, we should have a higher target." that takes you to other systems like nominal gdp targeting that has some interesting advantages or price-level targeting. i think these things are worth considering. i think ben's suggestion for essentially making it clear that the fed would resort to price-level targeting in situations where the zero lower bound is binding that is a type

of lower for longer approach you would codify in advance of a zero lower bound episode are absolutely -- they have some attractive features. monitore'll continue to and bring you any headlines from janet yellen and ben bernanke's conversation at the brookings institution in washington. you can also watch the event on the bloomberg at tv . that is a specific events page you are looking at there, so you don't have to miss anything if you choose not to. coming up, the bloomberg deals report -- reaching for the sky. comcast starts a bidding war with disney for sky tv. we will bring you the latest. this is bloomberg. ♪

julia: it is 3:00 p.m. in new york, 12:00 p.m. in san francisco, and it :00 p.m. in london. i am julia chatterley -- and 8:00 p.m. in london. i am julia chatterley. scarlet: and i am scarlet fu.

welcome to bloomberg markets. we are live in bloomberg world headquarters in new york over the next hour. here are the top stories we are covering on the bloomberg and around the world. yieldsell affect -- spike and stocks fall as investors rate the fed chair's assessment of the u.s. economy. janet yellen joined been bernanke -- joint ben bernanke for a consonant -- conversation at the brookings institute. we'll bring you headlines. and aiming for the sky -- comcast makes a surprise bid for the british broadcaster. one hour from the close of trading, let's get a check in the markets with julie hyman where good news is not good news for the markets. julie: not necessarily. it depends on what you consider good news i guess, right? we are talking in this case speaking in his

testimony about the strengthening economy. it would be good news if it is not necessarily bring higher rates that might slow aspects of that growth. all three major averages at their lows of the session as we see rates rise in the wake of his comments, although they are off their highs of the session, now off four basis point versus five basis points earlier. in the wake of the selloff we saw at the end of last month, beginning of this month, we are on somewhat fragile footing when it comes to the equity market. that is evidenced by what we saw in the reading of consumer expectations for stock prices. what will they do in the next 12 months? we had seen that meeting at a high just last month in the wake of a rally that took stocks -- reading at a high just last month in the wake of a rally that took stocks to records, and now we saw a plunge in the wake of the selloff of the stock market, going above 50%, to closer to 41%. this is measuring consumers, not

necessarily professionals in the market, but retail sentiment. also in terms of the stock market today, we see some of the interest-rate sensitive groups selloff. that is what you might expect when you see the increase in rates -- utilities, telecoms usually fall into that category. what is interesting, consumer discretionary is also on the list. that has to do with the disappointing earnings from companies like autozone and also the ripple effect from the sky offer coming now from comcast -- a $31 billion offer. if you look at the u.s. listed media companies, we see weakness there. they are part of the consumer discretionary group. disney is trading lower. it is the one whose efforts might be spoiled by this. we will dig more into this in a moment. comcast itself is lower, and of course 21st century fox which is in the process of being mostly acquired by disney, is also taking a hit. scarlet: we will continue the conversation, but in the meantime we want to get you to

first word news with mark crumpton. longtimesident trump's aide hope hicks was questioned by the house intelligence committee. hicks was interviewed behind closed doors as part of the russian investigation. the panel investigating contact between russia and the trump campaign. hicks already has been questioned by special counsel robert mueller. general joseph -- head of u.s. central command says host of the land once held by islamic state has been reclaimed. the general highlighted the effectiveness of operation and haran and resolve during testimony before the house armed services committee. >> over 90% of the territory previously held by isis in iraq and syria is no longer under their control. the destruction of the ice is physical caliphate is imminent. also agreedl votel to ran's -- he ran -- iran's ballistic missile program is a

challenge. to strike new break deals after brexit -- speaking in london, william fox said keeping the status quo would force britain to negotiate with one arm -- one arm tied behind our back. loseelieves the u.k. will out on trade customers if brussels continues to have a say. rule takers without any say in how the rules were made we would be in a worse position than we are today. it would be a complete sellout of britain's national interest and a betrayal of the voters in the referendum. comments came after jeremy corbyn endorsed a continuing custom spec 20 u.k. and the european union. in moscow, people laid flowers that are minimized memorial for slain opposition leader boris -- on the third anniversary of his

murder. among those who came to pay tribute were members of the u.s. and german delegations. a vocal critic of president vladimir putin, he was shot dead on the bridge overlooking the kremlin on february 20 7, 2015 27, 2015.y global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. scarlet: thank you so much. we want to get to our deals report and talk about the comcast story because it may have outfoxed rupert murdoch and bob iger. the company made a surprise bid for sky, topping the bid for the british broadcaster. joining us with more is at hammond, bloomberg deals reporter. if i look at the ownership of sky on the bloomberg terminal, you can see 21st century fox has a 39% stake in sky, which means

everyone else owns 61%, roundabout. that is about convincing the 61% of shareholders to do what is in their best interest. or fox considering -- convincing 61% to do what is in their best interest. you get down to it quickly -- the next biggest holder has less than 5%. the challenge for comcast here to get need to get 50.1% this done. that is the threshold. there offer is superior on paper to the fox offer. the question to the shareholders of scott right now is do they go with the comcast offer, -- sky right now is do they go with the comcast offer, side with them? really comcast has very little margin for error in terms of getting this right and getting the shareholders on board. julia: and what about bob iger? he is sitting here -- he called sky the crown jewel of fox's assets. with the be happy with fox's

assets minus sky, or does he turn around and say we have to pay a little more? ed: it is fascinating. basis he fox on the would have at least 39% of sky. there are two options. one, they could end up owning the current fox share. that would not be ideal for them, particularly if the remaining 69% was owned by comcast, a huge rival for them. the other could do is somehow launch their own bid for the remaining piece and see if that is something that could win shareholders over the comcast bid. another option as fox coming back over the top of comcast, offer a higher number, and then disney ends up with the fox deal and the option of buying the whole thing, but that raises the question of does disney have to recut the deal? julia: the timing is important

because we know fox is having a shocker in the u.k. trying to get this passed regulators. that is another angle. there is an assumption here on the part of disney that this deal was going to go through between fox and sky, and then they would be able to acquire. there are so many assumptions being made on all sides here. ed: that is right, and as you rightly say, fox has headwinds in the u.k.. they have the phone hacking scandal which is not too far the pastor there are issues about plurality end up owning -- and there are issues about plurality and them owning too much. you have to say the same thing would be true for disney. if disney ended up ultimately as the owner of sky in the u.k. that would present issues in the way fox owning them would. there are potential outcomes and a lot of moving parts. speaking to people involved in the situation, this is something fox long expected. they knew comcast were lurking,

that this was an asset they were interested in. is not a surprise. the real question is do they come back and try to top comcast's did. -- bid. scarlet: what are you hearing -- murder tends to get wood -- murdoch tends to get what he wants. ed: he does tend to get what he wants. but the market thinks will happen is fox will have to come back with a higher bid. they simply have no choice you see that reflected in sky shares which are trading one pound sterling over the current offer price. there is a next occasion this will turn into a bidding war and sky with already 39% of their company under the ownership would be most benefited. julia: the murdochs versus the roberts. clash of the titans. one week from today, qualcomm will hold its annual shareholder meeting and the top of the takeover.oadcom's

joining us, stacy rasgon. great to have you with us. we talk endlessly about how much of a price talk the ceo of broadcom ultimately is, but you are saying the critical issue is not necessarily the price, but the divestitures that will need to be done as part of the deal. talk us through it. stacy rasgon: qualcomm put out a letter that in my opinion was a little disingenuous. it seems to indicate that between the companies meeting together that they had ironed out most of the issues and it was more about qualcomm looking for a higher price, but when you go and look through the updated merger proposal broadcom put together it is clear they -- it is more than that. they are asking for that registers around the bulk of the chip business. they would like broadcom to put that on the table. in my opinion that will not happen true that is probably a

deal killer. i think they are still far apart on the other mechanics of the deal. i think this is more than just price. ed: stacy, physical that registers aside, which the companies express some differences of opinion, what about the -- because they would come into play if you saw broadcom emerge in places like europe. there were the issues on whether they are a suitable actor. stacy: sure. qualcomm has had issues in europe in terms of the coupling of the chipset business and the licensing business. points one of qualcomm's are they believe they can operate a copy to remove those concerns -- points. they believe they can operate the company to remove those concerns. i am not as concerned about a direct overlap from a military standpoint. i would be more weight about the indirect areas. standpoint.y

i would be more worried about the indirect areas. there is a question of content or bill of material -- how much of the bill of material will be what the combined company will own. scarlet: we get a sense of qualcomm's ideal scenario based on the letter they released, and we know what broadcom wants to acquire. what you think is the most likely outcome when all is said and done? stacy: that is a good question. the vote is coming up. i suspect it will be close. i do not know -- will get the majority of what he is looking for. at a minimum, he will pick up some board seats. you could argue that would be good for qualcomm in the long come -- long-term. my guess is the vote will be close. julia: to what extent you think shareholders are saying qualcomm would be in a better place to have someone run this company rather than current management?

stacy: logically, you have to look at it this way. if you are a qualcomm shareholder, a you vote qualcomm's slate. if you think they would fix the issues with apple, or if you believe if broadcom were to acquire it and the broadcom deal were to fall through the company would be wrecked. i think you would vote for hock had concerns the deal would get approved, or if you believe the broadcom board would not be running it any worse in the qualcomm board. that is logical. how it works out in practice we will find out in a few days. ed: you have a price target of 65. 79 is the current offer on the table. what is fair value for this? what will get it knocked over? stacy: you could argue -- let's say the broadcom deal gets approved. let's say it is in the ballpark of $80. the stock is probably not going to $80. it will go to $70.

the deal spread will stay wide because the regulatory process is going to be long. i think if the broadcom deal falls apart but if they manage and that is up in the -- -- but if they can close that, the stock might really -- might trend in the low-60's. if the broadcom deal -- if broadcom walks away and qualcomm cannot manage to close -- this thing was trading in the low-50's not that long ago. we're probably headed there. julia: do not ask for a dealbreaker in order to make a deal. stacy, great to chat with you. course, edn, and of senior, bloomberg's deals report. we have been continue to monitor ben bernanke and janet yellen's conversation at the brookings institution washington. she said the fiscal situation concerns are. you can watch the event live on the bloomberg at tv .

this is bloomberg. ♪

julia: this is bloomberg markets. i am julia chatterley. scarlet: and i am scarlet fu. time for the bloomberg business ash. the world's biggest sovereign wealth fund will remain committed to investing in the u.k. despite brexit talks. it is the norwegian's sovereign wealth fund -- largest sovereign wealth fund after the u.s. is in the u.k.. the fund delivered its best return on record last year. cryptocurrency companies hoping to get the jump on stricter rules are hiring more former regulators and government

authorities. they are hoping the new hires will come in handy if nations decide to embrace or outlaw digital money. it follows a similar move from other innovators like online lenders after disrupting the industry. starbucks is a sober lining in the downturn. -- silver lining in the downturn. it is leading to lower rents, which stands to benefit the chain of coffee shops which has more than 14,000 locations in the u.s. alone. and that is your business flash update. julia: let's get you back down to the brookings institution and washington, d.c. janet yellen, ben bernanke, you know the drill, #fedduet. ben: the recent volatility is nothing exceptional on a historical basis. as the veterans here are quite aware. the purpose of fed communication

is not to a limit or suppress volatility. the purpose is to eat eliminate unnecessary -- is to eliminate unnecessary problems that lead to extra volatility that otherwise would be coming from the fundamental economy. i think communication has come a very long way. it has only been a quarter-century since the fed began issuing a statement after its meetings, and now we have far more information provided about the outlook for the economy, even about what the fed thinks of the fomc members think will be the path of interest rates. obviously it is a work in progress. i would compare janet's handling of the balance sheet with my handling of the balance sheet as an example about technological process exists, even in central banking. [laughter] ben: so i think there is still a lot to be learned. i think transparency and communication have been very positive and is continuing to improve. i would just note that we are meeting this afternoon instead

of this morning because chairman powell's inaugural testimony this morning emphasize very strongly has them into expanding transparency and explaining what the fed does, which i think is good not only from a policy point of view and mark's point of view, but from a democratic accountability point of view. >> let me ask one question -- scarlet: he monitor and bring you headlines from the janet yellen and ben bernanke conversation at the brookings institute in washington. you can also watch on the bloomberg at tv . this is bloomberg. ♪

this is bloomberg markets. i am julia chatterley. scarlet: and i'm scarlet fu. it is time for options insight with julie hyman. julie: thanks. joining me today is kevin kelly, managing partner at benchmark investments. we're talking retail. macy's came out with her intended better than estimated,

which is a surprise. were you surprised by the strength in numbers? surprised by the strength in numbers and more surprised by the guidance going forward. they are beating consensus across the board by significant amount. when you look at the retail space, i want to see what was happening and i looked at the xrt, and s&p 500 retail etf. it has the broad-based, and the constituent more than 1.5%, and it was pretty much down. in the options market you saw a lot more -- 2.5 times the amount of puts versus calls. on a day that macy's beats guidance it was perplexing. julie: it is interesting. you have some retail movers like autozone and i do not know if they are in the etf -- kevin: they are. they are. julie: maybe that is part of the issue. do you extrapolate for macy's and the rest of retail? we are at the beginning of earnings season for retailers reporting. kevin: exactly. in the retail space, they are

all wearing milk bone underwear and it is a dog eat dog world. you even saw nordstrom's try to do a management buyout. they could not get the financing and we see winners and losing in the retail space because of the -- those that control the on the channel. you have seen retailers have a hard time doing that. nordstrom's has done that as well as macy's. dillards is another that beat estimates. how do you translate it into an options trader? then: i wanted to go into underlying asset that runs retail. if you look at a company like simon property group they came out with earnings and said the fund from operations will be up 6% to 8% this year. they will not do m&a. they will focus on revamping, revitalizing, redeveloping

current properties, and that will increase a lot of the rents they get. increasect rents to 3.5%. they may have occupancy issues in the short-term, especially when it comes to the 12 fears they have taken over, but they can rent those out at a higher slot -- sears have taken over, but they can rent those out at a higher level. julie: ok, what is the tray to s? kevin: simons down to 2.5%. the indicative yield is 5%. buy it at the spot price. sell the 1.60 call. he will lower your cost basis to $150 a share. you have the upside to $160. this takes you to june, given your cushion to take you through the next earnings season -- their earnings season and the current retail earnings season. it is a great way to play it because they have a replaceable trophy assets that in the private market would trade at a premium. julie: right, simon and owner of more of the a malls, as they are

called. this is a way of financing your trade of the underlying stock versus a theoretical options play. kevin: right. this is one of the most conservative option stretches because you are owning the underlying stock. you want to take into consideration you are taking advantage of the extremely elevated implied volatility. real estate should not have this high of implied volatility in this is a way to take advantage of that. julie: kevin, thanks much. kevin kelly. julia, back to you. julia: think you so much, julie. still ahead, disney outfoxed? maybe, we will speak to larry haverty as comcast launches media hunger games. from new york, this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. house republicans don't plan on legislation to ban assault weapons or expanded background checks.

speaker paul ryan said he is more interested in protecting the rights of "law-abiding citizens." majority whip a victim of gun violence focused on the lack of preemptive action against the alleged florida school shooter nicolas cruz. most important thing we can look at is about what are all the laws on the books that were not enforced or not properly implemented? when angered me the most is when i see break downs with law enforcement. the fbi had this guys name on a silver platter. they proposed modest fixes to the background check system but the package stalled in the senate because it also it bans other gun owner rights. other gun owner rights. the country's response to russian meddling and disinformation campaigns hasn't been strong enough.