Bloomberg: Banks Get Battered | Beyond the Bell 03/13/23

Comprehensive cross-platform coverage of the U.S. market close on Bloomberg Television, Bloomberg Radio, and YouTube with Romaine Bostick, Scarlet Fu, Carol Massar and Katie Greifeld. Regional banks get battered due to the SVP collapse.

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Transcript

Beyond the bell Bloomberg’s comprehensive cross-platform coverage of the U.S market close starts right now and right now we are two minutes away from the end of the trading day Romaine Bostic alongside Scarlet Foo we’re counting it down to the closing bell here to help take us beyond the bell

It’s a global simulcast with Carol masser and Katie greifeld we welcome our audiences across Bloomberg television radio originals and those folks streaming on YouTube and I on the equity Market here with the NASDAQ Carol holding uh in onto some gains on the day but all the other major indices lower

The Russell which of course has a huge component of Bank stocks down about 1.6 percent here on a day where we should point out treasury yields a two-year treasury yield down 57 basis points pretty remarkable right and such a change of tune from what we saw certainly last week here and I’m just

Thinking about how many days until the next fed meeting what is it that will ultimately shape the fed’s decision Katie when they sit down to uh make the second rate move of the year and you have to imagine the CPI numbers that we’re going to get at 8 30 a.m tomorrow

Will play some factor in that decision but I mean if you look at the markets right now it feels like CPI has really taken a back seat to just mapping the Fallout from svb not even that but also the PPI number as one then we’ve got

Retail sales later on the week how much of that really matters right now if there’s something fundamentally broken in the economy I don’t know I mean I mean there’s that’s the whole debate though is there something really fundamentally broken with the economy or is there something just fundamentally

Broken with svb and maybe the universe surrounding that and is that what we’re trying to figure out right yeah well that’s what the FIB is going to have to debate I mean I think whatever they were going to go into that meeting talking about let’s just say there’s been a

Couple other points added to the agenda the other thing though and Katie you brought this up too I mean and we all did like we’re still fighting inflation we still have a ways to go and that is certainly that makes it much more difficult to remain for the FED in terms

Of what to do all right folks uh we’re getting the closing Bells here in New York the Dow Jones Industrial Average is going to finish the day down roughly about uh three tenths of a percent it’s down about 80 points as we wait for these numbers to settle the S P 500 down

About six points or about a tenth of a percent here on the day and the NASDAQ Composite down Higher by about five tenths of a percent here uh we should point out some breaking news crossing the wire right now this coming out of the FED that the FED is going to probe

Its supervision of svb and release a review by May 1st remember folks there’s been a lot of discussion here about why we didn’t know what we now know and the Federal Reserve are planning a review of this situation that will be led by the Vice chair of supervision Michael Barr

And that they will publicly release that report uh by May 1st and guys I mean just not to get us off track here uh but I just want to bring you back into this conversation because this really brings up a lot of broader issues I think about

Why svb was allowed to have such a wide liquidity mismatch in a way that would not have been allowed if you were a Citigroup or JP Morgan or a Bank of America those systemically important Banks I know svb wasn’t in that category should they have been well I bet there’s

A little bit of a political debate going on right in terms of moves to expand certainly the oversight when it comes to regulator and and more of the banking sector if you will and there is that thinking right we talked with Matt Levine we should expect that at some

Point that this is going to be an expansion of regulatory oversight especially as we think about Shadow banking the private markets there’s a lot more that needs to be watched let’s not let’s not forget as well that uh the Dodd-Frank was actually watered down during uh the last couple of years so

Maybe svb would have fit that profile before but after it was watered down it Nova it basically fell out of that category hey Scarlet I know you’re going to get to uh some of the sector movers I just want to pan out the KBW Bank index

The bkx closing down 12 here on the day single worst day for that index going back to March 16th of 2020. and you see that reflected here in the sector performances too because financials big cap financials uh leading the way down uh for the S P 500 which closed off by

One tenth of one percent you see Banks and insurers at the very bottom here Banks losing seven percent on the day insurers losing 2.9 Diversified financials off by two percent so very much financials dragging the S P 500 lower on the upside Lori cavacino was just telling us that she’s somewhat

Encouraged by the rotation into some of the sectors like technology for instance a real estate and utilities Bond proxies both doing very well up at least one and a half percent Carol all right so let’s get to some of the individual gainers certainly in today’s session and what’s really

Interesting is yeah it’s not Banks folks it’s a lot of other names and there’s some special situations Illumina it is top in the S P 500 and the NASDAQ 100 soaring after a Wall Street Journal report that activist investor Carl Icahn plans to nominate three people to that company’s board

Um and so we are seeing some movements certainly that name was up almost 17 percent in today’s session let’s also go to Siegen uh you know this was another big one special situation Pfizer buying the cancer drug maker for 43 billion dollars so no surprise to see a pop in

That Target up almost 15 percent Siegen and moderna also atop uh the indices when it comes to movement to the upside uh cow and upgrading the biotech company to outperform for Market reform raising the price Target on that name to 180 from 150 so that stock moderna up almost

Seven percent closing at 147 almost 148 uh in today’s session Katie and if if you look at the decliners I mean got to talk about the banks today because that pain was really widespread as we think about the contagion at least from a Market’s perspective of svb so let’s

Look at First Republic Bank of course it’s another Regional Bank it said on Sunday that it had about 70 billion dollars in unused liquidity to fund its operations uh but even still I mean you can see the shares down by the most on record I also want to talk about key

Core it’s another Regional lender also in The Hurt Locker shares finished about 27 percent lower so that is the worst decline since October 2008 and Schwab of course it’s a brokerage firm it also owns a bank it’s said that it has ample liquidity that did see seem like it

Soothed investors somewhat shares have been down some were over 20 percent finished about 11 and a half percent lower all right let’s get a quick check at yields here because what less than a week ago guys we had a two-year yield above five percent right now it is below

Four percent and the drop today 56 basis points we haven’t seen a drop on the 2 your yield on a basis point level like this going back to October of 2008 if you can believe it one of the most amazing days that we’ve seen across Equity markets and of course in the

Yield space as well and now we go back to that breaking news that we just got the Federal Reserve launching an internal review of its supervision and regulation of Silicon Valley Bank after that bank’s failure Bloomberg International economics and policy correspondent Michael McKee joining us right now to talk a little bit more

About this Mike what do we know well the FED is uh uh adopting what the vice chair for supervision Michael Barr calls uh humility and he said they were conduct a careful and thorough review of how they supervised and regulated Silicon Valley Bank there’s been a lot of critics over the weekend suggesting

That uh the problems with the bank were sort of hiding in plain sight and they should have been recognized by Regulators so the fed’s going to take a look at it and find out where they went wrong they say they will publicly release the study by

May 1st so it’s it’s going to be fairly quick uh one senior beneficial uh today said to me uh the banking system may be good but there are always going to be bad bags uh badly run Banks so there is definitely a reason to look at their supervisory practices and see how they

Can fix them Mike this is right what or one of the things that the FED does but how do you think about this and then of course that upcoming fed meeting on March 22nd how do you kind of put it together well I think this goes beyond that fed

Meeting what will determine what the FED does is how we get through the next 10 days in terms of the markets and so far so good some banks struggling today obviously but overall the markets generally reacting positively to the bailout plan and then what the CPI looks

Like tomorrow and to a lesser extent PPI on Wednesday if it does look like there is progress still being made on inflation and the FED is okay with the way markets are going uh then it’s a tough call but if there’s a jump in inflation that that is probably going to

Lean towards still doing 25 basis points right right that’s a separate battle that the FED has to fight which I guess goes to the idea that the FED does many things we talk about it in terms of its monetary policy setting role but uh of course it is a regulator to the banks

Give us an idea of the structure of the central bank is there a Chinese wall between a supervisory role and a monetary policy setting role here it’s not a Chinese wall it’s two different divisions of the bank but Michael Barr the vice chairman for supervision Bridges the two and it’s

Always been done even before we had an official Vice chair for supervision coming out of the Dodd-Frank regulations uh we had uh people uh we had a member of the FED board who oversaw the supervisory roles that was Dan Carrillo before we had the uh Leo Brainerd in

That role so uh you do have uh a mixture of the of both uh the FED also always has a banker on its uh board uh right now that’s Mickey Bowman who was a Kansas banker and uh worked in Bank supervision so there’s a lot of uh

Overlap there all right uh Michael McKay they’re helping us break this news here at the FED uh officially announcing the probe of what happened with svb uh and getting to this idea here uh that they will release that report by uh May uh first guys yeah I think it’s interesting right uh

And I think at this point you know we’re seeing all the Regulators we certainly saw it over the weekend that you know jumping on this trying to get the transparency out there to investors into the marketplace to hopefully calm things and hopefully be a much more informed

Market going forward and uh this is certainly what we’re grappling in and that’s certainly the environment and we should point out this still isn’t over there’s another headline crossing the wire that’s attributed to the Wall Street Journal that there will be another auction uh with regards to the

FDIC trying to offload some of these assets uh with regards to svb again that’s attributable to the Wall Street Journal all right certainly something and an ongoing story as we all know and continuing to track all right guys that’s a wrap a lot going on on this Monday our cross-platform coverage on

Radio TV on YouTube and Bloomberg Originals beyond the bell we will see you again same time same place tomorrow

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