My top 10 things to watch Tuesday, March 14
1. The Dow, the S&P 500 and the Nasdaq set for higher open after February retail inflation data comes in as expected and banking concerns recede. Consumer price index: up 0.4% month over month and up 6% year over year. Ex food and energy slightly cooler. Shelter costs, which make up about a third of the index's weighting, jumped 0.8%. We know that's hotter than what's actually happening in housing.
2. Why is it so hard to find a bottom? I question the FDIC's ability in conducting a real SVB auction. The Silicon Valley Bank auction holds the ability to get some price discovery of a regional bank with a bad mismatch of deposits and held-to-maturities fixed-income bought at the generational low of yields.
3. Most bank failures are about a lack of equity. This one is about a lack of sticky deposits and the ease one can journal money to a major such as JPMorgan (JPM). Our banks Wells Fargo (WFC) and Morgan Stanley (MS) are bouncing early Tuesday.
4. Regionals, too, First Republic (FRC) up nearly 50% ahead of the open after plunging in recent days. Executive chairman Jim Herbert tells me the bank was not seeing big outflows; operating as usual. First Republic also announced Sunday it received additional liquidity from JPMorgan and the Fed.
5. Was the Charles Schwab (SCHW) deposit base understated by its large cash business that is very sticky? Schwab now "significantly de-risked," JPMorgan analysts say. SCHW jumps 12% after closing 11.5% lower.
6. We have two doctrines crossing: The need for a solvent banking system and a need to have less concentration with still-strong rules. The only banks that know how to bid on other banks are already too big to buy them, the rest are novices.
7. Signature Bank, in many ways, was the scarier closing. Didn't seem to be in trouble like SVB. But it had a huge concentration in crypto and Treasury is very worried about bailing out crypto. Coinbase (COIN) had $240 million with Signature. That was considered to be a flight risk. Crypto is mocking Fed's efforts.
8. Club holding Honeywell (HON) changing of the guard. CEO Darius Adamczyk moves to executive chairman in June. Vimal Kapur, a 34-year Honeywell veteran, picked as new CEO. Kapur ran sustainability and digitalization activities. The company has made sustainable aviation fuel a reality. Half of business is to cut greenhouse gases. Under Adamczyk, $88 billion market cap to $145 billion.
9. Microsoft (MSFT), a backer of OpenAI's ChatGPT, publishes two papers that showed you need THOUSANDS of GPUs (graphics processing units) from Nvidia (NVDA) to make generative artificial intelligence. Both are Club holding, and they are well-positioned in AI.
10. TD Cowen initiates coverage of Club holding Estee Lauder (EL) with an outperform (buy) rating. $280-per-share price target, nearly 20% higher than Monday's close. Analysts cite iconic brand portfolio. We bought more shares Monday, along with Palo Alto Networks (PANW) and Pioneer Natural Resources (PXD).
(Jim Cramer's Charitable Trust is long WFC, MS, HON, MSFT, NVDA, EL, PANW, PXD. See here for a full list of the stocks.)
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