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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtis and I'm Doug Krisner. Here are the

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Speaker 2: stories we're following today.

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Speaker 1: Well, the US intelligence community and the White House are

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Speaker 1: making an urgent plea for a concerted effort to fight

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Speaker 1: China cyber crime. At Baxter has the story and more

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Speaker 1: from San Francisco. Ed.

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Speaker 3: Yeah, that's exactly right, Brian. FBI Director Christopher Ray issuing

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Speaker 3: a warning before our a House Select Committee on China today,

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Speaker 3: saying national state cyber crime is the defining threat of

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Speaker 3: our generation.

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Speaker 4: If you took every single one of the FBI cyber

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Speaker 4: agents and intelligence analysts and focused them exclusively on the

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Speaker 4: China threat, China's hackers would still outnumber FBI cyber personnel

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Speaker 4: by at least fifty to one.

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Speaker 3: Now, Ray says more funding, more support, more understanding of

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Speaker 3: how deep the threat is. He says it is going

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Speaker 3: to not only harm government, but business and the economy.

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Speaker 3: He says more people needed. Meanwhile, the Justice Department has

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Speaker 3: charged four Chinese nation with smuggling American electronics to supply

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Speaker 3: Iranian weapons production. The US is now saying it will

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Speaker 3: carry out targeted attacks against Iranian proxies covering several days

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Speaker 3: NSC spokesman John Kirby.

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Speaker 5: We believe that the attack in Jordan was planned, resource

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Speaker 5: and facilitated by an umbrella group called the Islamic Resistance

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Speaker 5: in Iraq, which contains multiple groups including Katab, HESBLA.

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Speaker 3: And Iran is hardening its position, saying it will hit

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Speaker 3: back at any US strike. Bloomberg Middle East editor Patrick

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Speaker 3: Syke says Tehran's talking tougher then.

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Speaker 6: We had Biden ever nights saying that they've made a

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Speaker 6: decision on how to respond, and since then in Iran

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Speaker 6: there's been a change of tone, promising a decisive response

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Speaker 6: to any attacks on its territory, interests or citizens abroad.

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Speaker 3: Now the White House is intimating the next few days

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Speaker 3: for its attacks. Heads of the country social media companies

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Speaker 3: in front of a Senate Judiciary committee today metas CEO

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Speaker 3: Mark Zuckerberg getting a well tongue lashing from Senator Marsha Blackburn.

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Speaker 7: It appears that you're trying to be the premier sex trafficking.

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Speaker 8: That's that's ridiculous.

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Speaker 7: No, it is not ridiculous.

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Speaker 9: You want to turn around and tell.

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Speaker 7: These people platforms a week, why don't you.

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Speaker 1: Take it down?

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Speaker 7: We are here discussing to work with us.

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Speaker 2: No, you're not, you are not.

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Speaker 3: Zuckerberg did offer an unscripted apology to the families of

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Speaker 3: victims of sexual exploitation of the platform, saying I am

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Speaker 3: sorry for everything you have gone through. Meanwhile, TikTok will

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Speaker 3: pledge two billion dollars this year on protecting children and

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Speaker 3: other viewers on its service. House speaker Mike Johnson has

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Speaker 3: given its first floor speech on the crisis at the

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Speaker 3: US border with Mexico. This comes as a first article

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Speaker 3: of impeachment against DHS Secretary Alejandro Marcus has been drawn up.

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Speaker 7: He's handicapping law enforcement. He's limiting their ability to catch

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Speaker 7: narcotics like Finnel.

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Speaker 3: He says, the House will move swiftly through the process.

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Speaker 3: We'll have a tough time in the Senate getting a conviction.

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Speaker 8: Though.

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Speaker 3: President Biden continues to trail former President Donald Trump in

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Speaker 3: each of seven swing states and the latest Bloomberg Moot

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Speaker 3: News Morning Consult poll. The survey shows Biden is lagging

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Speaker 3: Trump forty two to forty eight percent across those states

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Speaker 3: in a head to head matchup, and also, very interestingly,

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Speaker 3: it showed that if Trump is convicted of any of

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Speaker 3: the crimes ninety one. What is it against him? Now?

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Speaker 3: Half of the swing state more voters more fifty three

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Speaker 3: percent say they would not vote for him. Fifty five

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Speaker 3: percent said they would not if he goes to prison.

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Speaker 3: Global News twenty four hours a day and whenever you

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Speaker 3: want it with Bloomberg News now in San Francisco. I'm

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Speaker 3: Ed Baxter. This is Bloomberg all.

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Speaker 1: Right, Brian, thanks very much the time six and a

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Speaker 1: half minutes past the hour, Brian Curtis and Doug Christner.

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Speaker 1: We wanted to drill down a little bit more for

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Speaker 1: you here on the Federal Reserve and what happened today

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Speaker 1: and also get the market response. In a few moments

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Speaker 1: we will be speaking with Jersey of Bloomberg. But let's

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Speaker 1: see what they did. Fed policy makers. They once again

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Speaker 1: held the benchmark US interest rates steady. Now the Fed

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Speaker 1: has been on hold since June, and it signaled openness

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Speaker 1: to cutting rates, although just not right away. Powell himself,

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Speaker 1: the chair, was reluctant to give a timeframe for a

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Speaker 1: potential rate cut.

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Speaker 7: We want to see more good data. It's not that

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Speaker 7: we're looking for better data, so we're looking at continuation

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Speaker 7: of the good data that we've been seeing, and a

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Speaker 7: good example is inflation. So we have six months of

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Speaker 7: good inflation data. The question really is that's six months

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Speaker 7: of good inflation data. Is it's sending us a true

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Speaker 7: signal that we are in fact on a path, sustainable

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Speaker 7: path down to two percent inflation.

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Speaker 1: That's the question that's fed share Jerome Powell. The decision

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Speaker 1: to leave rates unchanged was unanimous and the FOMC will

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Speaker 1: hold its next policy meeting March nineteenth and twentieth.

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Speaker 2: The other big story today in New York was the

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Speaker 2: story surrounding New York Community Bank Corp. The stock was

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Speaker 2: down over thirty seven percent today. NYCB reported a surprising

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Speaker 2: loss for the fourth quarter. This is a regional lender.

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Speaker 2: NYCB also reduced its dividend five cents. Here's the thing,

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Speaker 2: the strait was looking for kind of a maintaining of

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Speaker 2: the dividend at around seventeen cents, So that was also

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Speaker 2: a bit of a shock. Bloomberg Intelligence senior bank analyst

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Speaker 2: term and Chan tells us this was kind of a surprise.

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Speaker 2: Although NYCB is an outlier.

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Speaker 9: Pretty much across the board of their larger piers, everybody

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Speaker 9: was actually pretty sangle. In about twenty twenty four credit quality.

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Speaker 9: So this seems more of a New York community specific

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Speaker 9: issue of needing to shore up their balance sheet and

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Speaker 9: facing a blip on their credit quality that they need

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Speaker 9: to know and still some more confidence in the market.

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Speaker 2: That is Bloomberg's Herman Chin. Now, last year, NYCB purchased

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Speaker 2: deposits from the now defunct Signature Bank. That happened right

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Speaker 2: after Signature collapsed. Now NYCB is stockpiling cash. And one

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Speaker 2: of the things that was also surprising today we learned

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Speaker 2: that provision for loan losses surged to five hundred and

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Speaker 2: fifty two million. Needless to say, that came as a

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Speaker 2: bit of a shock to both analysts and shareholders.

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Speaker 1: Right well, Qualcomm gave a revenue forecast for the current

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Speaker 1: quarter that was in line with analyst estimates. The company

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Speaker 1: is projecting between eight point nine and nine point seven

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Speaker 1: billion dollars in sales for the fiscal second quarter. We

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Speaker 1: get some reaction here from John Vinn, analyst at key

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Speaker 1: Bunk Capital Markets.

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Speaker 8: You know, there's a little bit of consternation in the

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Speaker 8: supply chain about Apple demand. You know, I think we've

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Speaker 8: seen sell through get a little bit weaker in the

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Speaker 8: China market. We've seen get a little bit weaker in

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Speaker 8: the North American market, but we haven't seen major cuts

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Speaker 8: out of the supply chain at Apple. More broadly speaking.

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Speaker 1: John Vinn Qualcom is looking to decrease its dependence on

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Speaker 1: the phone market with ventures into automotive and PC chips,

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Speaker 1: but Qualcomm's earnings are still heavily influenced by smartphone demand,

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Speaker 1: particularly in China. Shares of Qualcom in late trading traded

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Speaker 1: down about a quarter of one percent. Well, let's get

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Speaker 1: to our guest now, and that is Bloomberg Intelligence Chief

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Speaker 1: interest rate strategist Ira Jersey. Ira. Sometimes the market reaction

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Speaker 1: is more interesting than the event itself, and we saw

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Speaker 1: a lot of selling today after Jerome Palace news conference.

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Speaker 1: It's funny because yesterday we were reporting that there was

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Speaker 1: only a one in four chance now that we would

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Speaker 1: see a rate cut in March, and so him more

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Speaker 1: or less taking it off the table doesn't seem like

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Speaker 1: it's such a huge surprise. Is this a a hedge

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Speaker 1: in the marketplace against maybe the Fed just being too

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Speaker 1: slow and that would that would hurt the economy.

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Speaker 10: Well, we have to be careful about the timing of

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Speaker 10: when we saw a lot of the market moves today,

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Speaker 10: particularly in the rates market. Certainly equities didn't like the

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Speaker 10: idea that maybe the Fed Reserve was going to go

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Speaker 10: a little bit slower than some equity investors had thought.

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Speaker 10: But in the bond market, when you look at what

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Speaker 10: happened in ten year bonds and in particular two year notes,

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Speaker 10: so that's the very front end of the curve, usually

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Speaker 10: more sensitive to interest rates set by the Federal Reserve,

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Speaker 10: those first started to rally, so prices went up and

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Speaker 10: yields went down, and that really started after the employment

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Speaker 10: costs index numbers came in a little bit better than anticipated.

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Speaker 10: And then it actually they actually did very little during

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Speaker 10: the Fed They actually went up and down, up and down,

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Speaker 10: up and down, but they basically finished the end of

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Speaker 10: the press conference right around where they were at two

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Speaker 10: o'clock when the statement came out. But then at the

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Speaker 10: very end of the day you had months end rebalancing,

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Speaker 10: and what you saw, I think then was stocks did

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Speaker 10: really well. This month's bonds kind of didn't do very

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Speaker 10: much at all, and so you had people selling stocks

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Speaker 10: to buy bonds, and you really saw that pretty massively.

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Speaker 10: Right around the four o'clock close.

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Speaker 2: There's so much that I want to talk about, but

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Speaker 2: one of the things that I want to throw into

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Speaker 2: the pile here is the details on the quarterly refunding.

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Speaker 2: Could that have had any impact, I could all in

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Speaker 2: terms of the dynamic that you're describing across the curve.

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Speaker 10: I if anything, I think it would have went the

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Speaker 10: other way. So that move was a little bit surprising.

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Speaker 10: So it's hard to disentangle these because the quarterly refunding announcement,

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Speaker 10: so the Treasury Department said it was going to issue

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Speaker 10: at least a bit more of two year notes and

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Speaker 10: five year notes than we thought they were going to issue.

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Speaker 10: So they're they're going to issue nine billion dollars more

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Speaker 10: this quarter of both of both two year notes and

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Speaker 10: five year notes, and they increased everything else because deficits

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Speaker 10: are still running very hot. So you would have thought

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Speaker 10: that with that announcement that the bond market would have

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Speaker 10: sold off, so again, higher yields, lower prices. You didn't

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Speaker 10: see that. You saw just the opposite because that data,

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Speaker 10: that announcement came out right at the same time as

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Speaker 10: the ECI data, and I think the market really focused

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Speaker 10: more on that employment cost index. You know that inflation

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Speaker 10: data is much more important to the market right now

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Speaker 10: than is the supply data.

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Speaker 1: The chair didn't really want to use the the phrase

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Speaker 1: soft landing, but when he was asked about it, I mean,

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Speaker 1: his picture of the economy is reasonably good. I mean,

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Speaker 1: i'd say it's very sanguine. And he said more importantly

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Speaker 1: that the Fed is not looking for growth to slow

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Speaker 1: or for jobs to be lost. That's not what they're targeting.

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Speaker 1: That's not what they want. They're simply looking at inflation

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Speaker 1: coming down and they're watching wages. And if you think

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Speaker 1: about it, given the choice, isn't that what investors would want?

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Speaker 10: Yes, well, they want the soft landing, So I think,

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Speaker 10: you know, j Powell was much more direct today than

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Speaker 10: he has been as to the path of rates right

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Speaker 10: saying that his base case is not that they're going

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Speaker 10: to cut in March. That's pretty unusual for any FED

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Speaker 10: chair to say, you know, and certainly Jay Powell hasn't

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Speaker 10: been as explicit as that in recent months. But at

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Speaker 10: the same time, you know, they are concerned that as

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Speaker 10: inflation comes down, they don't want to leave the target rate,

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Speaker 10: the FED funds rate too high for two long because

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Speaker 10: they're afraid that that might drive those other good things, right,

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Speaker 10: the proper profits, the employment and everything else, might drive

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Speaker 10: those down and cause of recession. So you know, it's

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Speaker 10: weird balancing act that they're trying to do. And he might

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Speaker 10: have sounded a little bit confusing about that, because you know,

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Speaker 10: they're trying to calibrate the market to the economy to

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Speaker 10: their policy, and it's been difficult for them to do that,

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Speaker 10: and that's often the case right around turn. So we

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Speaker 10: think that they're going to start cutting in May, and

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Speaker 10: then they might not cut every meeting after that, but

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Speaker 10: they're going to, you know, cut at least a little bit.

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Speaker 2: One of the things that was not in the FED

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Speaker 2: statement today that had been in the previous statement was

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Speaker 2: the fact that the US banking system is sound and resilient,

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Speaker 2: and maybe a little ironic that this occurred on a

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Speaker 2: day when we're talking about the New York Community Bank Corp.

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Speaker 2: And a real build up in lone loss provisions all

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Speaker 2: the way up to five hundred and fifty two million dollars.

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Speaker 2: A lot of this is tied to office space, commercial

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Speaker 2: real estate. Is this a canary in the coal mine?

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Speaker 2: Should we be concerned about this as it applies to

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Speaker 2: maybe a few other regional banks or is this an

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Speaker 2: isolated case on the part of New York Community Bank Corp.

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Speaker 10: Do you think, well, I would defer to my colleagues

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Speaker 10: who cover the banking sector. But my thought has been

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Speaker 10: since last March when we had the banking hiccup with

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Speaker 10: SVB and Signature, is that in a way, I feel

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Speaker 10: like a lot of what's going on right now in

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Speaker 10: the regional banks and the smaller banks is more similar

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Speaker 10: to the savings and loan crisis that we had in

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Speaker 10: the late eighties and early nineties, And so there will

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Speaker 10: be issues that will crop up here, and they are

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Speaker 10: for any variety of reasons. You'll notice that when you

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Speaker 10: have New York Community Bank or not a small bank,

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Speaker 10: but at the same time not one of the globally

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Speaker 10: systemic financial institutions, which have so much equity capital right

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Speaker 10: now and they have to hold so much and not

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Speaker 10: take nearly as much risk as they were allowed to

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Speaker 10: prior to the global financial crisis in two thousand and

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Speaker 10: seven to two thousand and nine. They So I do

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Speaker 10: think that these issues will in regional banks will prop

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Speaker 10: up now and again, you know, and it might be

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Speaker 10: a fact of life, and you know, so I can't

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Speaker 10: say if this is it's certainly not systemic, right, not

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Speaker 10: in the way that you know City Group was or

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Speaker 10: Bear Stearns was back a decade ago. But it does matter, right,

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Speaker 10: and it is something that's going to certainly affect market

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Speaker 10: psychology if nothing else.

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Speaker 1: I also found it interesting that Jerome Powell was not

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Speaker 1: that concerned about inflation turning higher. He said he was

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Speaker 1: much more concerned that inflation would stabilize at too high

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Speaker 1: a levels in your own analysis, do you see that

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Speaker 1: as a quite reasonable possibility.

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Speaker 10: Yeah, I don't. You know, when we look at when

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Speaker 10: we look at the data, what we see, and j.

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Speaker 10: Powell alluded to this today as well, is that goods

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Speaker 10: prices have been coming down, but the services sector, even

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Speaker 10: services excluding housing, are still running at a reasonably high

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Speaker 10: pace and are going to keep inflation a bit higher

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Speaker 10: than maybe some would like to see. And certainly it's

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Speaker 10: going to make it hard for inflation that come down

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Speaker 10: to two percent. You know, if we go back even

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Speaker 10: to the mid twenty tens, and you go back to

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Speaker 10: twenty fourteen, fifteen sixteen, it turns out services inflation was

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Speaker 10: running at three percent, but goods prices were falling, So

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Speaker 10: that's how you wound up with the PC deflator with

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Speaker 10: a two handle, So you know whether or not that

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Speaker 10: can be maintained. I think will be very important to

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Speaker 10: the FEDS read on monetary policy and what it's going

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Speaker 10: to do going forward. Either way, I do think that

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Speaker 10: the Fed is going to cut right. I think the

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Speaker 10: big question that the market is going to continue to

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Speaker 10: have to ask itself and probably reprice for, because I

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Speaker 10: think it's miss priced right now in terms of how

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Speaker 10: fast it's going to cut is firstly, is the pace

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Speaker 10: of those cuts? And then secondly, are they going to

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Speaker 10: actually cut to three and a quarter percent like they

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Speaker 10: suggest that they will in twenty twenty five or will

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Speaker 10: they have to cut more or less based on the

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Speaker 10: path of the economy.

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