WEBVTT - The Fed Holds, NYCB Plunges, Qualcomm Earnings

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Brian Curtis and I'm Doug Krisner. Here are the

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<v Speaker 2>stories we're following today.

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<v Speaker 1>Well, the US intelligence community and the White House are

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<v Speaker 1>making an urgent plea for a concerted effort to fight

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<v Speaker 1>China cyber crime. At Baxter has the story and more

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<v Speaker 1>from San Francisco. Ed.

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

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<v Speaker 3>a warning before our a House Select Committee on China today,

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<v Speaker 3>saying national state cyber crime is the defining threat of

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<v Speaker 3>our generation.

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<v Speaker 4>If you took every single one of the FBI cyber

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<v Speaker 4>agents and intelligence analysts and focused them exclusively on the

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<v Speaker 4>China threat, China's hackers would still outnumber FBI cyber personnel

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<v Speaker 4>by at least fifty to one.

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<v Speaker 3>Now, Ray says more funding, more support, more understanding of

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<v Speaker 3>how deep the threat is. He says it is going

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<v Speaker 3>to not only harm government, but business and the economy.

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<v Speaker 3>He says more people needed. Meanwhile, the Justice Department has

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<v Speaker 3>charged four Chinese nation with smuggling American electronics to supply

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<v Speaker 3>Iranian weapons production. The US is now saying it will

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<v Speaker 3>carry out targeted attacks against Iranian proxies covering several days

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<v Speaker 3>NSC spokesman John Kirby.

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<v Speaker 5>We believe that the attack in Jordan was planned, resource

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<v Speaker 5>and facilitated by an umbrella group called the Islamic Resistance

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<v Speaker 5>in Iraq, which contains multiple groups including Katab, HESBLA.

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<v Speaker 3>And Iran is hardening its position, saying it will hit

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<v Speaker 3>back at any US strike. Bloomberg Middle East editor Patrick

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<v Speaker 3>Syke says Tehran's talking tougher then.

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<v Speaker 6>We had Biden ever nights saying that they've made a

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<v Speaker 6>decision on how to respond, and since then in Iran

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<v Speaker 6>there's been a change of tone, promising a decisive response

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<v Speaker 6>to any attacks on its territory, interests or citizens abroad.

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<v Speaker 3>Now the White House is intimating the next few days

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<v Speaker 3>for its attacks. Heads of the country social media companies

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<v Speaker 3>in front of a Senate Judiciary committee today metas CEO

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<v Speaker 3>Mark Zuckerberg getting a well tongue lashing from Senator Marsha Blackburn.

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

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<v Speaker 8>That's that's ridiculous.

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<v Speaker 7>No, it is not ridiculous.

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<v Speaker 9>You want to turn around and tell.

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<v Speaker 7>These people platforms a week, why don't you.

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<v Speaker 1>Take it down?

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<v Speaker 7>We are here discussing to work with us.

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<v Speaker 2>No, you're not, you are not.

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<v Speaker 3>Zuckerberg did offer an unscripted apology to the families of

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<v Speaker 3>victims of sexual exploitation of the platform, saying I am

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<v Speaker 3>sorry for everything you have gone through. Meanwhile, TikTok will

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<v Speaker 3>pledge two billion dollars this year on protecting children and

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<v Speaker 3>other viewers on its service. House speaker Mike Johnson has

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<v Speaker 3>given its first floor speech on the crisis at the

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<v Speaker 3>US border with Mexico. This comes as a first article

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<v Speaker 3>of impeachment against DHS Secretary Alejandro Marcus has been drawn up.

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<v Speaker 7>He's handicapping law enforcement. He's limiting their ability to catch

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<v Speaker 7>narcotics like Finnel.

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<v Speaker 3>He says, the House will move swiftly through the process.

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<v Speaker 3>We'll have a tough time in the Senate getting a conviction.

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<v Speaker 8>Though.

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<v Speaker 3>President Biden continues to trail former President Donald Trump in

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<v Speaker 3>each of seven swing states and the latest Bloomberg Moot

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<v Speaker 3>News Morning Consult poll. The survey shows Biden is lagging

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<v Speaker 3>Trump forty two to forty eight percent across those states

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<v Speaker 3>in a head to head matchup, and also, very interestingly,

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<v Speaker 3>it showed that if Trump is convicted of any of

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<v Speaker 3>the crimes ninety one. What is it against him? Now?

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<v Speaker 3>Half of the swing state more voters more fifty three

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<v Speaker 3>percent say they would not vote for him. Fifty five

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<v Speaker 3>percent said they would not if he goes to prison.

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<v Speaker 3>Global News twenty four hours a day and whenever you

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<v Speaker 3>want it with Bloomberg News now in San Francisco. I'm

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<v Speaker 3>Ed Baxter. This is Bloomberg all.

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<v Speaker 1>Right, Brian, thanks very much the time six and a

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<v Speaker 1>half minutes past the hour, Brian Curtis and Doug Christner.

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<v Speaker 1>We wanted to drill down a little bit more for

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<v Speaker 1>you here on the Federal Reserve and what happened today

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<v Speaker 1>and also get the market response. In a few moments

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<v Speaker 1>we will be speaking with Jersey of Bloomberg. But let's

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<v Speaker 1>see what they did. Fed policy makers. They once again

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<v Speaker 1>held the benchmark US interest rates steady. Now the Fed

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<v Speaker 1>has been on hold since June, and it signaled openness

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<v Speaker 1>to cutting rates, although just not right away. Powell himself,

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<v Speaker 1>the chair, was reluctant to give a timeframe for a

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<v Speaker 1>potential rate cut.

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<v Speaker 7>We want to see more good data. It's not that

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<v Speaker 7>we're looking for better data, so we're looking at continuation

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<v Speaker 7>of the good data that we've been seeing, and a

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<v Speaker 7>good example is inflation. So we have six months of

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<v Speaker 7>good inflation data. The question really is that's six months

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<v Speaker 7>of good inflation data. Is it's sending us a true

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<v Speaker 7>signal that we are in fact on a path, sustainable

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<v Speaker 7>path down to two percent inflation.

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<v Speaker 1>That's the question that's fed share Jerome Powell. The decision

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<v Speaker 1>to leave rates unchanged was unanimous and the FOMC will

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<v Speaker 1>hold its next policy meeting March nineteenth and twentieth.

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<v Speaker 2>The other big story today in New York was the

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<v Speaker 2>story surrounding New York Community Bank Corp. The stock was

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<v Speaker 2>down over thirty seven percent today. NYCB reported a surprising

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<v Speaker 2>loss for the fourth quarter. This is a regional lender.

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

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<v Speaker 2>the strait was looking for kind of a maintaining of

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<v Speaker 2>the dividend at around seventeen cents, So that was also

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<v Speaker 2>a bit of a shock. Bloomberg Intelligence senior bank analyst

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<v Speaker 2>term and Chan tells us this was kind of a surprise.

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<v Speaker 2>Although NYCB is an outlier.

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<v Speaker 9>Pretty much across the board of their larger piers, everybody

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<v Speaker 9>was actually pretty sangle. In about twenty twenty four credit quality.

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<v Speaker 9>So this seems more of a New York community specific

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<v Speaker 9>issue of needing to shore up their balance sheet and

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<v Speaker 9>facing a blip on their credit quality that they need

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<v Speaker 9>to know and still some more confidence in the market.

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

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<v Speaker 2>deposits from the now defunct Signature Bank. That happened right

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<v Speaker 2>after Signature collapsed. Now NYCB is stockpiling cash. And one

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<v Speaker 2>of the things that was also surprising today we learned

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<v Speaker 2>that provision for loan losses surged to five hundred and

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<v Speaker 2>fifty two million. Needless to say, that came as a

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<v Speaker 2>bit of a shock to both analysts and shareholders.

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<v Speaker 1>Right well, Qualcomm gave a revenue forecast for the current

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<v Speaker 1>quarter that was in line with analyst estimates. The company

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<v Speaker 1>is projecting between eight point nine and nine point seven

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<v Speaker 1>billion dollars in sales for the fiscal second quarter. We

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<v Speaker 1>get some reaction here from John Vinn, analyst at key

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<v Speaker 1>Bunk Capital Markets.

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<v Speaker 8>You know, there's a little bit of consternation in the

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

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<v Speaker 8>seen sell through get a little bit weaker in the

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<v Speaker 8>China market. We've seen get a little bit weaker in

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<v Speaker 8>the North American market, but we haven't seen major cuts

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<v Speaker 8>out of the supply chain at Apple. More broadly speaking.

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<v Speaker 1>John Vinn Qualcom is looking to decrease its dependence on

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<v Speaker 1>the phone market with ventures into automotive and PC chips,

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<v Speaker 1>but Qualcomm's earnings are still heavily influenced by smartphone demand,

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<v Speaker 1>particularly in China. Shares of Qualcom in late trading traded

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

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<v Speaker 1>to our guest now, and that is Bloomberg Intelligence Chief

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<v Speaker 1>interest rate strategist Ira Jersey. Ira. Sometimes the market reaction

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<v Speaker 1>is more interesting than the event itself, and we saw

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<v Speaker 1>a lot of selling today after Jerome Palace news conference.

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<v Speaker 1>It's funny because yesterday we were reporting that there was

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<v Speaker 1>only a one in four chance now that we would

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<v Speaker 1>see a rate cut in March, and so him more

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<v Speaker 1>or less taking it off the table doesn't seem like

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<v Speaker 1>it's such a huge surprise. Is this a a hedge

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<v Speaker 1>in the marketplace against maybe the Fed just being too

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<v Speaker 1>slow and that would that would hurt the economy.

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<v Speaker 10>Well, we have to be careful about the timing of

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<v Speaker 10>when we saw a lot of the market moves today,

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<v Speaker 10>particularly in the rates market. Certainly equities didn't like the

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<v Speaker 10>idea that maybe the Fed Reserve was going to go

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<v Speaker 10>a little bit slower than some equity investors had thought.

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<v Speaker 10>But in the bond market, when you look at what

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<v Speaker 10>happened in ten year bonds and in particular two year notes,

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<v Speaker 10>so that's the very front end of the curve, usually

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<v Speaker 10>more sensitive to interest rates set by the Federal Reserve,

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<v Speaker 10>those first started to rally, so prices went up and

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<v Speaker 10>yields went down, and that really started after the employment

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<v Speaker 10>costs index numbers came in a little bit better than anticipated.

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<v Speaker 10>And then it actually they actually did very little during

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<v Speaker 10>the Fed They actually went up and down, up and down,

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<v Speaker 10>up and down, but they basically finished the end of

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<v Speaker 10>the press conference right around where they were at two

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<v Speaker 10>o'clock when the statement came out. But then at the

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<v Speaker 10>very end of the day you had months end rebalancing,

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<v Speaker 10>and what you saw, I think then was stocks did

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

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<v Speaker 10>much at all, and so you had people selling stocks

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<v Speaker 10>to buy bonds, and you really saw that pretty massively.

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<v Speaker 10>Right around the four o'clock close.

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<v Speaker 2>There's so much that I want to talk about, but

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<v Speaker 2>one of the things that I want to throw into

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<v Speaker 2>the pile here is the details on the quarterly refunding.

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<v Speaker 2>Could that have had any impact, I could all in

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<v Speaker 2>terms of the dynamic that you're describing across the curve.

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<v Speaker 10>I if anything, I think it would have went the

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<v Speaker 10>other way. So that move was a little bit surprising.

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

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<v Speaker 10>so the Treasury Department said it was going to issue

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<v Speaker 10>at least a bit more of two year notes and

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<v Speaker 10>five year notes than we thought they were going to issue.

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<v Speaker 10>So they're they're going to issue nine billion dollars more

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<v Speaker 10>this quarter of both of both two year notes and

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<v Speaker 10>five year notes, and they increased everything else because deficits

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<v Speaker 10>are still running very hot. So you would have thought

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<v Speaker 10>that with that announcement that the bond market would have

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

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<v Speaker 10>see that. You saw just the opposite because that data,

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<v Speaker 10>that announcement came out right at the same time as

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<v Speaker 10>the ECI data, and I think the market really focused

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<v Speaker 10>more on that employment cost index. You know that inflation

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<v Speaker 10>data is much more important to the market right now

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<v Speaker 10>than is the supply data.

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<v Speaker 1>The chair didn't really want to use the the phrase

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<v Speaker 1>soft landing, but when he was asked about it, I mean,

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<v Speaker 1>his picture of the economy is reasonably good. I mean,

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

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<v Speaker 1>that the Fed is not looking for growth to slow

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

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

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<v Speaker 1>coming down and they're watching wages. And if you think

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

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<v Speaker 10>Yes, well, they want the soft landing, So I think,

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<v Speaker 10>you know, j Powell was much more direct today than

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<v Speaker 10>he has been as to the path of rates right

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<v Speaker 10>saying that his base case is not that they're going

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<v Speaker 10>to cut in March. That's pretty unusual for any FED

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<v Speaker 10>chair to say, you know, and certainly Jay Powell hasn't

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<v Speaker 10>been as explicit as that in recent months. But at

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<v Speaker 10>the same time, you know, they are concerned that as

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

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<v Speaker 10>the FED funds rate too high for two long because

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<v Speaker 10>they're afraid that that might drive those other good things, right,

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<v Speaker 10>the proper profits, the employment and everything else, might drive

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

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

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<v Speaker 10>have sounded a little bit confusing about that, because you know,

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<v Speaker 10>they're trying to calibrate the market to the economy to

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

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<v Speaker 10>and that's often the case right around turn. So we

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<v Speaker 10>think that they're going to start cutting in May, and

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<v Speaker 10>then they might not cut every meeting after that, but

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

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<v Speaker 2>One of the things that was not in the FED

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<v Speaker 2>statement today that had been in the previous statement was

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<v Speaker 2>the fact that the US banking system is sound and resilient,

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<v Speaker 2>and maybe a little ironic that this occurred on a

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

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<v Speaker 2>And a real build up in lone loss provisions all

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<v Speaker 2>the way up to five hundred and fifty two million dollars.

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<v Speaker 2>A lot of this is tied to office space, commercial

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<v Speaker 2>real estate. Is this a canary in the coal mine?

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<v Speaker 2>Should we be concerned about this as it applies to

0:12:07.160 --> 0:12:09.400
<v Speaker 2>maybe a few other regional banks or is this an

0:12:09.480 --> 0:12:12.280
<v Speaker 2>isolated case on the part of New York Community Bank Corp.

0:12:12.360 --> 0:12:14.720
<v Speaker 10>Do you think, well, I would defer to my colleagues

0:12:14.760 --> 0:12:17.839
<v Speaker 10>who cover the banking sector. But my thought has been

0:12:17.960 --> 0:12:20.520
<v Speaker 10>since last March when we had the banking hiccup with

0:12:20.600 --> 0:12:25.000
<v Speaker 10>SVB and Signature, is that in a way, I feel

0:12:25.000 --> 0:12:27.800
<v Speaker 10>like a lot of what's going on right now in

0:12:27.840 --> 0:12:30.800
<v Speaker 10>the regional banks and the smaller banks is more similar

0:12:30.800 --> 0:12:32.480
<v Speaker 10>to the savings and loan crisis that we had in

0:12:32.480 --> 0:12:35.120
<v Speaker 10>the late eighties and early nineties, And so there will

0:12:35.160 --> 0:12:37.199
<v Speaker 10>be issues that will crop up here, and they are

0:12:37.240 --> 0:12:40.720
<v Speaker 10>for any variety of reasons. You'll notice that when you

0:12:40.760 --> 0:12:43.960
<v Speaker 10>have New York Community Bank or not a small bank,

0:12:44.000 --> 0:12:46.360
<v Speaker 10>but at the same time not one of the globally

0:12:46.400 --> 0:12:50.640
<v Speaker 10>systemic financial institutions, which have so much equity capital right

0:12:50.679 --> 0:12:52.400
<v Speaker 10>now and they have to hold so much and not

0:12:52.520 --> 0:12:55.480
<v Speaker 10>take nearly as much risk as they were allowed to

0:12:55.679 --> 0:12:58.439
<v Speaker 10>prior to the global financial crisis in two thousand and

0:12:58.480 --> 0:13:01.840
<v Speaker 10>seven to two thousand and nine. They So I do

0:13:01.880 --> 0:13:04.480
<v Speaker 10>think that these issues will in regional banks will prop

0:13:04.600 --> 0:13:08.280
<v Speaker 10>up now and again, you know, and it might be

0:13:08.320 --> 0:13:11.400
<v Speaker 10>a fact of life, and you know, so I can't

0:13:11.440 --> 0:13:13.720
<v Speaker 10>say if this is it's certainly not systemic, right, not

0:13:13.760 --> 0:13:16.080
<v Speaker 10>in the way that you know City Group was or

0:13:16.120 --> 0:13:20.920
<v Speaker 10>Bear Stearns was back a decade ago. But it does matter, right,

0:13:20.920 --> 0:13:23.400
<v Speaker 10>and it is something that's going to certainly affect market

0:13:23.440 --> 0:13:24.680
<v Speaker 10>psychology if nothing else.

0:13:25.800 --> 0:13:28.679
<v Speaker 1>I also found it interesting that Jerome Powell was not

0:13:28.720 --> 0:13:31.240
<v Speaker 1>that concerned about inflation turning higher. He said he was

0:13:31.320 --> 0:13:35.880
<v Speaker 1>much more concerned that inflation would stabilize at too high

0:13:35.920 --> 0:13:39.480
<v Speaker 1>a levels in your own analysis, do you see that

0:13:39.679 --> 0:13:44.520
<v Speaker 1>as a quite reasonable possibility.

0:13:42.880 --> 0:13:45.360
<v Speaker 10>Yeah, I don't. You know, when we look at when

0:13:45.440 --> 0:13:48.280
<v Speaker 10>we look at the data, what we see, and j.

0:13:48.440 --> 0:13:51.120
<v Speaker 10>Powell alluded to this today as well, is that goods

0:13:51.160 --> 0:13:53.760
<v Speaker 10>prices have been coming down, but the services sector, even

0:13:53.800 --> 0:13:57.679
<v Speaker 10>services excluding housing, are still running at a reasonably high

0:13:57.720 --> 0:14:01.360
<v Speaker 10>pace and are going to keep inflation a bit higher

0:14:01.800 --> 0:14:05.120
<v Speaker 10>than maybe some would like to see. And certainly it's

0:14:05.120 --> 0:14:07.120
<v Speaker 10>going to make it hard for inflation that come down

0:14:07.320 --> 0:14:09.520
<v Speaker 10>to two percent. You know, if we go back even

0:14:09.559 --> 0:14:11.679
<v Speaker 10>to the mid twenty tens, and you go back to

0:14:11.760 --> 0:14:15.319
<v Speaker 10>twenty fourteen, fifteen sixteen, it turns out services inflation was

0:14:15.400 --> 0:14:18.240
<v Speaker 10>running at three percent, but goods prices were falling, So

0:14:18.280 --> 0:14:22.600
<v Speaker 10>that's how you wound up with the PC deflator with

0:14:22.680 --> 0:14:25.800
<v Speaker 10>a two handle, So you know whether or not that

0:14:25.840 --> 0:14:28.160
<v Speaker 10>can be maintained. I think will be very important to

0:14:29.120 --> 0:14:31.640
<v Speaker 10>the FEDS read on monetary policy and what it's going

0:14:31.680 --> 0:14:34.200
<v Speaker 10>to do going forward. Either way, I do think that

0:14:34.240 --> 0:14:36.040
<v Speaker 10>the Fed is going to cut right. I think the

0:14:36.040 --> 0:14:38.640
<v Speaker 10>big question that the market is going to continue to

0:14:38.680 --> 0:14:41.640
<v Speaker 10>have to ask itself and probably reprice for, because I

0:14:41.640 --> 0:14:44.480
<v Speaker 10>think it's miss priced right now in terms of how

0:14:44.560 --> 0:14:48.360
<v Speaker 10>fast it's going to cut is firstly, is the pace

0:14:48.400 --> 0:14:50.680
<v Speaker 10>of those cuts? And then secondly, are they going to

0:14:50.720 --> 0:14:54.160
<v Speaker 10>actually cut to three and a quarter percent like they

0:14:54.200 --> 0:14:56.640
<v Speaker 10>suggest that they will in twenty twenty five or will

0:14:56.720 --> 0:14:58.680
<v Speaker 10>they have to cut more or less based on the

0:14:58.720 --> 0:14:59.800
<v Speaker 10>path of the economy.

0:15:01.160 --> 0:15:04.000
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