My top 10 things to watch Monday, March 13
1. Bank of the First Republic (FRC) down 60% early Monday, major banking stocks fell in the open. The global market opens lower, the morning after regulators took extraordinary steps to protect depositors from the bankruptcy of Silicon Valley Bank, owned by SVB Financial (SIVB), and Signature Bank (SBNY).
2. The regulators’ action is clamping down on systemic risk from banks (a result I pushed ahead of Sunday night’s announcement) that had deposit risk and duration risk in bond portfolios. Money leaves stocks and accumulates in bonds and depresses yields. The Fed’s interest rate hike at the March meeting may be on hold.
Sign up for my Top 10 Morning Thoughts on the Marketplace Email Newsletter for free
3. Will all banks be worth less until we eliminate the troubled ones? Probably not, because the Fed has funding for all the banks that made the mistake of being in the wrong place on the yield curve. This means that they took on too much duration risk when the Fed tightened. Bond prices move opposite to yields.
4. The First Republic lost a lot of ground as it needed special help to prevent a race from destroying it. JP Morgan (JPM) helped save this one. The FRC sees a large deposit outflow due to the huge mix of deposits above the FDIC-assured $250,000 level; and because they, too, lent against shares that had not yet been listed on the stock exchange.
5. Citi Upgrades Charles Schwab (SCHW) to buy from breakeven (hold) but lower price target to $75 per share from $83. Believes that sorting of species is in place. I question that as they apparently have more duration risk than others and may need some help from the Fed. Bank of America cuts SCHW price target to $60.
6. JPMorgan and its fortress balance sheet emerge as a winner in deposits fleeing smaller banks, Wells Fargo analysts say. Overweight JPM Upgrade from Equal Weight (Pending Purchase). Raises price target to $155 per share from $148.
7. Even though depositors are now covered, they still see a pullback from smaller banks anyway. JPMorgan shares, along with other major banks such as the Club’s Wells Fargo (WFC) and Morgan Stanley (MS), are also driven down.
8. Wells Fargo analysts upgrade Club holding Eli Lily (LLY) to overweight at equal weight (purchase pending). Price target increased to $375 per share from $360. Decommissioning of wells Merck (MRK) to equal the weight of overweight (retain from purchase). PT cut at $115 from $120.
9. Metaplatforms (META) envisioning huge cost savings, possibly up to $1.1 billion, with another 13% reduction in staff.
ten. Wolfe says he feels less safe and You’re here (TSLA) is already cutting prices, so jumps to peer performance from outperformance (hold to buy).
(Jim Cramer’s Charitable Trust is long WFC, LLY, MS, META. See here for a complete stock list.)
As a CNBC Investing Club subscriber with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.