>> welcome. i am john holland with the first word news. a developing story in nashville to tell you about. according to multilevel -- multiple reports, at least three children and two adults were killed by an active shooter. we will bring more details as it becomes available. ukraine is demanding a meeting of the u.s. counsel after vladimir putin's announcement on nuclear weapons. russia could veto any resolution or action that is proposed. netanyahu has won support from a key component to delay the weakening of the supreme court. that after the main trade union and thousands protested in the streets. it has sharply cited both israeli -- it has sharply

incited is really -- they include the special counsel investigation into classified materials found a trump's home, as well as his role in the january 6 attack at the u.s. capitol. the district attorney in fulton county george is weighing whether trump try to change the results in the state. lisa m: --global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ >> welcome to bloomberg markets.

let's get ticking here on the markets. we are seeing a little uplift on the s&p. we are off the highs of the session. nasdaq rolling over a bit. the nasdaq 100 was up 20% from its december 2022 low. but it could not hold onto that. one possible reason is what is happening with the two year yield, now up a whopping 22 basis points. in alex closer to pricing in a rate hike when it comes to may. what is holding up the overall indices is the kbw bank index. top performers in s&p up by 2.5%. jon: it's interesting when we look to technology. some stocks cooling off. need a compelling story to get investors excited today. some analyst commentary surrounding roku, which we were covering when it came to the deposits at silicon valley bank, getting a vote of confidence from wall street based on analyst commentary. while bookings have been pretty strong, the cost realities are raising profit margin pressure.

there's also a big question about what happens if banks start to pull back on lending. a cautious note on caterpillar. it is up right now, but if you see less commercial real estate activity, does that mean less demand for caterpillar equipment? to your point, there is general enthusiasm within the banking sector, whether it is the regionals referenced or a component like jp morgan, which is up 3%. alix: and oil is up big, too. let's get to the banking sector. first citizens agreeing to buy silicon valley bank. joining us now from san francisco is ed ludlow. the first thing i thought of is, what it does a bank on the east coast know about doing banking in silicon valley? what are people saying on the ground? ed: first wall, look at the cell reaction.

look at the history of this bank first. it has some experience dealing with troubled assets and banks. that is the first thing. at this way in silicon valley and san francisco, that's what a lot of inter-capitalists wanted. they wanted svb to be reincarnated. that is why the numbers are so important. what you actually dig into his first citizens buying 72 billion dollars of svb's assets, with a discount of $16.5 million. that still leaves $90 billion in the hands of the fbi see. and a $20 billion cost to that insurance fund. it is not a straightforward transaction, but it has calmed a lot of nerds -- nerves out this way. jon: how would you compare the silicon valley reaction with wall street? ed: this creates the 15th largest bank in the u.s., with $200 million of assets on its

balance sheet. if you look at the sell side reaction, there is a great description. they basically say this takes all the boxes from an m&a perspective, the accretive benefit this will have to the broader bank. again, go back to how this bank has been able to operate, managing troubled banks or assets. most sell side is positive, not just because of a kick in the shares this has induced, but because of what they think this will look like. alix: what did not sell? what are regulators in the government stuck with at this point? ed: it's interesting. the data we have been tracking out here is where deposits flow to. quite a lot of it went to j.p. morgan chase. a lot of it went to startups like mercury and brett. the conclusion that one draws from all of that is that the

regulators and the government did not want even bigger banks. we say high up in the bloomberg story that this creates one of the top 15 u.s. banks. can you imagine what it would look like if j.p. morgan had come in, for example? and what the readthrough might be for first republic. it seems like we did not once we did not want a much bigger big bank, if that makes sense. jon: helpful context. ed, thanks so much. ed ludlow joining us as we continue to track the story. let's get some more insight on the state of the banking sector. bob, you heard some of what ed was saying there. what is your own take? bob: i should note today that my views are personal. i think it was a great deal for shareholders.

obviously, the market liked it. what i would add is that the 20% discount on the loans gives shareholders a lot of confidence that they can deliver good quality assets. it was an asset deal instead of a share purchase deal, so they are able to avoid any potential legal liability that would come with buying shares. obviously, they are not going to own the securities, so they will not be sitting down with a lot of low yielding assets. there will be a question or two, i am sure, about culture and being a long way from the west coast. on the other hand, they have experience on merging troubled banks and they are well trusted by the fbi see. i think it is a great deal. jon: given that you have so many regional banks, and we should remind people that you know extensively the u.s. banking sector, the canadian banking sector, where it is a lot more concentrated. the king at the reaction from everyone involved in this deal, do you see more consolidation as

inevitable for the banking landscape? bob: maybe it is a little glib to say this, but smaller regional banks have been a bit of an endangered species for the last four years. in 1980, there were 14,000 banks in the united states, per fbi see records. by 2000, there were 8000. today, there is a little over 4000. banking is a tough business. if you are not diversified either byproducts or geography, if you cannot invest in systems the way may be some of your customers would like you too i would expect there will be ongoing consolidation and the strongest will survive. alix: michael bar, the fed vice chair will be testifying tomorrow to congress to he says

the banking system is sound and resilient. to be sound and resilient, do you think it is going to need some serious government backstop? bob: what is new from 2008 and 2009 were two big surprises. firstly, when the news of svb first broke, i saw spreadsheets of insured versus uninsured posits by bank. they were available to anyone who is interested, either on the telephone or through emails. the market knew almost instantly who had the most uninsured deposits versus insured. that was shocking and i never saw that before. secondly, the impact of social media, we have heard a lot about this over the last couple of weeks. phone transfers of bank deposits has had an incredibly negative impact on uninsured deposits. i think regulators are really going to have to think through

how they respond to this new reality. they are not going to force people to hold deposits for one week or two weeks or anything like that. you still want to give depositors the ability to withdraw their money quickly if they want to do that. but i have a couple of suggestions i have been thinking about. i think the first is that the fed should formally recognize the primary role as the bedrock lender of last resort in the economy. they should do that in addition to price stability. if they don't do that, people will forget that the fed is standing hind these companies. i don't think we have to have one hunter percent fully assured deposits. but on the other hand, i think the fed's liquidity programs need to be redesigned, to ensure that banks can put virtually any instrument against the discount window, so they can always repay uninsured deposits if need be very quickly. i'll see that as an impossible task.

that sort of happened in 2008 and 2009. i think the fed has to really go back and think about the rapid stability of this system, to prevent contagion to other banks. jon: you made that interesting point with a click on your phone, deposits can move very quickly in 2023. but money can flow the equity world very quickly as well. it felt like in the aftermath of silicon valley bank, everybody was quickly looking at banks that had whatever level of uninsured deposits and were making quick decisions on that front. is that another consideration when it comes to speed and scale , and how it can be changed? bob: i don't think of it that way. but we have to be focused on is insured deposits and deposits generally. in the end, that is the real blood and oil of our economic system. whatever we should do, we should

focus first on protecting deposits and ensuring that our customers realize that there deposits are safe and there programs behind the banks through the lender of last resort to protect those deposits in an emergency. the fed, we know, is an incredibly effective way of doing that, as well as the new medium-term program. there are ways to do this so we can rapidly stabilize difficult situations, particularly in regional banks. alix: it was so great to get your perspective. noel archard --bob kelly, former bny mall and ceo. sentiment improves. relief may be on the way for banks. we will break down the likelihood of that next. this is bloomberg. ♪

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alix: this is bloomberg "markets." shares of first republic are up today. u.s. authorities are considering more support for banks. joining us now is hermann. pray to see you. the news was that we are going to see some new lending facility for banks to give it more time. for what? >> i think what the regulators and industry once to see is stabilizing first republic's deposits and actually regaining deposits that first republic lost to institutions. that would really shore up the confidence for the industry as a whole. jon: and since we were just talking about the situation was silicon valley bank, you have

been writing about acquirers of choice for the fbi see. are we going to increasingly be talking about which names, if things cannot be shored up in a way that everybody is satisfied, we turn to as the possible saviors here? herman: that's right. with first citizens, it has a long history of working with the fbi see during the financial crisis, acquiring banks that failed at that time. and even after the gmc. it has a long working history with regulators in the new york community. n.y.c. be, as you recall, was acquiring signatures for deposits as well. there is a running theme of thanks working with the fbi see and being more aggressive in acquiring failed banks that are happening currently. alix: do you think we will get a deal with this vpn first republic, and what might that look like?

herman: it does seem like the industry wants first republic to maintain their independence. you mentioned earlier the regulators potentially increasing some of the liquidity , like first republic, in terms of vehicles available to them. i point to the $30 billion deposits that the largest u.s. banks collectively have deposited into first republic. all those measures, to us, seems to point to the fact that the industry wants first republic to remain solvent and continue to work through their issues with positive outflow over time. jon: thanks as always. hermann chan of bloomberg intelligence. we continue to track what is happening in the banking world. we are putting it in context with the broader markets. stephen parker will talk about what is top of mind for him. this is bloomberg. ♪ ♪

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alix: this is bloomberg "markets." u.s. stocks rising, bouncing off recent lows. it yields popping higher. joining us now to make sense of it is stephen parker, of j.p. morgan private bank. i'm looking at 24 basis point move on the two year. i do not see the ripple through's in other areas of the market. why? stephen: we've gotten use to big moves in treasuries over the last couple of weeks. rates are moving higher despite the fact that there is not a big crisis. i think that has gone people spooked over the last couple of weeks. it has shaken confidence in the banking sector. that seems to be getting addressed, thanks to policymakers and the bank sector more broadly. even with the moving higher rates, i think people are breathing a sigh of relief.

jon: what about the fact that we have seen a decent chunk of cash making its way into tech stocks? what has been your observation area? stephen: i think there has been a lot of pessimism. people were positioned cautiously. last year was an incredibly difficult year for anything in the growth space, tech in particular. i think the outperformance you are seeing intact, the nasdaq up almost 20%, is a reflection that markets are telling you that interest rates have likely peaked in the fed is probably going to be easing by the end of the year. and we will probably be returning to a lower growth environment. alix: so, is growth a growth play or a safety play? stephen: i think for now it is a safety play. we think it is better to have a balanced approach in terms of allocations. last year, people got burned. they shifted to more cyclical

sectors paired we are seeing those sectors, whether it is financials or energy, underperforming. our base case is we will get a mild recession in the back half of this year. we have been pulling back on cyclical exposure and advocating a more balanced approach in equity portfolios. jon: let's dive into the bank stocks themselves. you see signs of confidence, seeing names rally, but broader concern seems to be based on some of those recessionary factors you cite, whether or not companies can deliver on the bottom line. when he thing of sectors where earnings might have to be revised, do the financials play into that in your opinion? stephen: i think you're going to see that. there is a big expectation that loan growth is going to slow. that earnings growth in the space is going to be under a bit of pressure, although some larger banks, or you are seeing some assets flowing, may be beneficiaries of that. i think that earnings expectations for the broad

market are still probably a little o high. they are not necessarily reflecting the recession that we expect. i think this is also been the most well telegraphed and anticipated recession in my career. investors are going to be a lot more focused on the earnings trajectory for next year rather than what we get for the back half of this year. alix: i guess we are all looking for a recession, but we don't know where the cracks are going to be. why not put your money in a money market fund and hang out a little bit? stephen: i think a lot of customers are doing that. there are pretty compelling yields that you can get today. the problem is that the upside can happen so quickly. we saw that in the fourth quarter last year. we think there is compelling opportunity in both traditional fixed income, as well as equities. we are taking a more balanced approach. if to think about the fact that there is a lot of pessimism in markets today. i haven't talked to anyone who is painting a really bullish case. fund managers are cautiously position, sitting on a lot of cash. if we do get that modest recession, finally get through that and accept it, and the fed

starts to ease, you could see a big pop in the back half of this year that i don't think anyone is prepared for. if you are sitting in money market funds, the time to put that money back to work is when things are really bad, and that is hard to do. jon: and when we pull up those two decade charts of missing the best days in the market, it starts to an upper or anyone going along in equities. stephen: absolutely. these rallies tend to be fairly concentrated and fairly fast. when you look at the set up today from a sentiment perspective, i think there could be a surprise upside toward the back half of this year. alix: really great to get your perspective. i also really love that bowtie. ask a lot. breaking news for you. the fbi see chairman is releasing prepared remarks for tuesday's hearing. it is probing management conduct at svb and signature bank failures. yeah, obviously, they're going to be doing that. the fdic's on the hook and may take some losses. our think this really points to the fact that this is just at the very start of being sussed

out. jon: and martin greenberg from the fbi see is saying that the probe and looking into these issues -- i will read the quote here that the fbi see has already commenced these investigations, but we will have to watch these headlines very closely. alix: it will be front and center tomorrow, when we have the hearings for two days. michael barr already releasing, saying that this banking system is very strong. i think the question becomes where the cracks come next. market real estate is on everyone's mind. shadow banking system and leverage cracks they are, what the pullback in critic implies for that space -- credit implies that space. jon: that will be seen in some banks. but there are some that will be beneficiaries from everything playing out right now. we will continue to watch that right now. as we talked about, the banks themselves have been broadly seeking gains today. the s&p up about 0.3%.

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>> happy monday afternoon. two hours to go before the close of the markets. i am katie greifeld. it feels like no collapse of a bank has us breathing a sigh of relief. >> the s&p 500 has been a pretty quiet day. we flipped into negative, now we are into positive. scarlet: bank stocks overall are higher. something to rejoice in given the last couple of weeks. nasdaq is in the red. i bring this up because the nasdaq 100 in turn a bull market last week. big tech stocks look like safe havens from all of those