consideration. >> significant disinflationary environment. gold is the right trade. stay long. >> steve >> jpmorgan, i think you'll make money longer term. >> that's it for us. "the exchange" with kelly evans starts right now thanks for watching. ♪ ♪ thank you very much. hi, everybody. i'm kelly evans. we could certainly use some luck to get the markets in the green. so far, the government's efforts to shore up banks haven't stopped this crisis in its tracks yet shares of first republic are back in the red today. almost back to the lows they hit yesterday morning before the coordinated bank rescue program was announced. down 26% today, to around $25 a share. they're don just about 70% here on the week. that's led the broader markets back into the red today, even the nasdaq, as you can see, has been the outperformer. the dow is off the lows, but

still down 350 the f.a.n.g. plus index is up 9%, that's for the week, making it the best week in about a year, as you can see here. today, you can see the pressure even coming on this with a 1% decline. overall, this one is still benefiting bitcoin as well, up 34% in just the past week. 32% as we are off the highs. what is the culprit here well, it could be the fed's balance sheet. take a look at what we just learned in the past week about this jump here behind me the fed balance sheet has gone to basically having the shrinkage we saw from quantitative tightening. here is the period where we saw the expansion after the financial crisis here is the big expansion during covid. we hit that peak at the top of the curve. we were starting to pull back. in one week alone, we just did half of that pullback. you can see the reaction here with the market that responded well to liquidity. so is the tightening over? will the fed even pause next

week my next guest doesn't think so let's bring in david zerbos, a chief market strategist. great to see you today, dave let's just start on that very pointed question do you think they're going to halt or not? >> i don't, kelly. i think they're -- as we have been talking with our clients, i think they're going to try to compartmentalize financial instability risks with balance sheet tools, dealing with balance sheet tools, like the discount window and the very generous terms they put forward on the discount window and then leave traditional monetary policy, interest rates and the general process of qt, leave that for the dual mandate. they are still very much dealing with the risks, so i think you're going to see this very much go along the lines of what happened in the uk with the ldi crisis, bank of england solved

the problem with a funding facility-like structure. and then in the not too distant future, was still resuming its monetary policy goals on inflation fighting via tightening or whatever was necessary. >> dave, let me ask you the following. so inflation peaked at 9% last june it's come down by a third. we have an economy that's clearly slowing, will do so even more now the job market is going to weaken after this all comes through. the wage growth is going to slow, and it's quite possible that another third of that inflation is going to come out in the next 12 months. why can't they just wait and see here, instead of pressing the pedal when they're seeing the credit system on the brink of seizing up as a result >> so i think it's -- look, it's a valid argument i think you can have that argument and say let's wait, let's take some risks with inflation, even though it's still running at 6% on the

headline cpi, which is 400 basis points above target. but, again, i think you've got this ability now with the balance sheet to kind of compartmentalize financial instability versus the macro side of the equation i think they're going to do that i think you can make that argument, kelly. it's not unreasonable. in 1998, for example, when there was a lot of financial instability, the fed cut three times. they look back and say, i wish we hadn't done that. the nasdaq tripled in the next 18 months and they had a huge bh bubble on their hands. i think we got to 6.5% by april of 2000, and then a crash was upon us. so i think you've got to be careful here you've got to think about what the risks are. you're absolutely right. we are nearing the end of this tightening we were probably 25 to 75 basis points away from where we needed

to stop, i think given what's going on. but, again, do you want to stop because of this or do you want to kind of just do, you know, what you set out to do on the inflation fight, and not get into this -- this hairy debate that i think the fed will get into if they slow for financial stability reasons, which is, are they taking kind of 1970s type risks. >> yeah. >> that's the problem. >> we need to give you two important shoutouts before i ask you the next question. number one, you were right, that the fed put is no longer in the market, and this will really put that to the test, the idea that the fed is going to ease when the market seizes up, and so far we're not seeing that. the second thing, you were so close. i feel like if i had just taken your point and pushed it a little bit further, i mean, we talked about this. you wrote this amazing note about a month ago saying why haven't there been more blowups? and you pointed out how much of the country is experiencing

losses you pointed out that it was in the banking system, and if we had only just connected the dots a little bit more. you said look, the reason why they haven't blown up is they transferred that risk to the fed. ironically, that is now the answer to the chris thas has come to a head here. so, again, well done the question i want to ask, though, does the fed's rescue plan here amount to monetary policy does the balance sheet expansion equal liquidity injection? is it undoing the effects of tightening by itself, or are these considered separate operations >> that's a great question, kelly. i think the answer is yes. this is a balance sheet expansion. and it undoes about half of the quantitative tightening we have been embarking on for the last eight months now and it's important it also is going to against what

was no doubt a financial conditions tightening that's taking place, because the regional banks are all going to be pulling back for lending and have a difficult time engaging in the same kind of behavior that they were engaging in before when it comes to making loans and engaging in any sort of financial activity. so we know there is a problem in the financial system this is going to offset that where that lines up in kind of the net-net, is this a tightening or an easing? i don't know obviously, rates have come down dramatically at the front end. so that will be a boost. against that, you have equities weaker, credit spread is wider i don't know the answer, is it tighter or easier, but i think the expansion of the balance sheet is, by any other means or name, is an easing by the fed, particularly on financial conditions >> yeah. >> that's important. i think the other point, kelly,

this could go further, these programs are open ended. there's nothing that suggests that $300 billion couldn't turn into 4, 5, 6 or even a trillion. >> exactly let me ask this, what does it mean that the fed can't exit you know, we have -- they tried to exit in 2019. we have the repo crisis. they're trying to exit and this is happening so it feels like -- i don't know if -- it's part and parcel monetary policy. every time we expand the balance sheet, it never seems to successfully go back down to size >> it's a good point it does seem that we find a way to keep that balance sheet wla large. i guess in some positive light, our balance sheet at the fed as

a percentage of gdp is still smaller than the one in europe or uk or switzerland, certainly japan. so we're not the most egregious users of balance sheet as a percentage as the size of the economy, but it's still big, it's burly, and certainly not helping the inflation battle you know, i want to get back to that, kelly. i think it's important i do think next week, jay is going to still sound tough on inflation, and you're going to hear about keeping at it, and keeping vigilant, and that they have the tools to deal with financial instability and they feel they can control the turmoil taking place in the banking system i do think they are behind the scenes quite up happy with how the regular toys and themselves managed this situation, allowing duration gaps to get as wide as they did at some of these banks. and there will be a lot of intro inspection on that i think they're kind of right on

this, but they believe they can handle that financial instability and they don't need to compromise their integrity on the inflation front. >> inflation is a lagging indicator. we saw peak inflation only after we had done all the stimulus, months afterwards. that's when we got peak inflation to the upside. you don't think -- why would the cpi rate this month be affected by what happened in the banking system in it will take several quarters to play out >> i think it's a lagging indicator. look, the unemployment rate is a lagging indicator, but those are the two we judge the fed on, right? those are the metrics we sort of say this is your job you have a dual mandate. looking ahead, we believe that this is coming down. but kelly, two, three years ago, did anybody predict we were going to 9% inflation at peak? and then did anybody predict when we had that happen, that

inflation expectations would never budge? just the short end so the fed -- it's got the credibility where it wants it. it doesn't need to take that risk it's got a labor market that is still strong i'm not sure why you need an overreaction honestly, the best argument for why you don't get zero or sort of stand up and yell "fire" again is the market looks to the fed and knowing more than it even though they'reprobably wrong. if the fed is saying, we're not going to tighten, even though we were talking about 25s arond 50 the market is going to think it's far worse than it is. right now it's a confidence thing. i think that 25, in a strange way, is a confidence boost that they can handle it, they have the tools to hand le it. >> again, kudos for basically

highlighting the problem that we were about to go headlong into dave, thanks for joining me today. appreciate it. >> always a pressure, kelly. now, in the meantime, there is this huge split over tech right now. the bulls on that trade say it should benefit from a less aggressive fed, and the nasdaq is up more than 4% this week, j outperforming the s&p 500. the bears warning the best days are over my next guest says tech is getting a demotion here. let's bring injason ware, alon with james, who has been buying more tech names here welcome to you both. james. i'll start with you. conviction across tech here, or is it more specific? >> no, definitely not all across

tech we're net bearish on most of the indexes. i do think that you have to be surgical when it comes to picking the names. i think when you look at the long-term opportunity across tech, i think the opportunities across ai, productivity, what have you, are undeniable and i think that trend will continue but that being said, over the medium term, i think you have to be aware of the second half. but the short term, with the terminal rate at the end of the year going from 5.5% to 4% and the futures expectations is a near term boost. what we have seen across a lot of these high quality names is that the multiples have, arguably -- as long as those growth rates do remain resilient, which we do think will be the case, i think you have a window here for the next

couple of months where those select names, the highest quality names will continue to go higher, including amazon. >> sure. you have ber, nvidia, microsof in there, as well. jason, you've been trimming microsoft. why? >> yeah. so i want to be very clear, we are not bearish on tech, especially large-cap, mega cap technology we have owned them for well over a decade we're quite bullish on the space. what we have been recognizing is twofold. one, we're going to see a recession at some point in the near future, leading to another leg lower in this bear market. therefore, adding a little more of a defensive posture makes sense. so we've been farming some of that at higher valuations. microsoft this week pushed up above our price target to trim we did that and it's trading at 30 times earnings and 10 times revenue. so we asked simple questions

going forward. just right sizing these positions to be a little more market neutral within the context of a macro environment where we see structure with higher interest rates and inflation not being 1% or 2%, but 3% or more over the next few years. so microsoft, for example, here is a $2.1 trillion market cap. we ask what is it going to take for microsoft, after a decade of incredible growth, to double from here and what time frame? answers today are different when this was a $500 billion market cap. i still like these businesses, just smaller in size >> so you've already outright sold applied materials and adobe. adobe seems like a stalwart. why isn't that one you want in your portfolio >> to be clear, we sold it

higher that was middle of last year, and again, as we look at some of these higher valuation tech companies, and adobe is an example of one when we sold it, it was trade 40g times earnings, and had a revenue multiple we were not comfortable with look at what they did with the acquisition. they basically paid a 2021 multiple in 2022 for a business, because clearly their core business is starting to see competition and growth so as we square value ationvalu us, it just didn't make sense to own those types of names in the context of a macro that has changed, as well >> james, i'll give you the last word >> yeah, look, volatility can be your enemy or friend i think the issues we're seeing in the financial sector could be a blessing in surprise in

getting the fed out of the way and enacting, as you were saying in a prior segment, a more data dependant and letting the economy self-correct that being said, i think as long as -- you have to be agile in this market. you can't -- the days of i think buying a stock and holding it are gone, at least for the foreseeable future so as long as you're disciplined with your entry and exit points, there is a lot of opportunities in tech. over the next couple of months, those select group of companies whether -- like the ones you just named, will continue to outperform so we're buying where we can >> thank you both. great perspectives today still to come, uni bonds are supposed to be one of the safest places to put your money, but did svb's failure reveal a flaw in the system? plus, the past four sessions have seen the highest volume days of the year for s&p 500 stocks, all leading up to today.

we'll look at the options action and what it means for the market with the s&p below it 200 and 100 day moving averages. and a closer look across the markets. ten-year yield down. the dow down 1%. same for the s&p the nasdaq composite down too. and credit suisse, shares down 7%, down 25% since monday, this is after the backstop by the swiss authorities. credit suisse having its worst week since 2008. "the exchange" is back after this (vo) with verizon, you can now get a private 5g network. so you can do more than connect your business, you can make it even now ports can know where every piece of cargo is. and where it's going. (dock worker) right on time. (vo) robots can predict breakdowns

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welcome back to "the exchange." muni yields holding steady, even though investors have been concerned banks like first republic could off load those assets for cheap according to "the wall street journal," first republic held more than $19 billion worth of munis at the end of 2022 in fact, nearly $4 trillion in outstanding muni debt has the regionals holding $140 billion is there a reason to worry tom, good to have you here

welcome. >> thanks for having me back, kelly. >> i think you need to explain to people how interconnected munis are between kind of state and local government funding, and the banking system this isn't just hey, by the way on the side this is happening. this is unfortunately a pretty important occurrence here. >> yeah, in the conversations i've been having this week with investors, one of the main things i'm doing is acknowledging how stunned and really disoriented a lot of the municipal investors are. i'm explaining to them we need to be realistic, that we don't necessarily know everything that will be playing out over the next couple of weeks or months we don't know if what happened last week and over the weekend will snowball. i'm not seeing cracks in muni credit caquality. but there is an underappreciated interconnectedness with large, and some of those small banks and public finance right now, we're talking to

investors about being cautious, a little defensive but we also don't want them to miss any opportunities >> yeah. talk to me about 2008 or past periods of credit strain what's happened with munis >> so in -- we saw -- now, this is close to a worst case scenario that we saw in my mind playing out through the summer, fall and winter, going into 2008 it was often times in that period of time, it was -- there was a lot of -- it was difficult for issuers to get liquidity during that time from an investor perspective, municipal treasury ratios, especially after lehman brothers, they widened out, and there was some opportunity there. that's one of the reasons why we're asking investors to stay defensive for months i've been talking to investors about use thing opportunity to trade out of credits that might be a little more problematic,

and into credits that are stronger now i'm doubling down on that. but also asking folks to be a little more defensive, and really stay in highly rated reputable bonds. >> it's a great point. if you're on the sidelines, you see these yields spike maybe there's an opportunity depending on the credit quality. last question for you, at least for today. what is the risk here as it goes back to issuers? in other words, what starts as this kind of wacky, almost esoteric thick, silicon valley bank, maybe first republic as the banking system gets a little insteady, let's say, how does that reverberate back to the ability of governments -- at a time when we're doing this massive infrastructure >> the insteadiness, if issuers don't have access to the

liquidity, whether it's in lines of credit from banks, then it's difficult for them to conduct their day-to-day business. now, i'm not seeing that quite yet. but that's one of the things that i'm remembering, again, very clearly that happened at the end of '07 if not all of '08. so this things snowball, that liquidity could be more difficult for the smaller and medium-sized issuers to obtain >> when we see that munis are available but not accepted through the fed's new program, is that because they can't accept them? >> i think one of the -- one of the things that we're not -- we haven't been seeing, we've been seeing two things. the first is that there has been, as part of this flight to quality, we did see a lot of buyers, not just banks, but

buyers on the retail side. they were -- even in some cases putting some cash to work. they were choosing to look at municipal bonds. one of the reasons is because of the strong credit quality. i think there will be times over the next couple of months or weeks where that will continue >> tom, thanks so much for joining us today we appreciate it >> thanks, kelly coming up, another outperformer this week the cloud computing etf, we'll hear from a leading voice in that space, next and check out commercial real estate. these are weak to date another worry for regional banks with high office exposure by the way. "the exchange" is back after this

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i heard about the payroll tax refund that allowed us to keep the people that have been here taking care of us. learn more at getrefunds.com. welcome back, everybody. new developments in the u.s. virgin islands lawsuit against jpmorgan over jeffrey epstein. let's get the very latest. >> in a courtroom last night in new york, attorneys for the u.s. virgin islands targeted jpmorgan's ceo jamie dimon as directly as we have seen so far in their case alleging that the bank aided jeffrey epstein in his decades of sex krimgs. the allegations against jamie dimon raise questions about how jpmorgan will defend itself. last week, jpmorgan sued jes

staley, alleging if there was any epstein related wrong doing at the bank, it was done by staley in essence, they were painting staley as a rogue employee but last night, attorneys for the u.s. virgin islands said they don't buy that argument an attorney general said if staley is a rogue employee, why isn't jamie dimon? and argued stanny knew, dimon knew, jpmorgan chase knew. jpmorgan generally, the attorney said, they broke every rule to facility his sex trafficking in exchange for his wealth and referrals. jamie dimon argued - >> jpmorgan asserted that dimon has no recollection of ever reviewing the epstein accounts at the bank. a judge sided with the usvi against jpmorgan on one point and agreed the usvi does have the ability to bring a case on

behalf of anyone a resident there. the attorney general for the virgin islands did not present evidence to prove her claim that dimon knew about epstein's crimes i reached out to jpmorgan for comment, but they declined to respond on the record. >> how much longer should this hearing take place for in terms of any further allegations we might hear >> we expect discovery to continue and the u.s. virgin islands is going to get a tranche of jpmorgan documents and we expect this to go all the way through the fall so a lot more to come here on this story, and a big question mark here for jamie dimon. as soon as they respond, we'll tell you what they have to say >> all right, thank you. let's go over to tyler mathisen for an update >> thank you very much joe biden is calling on congress to give regulators more power to punish executive it is

mismanagement leads to failure but based on a question today, it sounds like kevin mccarthy isn't ready to jump on board >> is there any congressional action that can be done in terms of the svb and reaction to the svb bank situation >> i think you want to get all the facts. it seems like the regulators didn't do their job. >> the justice department is investigating the chinese company that owns tiktok after it add mitted that some employees had improperly obtained the data of two u.s. reporters. that's according to "the new york times." the biden administration is threatening to ban the app if it isn't sold, citing national security concerns. and youtube has restored former president trump's channel, saying it's balancing the continued risk of real world violence with the need for voters to hear equally from major presidential candidates. there is no mention of guard

rails like those put in place by facebook when they reinstated trump's account. >> tyler, thank you. >> >> it's been a wild week for the markets. all three major averages are actually positive, just by a hair for the dow how should you position now? let's bring in chris murphy, and randall elie to talk about where people might see opportunity right now. welcome to both of you chris, let's start with you. we like to check in with you on quad witching day. we've seen the vics jumping this week how would you describe the liquidity position >> it has been a wild week in terms of each specific day on each day, we're still up on the week but despite being up on the week, the vics is flat or up small. and there's still a lot of

concern out there. the main reason those are remaining on the higher end and staying firm while the market rallies is because investors are more worried about the downside tail options you know, during the inflation and the higher rates over the last year, that was pretty well known and priced in, at least from a volatility perspective. now, we have this new, unknown bank issue, leading to much more demand for downside put protection, which increases a skew on something like the s&p 500. >> you know, a lot has been made, chris, of the fact that treasury liquidity is not what it used to be. people are concerned about that. is that a problem that's unique to the treasury market, or any sign of a broader concern, maybe starting with people backing away from perhaps equities or options this week? >> you know, i think that whenever volatility is higher

and uncertainty is higher, markets will thin out and get wider. but the use of etfs, even for example, the kre, is down a lot and absorbed a lot of supply it was used as a vehicle for directional exposure so i think the increased usage of options, and the increased usage of etfs are, in some ways, adding to different avs for investors to hedge their risk. in some ways, providing extra liquidity. >> there has been a direct impact from the banking problems onto wall street in other words, onto the accounts people have, the trades they're making obviously, charles schwab has been one of the names in particular here. do you discern any direct connection here? >> no, not that we're seeing -- obviously, we're trading with institutional clients. you know, not really seeing

anything too crazy when you have uncertainty over banks and liquidity, of course volatility is going to be higher but going back to the u.s. treasury volatility, if you're going to look at something hike the move index, compared to where the vics is, it's not close. equity volatility is hanging this there more than treasury volatility you can look back historically >> so the forward rate versus option spread, i don't know how you pronounce that will you start to see these widening out is that something that concerns you or is it just kind of, okay, we can kind of go back to normal as it shakes out, what is the message that is sending? >> yeah. i think once again, it's a typical reaction to what has been going on. you know, we're looking at the options and i believe that the vics is going back and forth,

but the term structure is not even inverted right now. and if you look at something like the s&p 500 and you were to compare the total size of the whole financial sector, compared to a number of the big f.a.n.g.s, you know, part of the reason why the equity market, if you look at the s&p is hanging in there is because of those big tech stocks. so as of now, it's relatively contained. once again, the s&p is up 1.5% this week. so we're not necessarily seeing quite as much of that kind of stress in the options and the equity volatility markets. >> great we'll let you know bank of america for instance seeing some volume, even carnival what can you say about that? >> the great thing about call options is, you know, if you are not sure that the stock is going to rebound but you would like to take a chance and you got the fed event looming next week, you can look at -- you saw a lot of

call buying in carnival cruise, united airlines, bank of america just to name a crew. but we are seeing underinvested investment community still want upside via buying call options >> chris murphy, great to have you on we read the tea leaves a little bit. let's talk about where you should be buying stocks. randall, you got clients that want no stock ownership these days >> most of my clients are just basic stock ownership. i think it's important for everyone who is trying to invest long-term, which i think is the best way to do it, to understand that what is going on is the federal reserve is removing the biggest punch bowl by far in american history and when that happens, you're going to have some unintended consequences, such as the banking crisis we're going through right now. but the united states is very

strong you know, we've got the assets, and volatility, when it comes to securities, particularly investment grade, whether stocks or bonds, is part of the price we have to pay long-term investors will continue investing in stocks in particular that are valued correctly, meaning not overvalued, and that have strong balance sheets, don't have a lot of debt. this is something, kelly, i have talked about this for a long time >> i love the reassurance, except for the fact you need to give it. we've talked in the past about stocks like at&t that you like i don't know if you wanted to weigh in on that one in general, randall, people right now are looking at yields and saying wait a minute, i've seen first republic cut its dividend, intel cut its dividend how do you sort through the names out there and confidently

pick both a yield that people want in this environment for a stock that you can own for a while and not be exposed to that dividend cut risk. >> that's right, you have to separate between those that have strong financial positions first, intel as far as we can see is -- their earnings are not what we would like, but it's still a strong company financially. wherein, when you get to these regional banks cutting dividends, it's for a different reason so intel's management needs to get more efficient in the way they're running their operation. and show us what they can do with the great amount of assets they have. but we need to stay away from companies that are paying dividends out of a dwindling supply of money. i gave you three names that i think would meet that. >> yes and i'll steal your punchline.

even naps mes like disney and starbucks, no one thinks those companies are going away but when they have to prioritize growth or expensive streaming or what have you, these things are always -- >> that's right. we're going to leave the running of the individual companies to the management but it's a fact of life. in a market like this, where so many companies are struggling to get access to finances, they suddenly realize that they can't borrow the kind of money they could even a year ago. the fed is pulling back. the companies, they can find other opportunities in being able to provide that capital, whether it's in a distress situation or just growing the business now in a lower cost way. >> randall, great to have you here thank you for sharing your wisdom appreciate it. coming up next, a

cybersecurity name climbing 3% this week, and there could be more strength in this sector in the wake of svb's collapse we'll hear from the ceo, next. as we head to break, gold to the highest level in nearly a 'rar, up nearly 3% today wee back after this. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading.

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welcome back, everybody. time now for tech check. how does the banking turmoil

we're seeing raise the risk for cyberattack? there is a connection here hi, diedra >> there most certainly is a connection to answer your question, it raises the risk by a lot one of the biggest cybersecurity companies has been monitoring the fallout and seen an spike o attacks in the sector. >> we're seeing that across a broad sector of banks. silicon valley bank had an early pickup, signature bank, first republic, credit suisse, we are seeing them as additional targets where criminals are posing as if they are either bank and saying here is how you can recover your funds or secure your funds or the other type of threat is that often times, criminals are sending messages to what might be customers of vendors that use

the silicon valley bank or one of the other banks >> prince says that the banking sector itself has done a good job of putting the right protections in place, but they're still vulnerable to attacks on some of the largest customers. >> i any right now the bigger risk is with the various companies that might be using the banks and how they might be scammed during this time of stress we do see that there are attacks that go against the financial sector if we look at all the different sectors out there, financial services and the banking industry is probably at the front of the pack in terms of cybersecurity protections. that isn't the top of list of concerns this week >> so kelly, everything that we're hearing, matthew prince saying attacks are on the rise this bodes well for cybersecurity spending in the months and years ahead, even against a softer economic

backdrop it has been one area of tech that has held up better, and that's likely to continue. >> i thought it was so fascinating, you were saying yesterday how there is this notion of wanting to come back and support svb through its struggles. this morning, it's filing for a reorg, and it will have many, many chapters to come in and sort this out. give us an update where sentiment in the valley stands >> i think it's similar to where it has been. silicon valley bank has been a partner through the dot com bust and the financial crisis no one knows what it look like going forward, but they want a partner that is going to serve tech specifically. whether that's silicon valley bank or someone else, a lot of people i talked to just don't see anyone that is able to fulfill that role, so they say silicon valley bank has the right management, has the right assets they'll go back. this is the time of opportunity, kelly. i speak to founders who say they're being pinged by private

bankers, all offering similar kinds of products. we'll see if anybody is able to do it. >> thank you, diedra still ahead, new inflation expectations shows american consumers becoming less concerned about future inflation. does that mean the fed can pause here next week we're asking nick from "the wall street journal," next. and some high profile investors have weighed in on that question all week here on cnbc here's what they had to say. >> i think they will raise rates. >> you do have inflation >> we did not have this mess, i think they'll go 25. >> i would think that the fed could be in a position, certainly to only go up by 25, but actually to justify a pause. >> the fed won't be raising

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welcome back to "the exchange." got a quick news alert on credit suisse reports at least four global banks including deutsche banks put seclusion. 9% decline on the session back to where it was before the backstop by swiss authorities. given uncertainty in the marketplace expectations of a half point fed hike next week seem to be off the table the street divided between a quarter point or flat-out pause. joining me with what he experts, chief correspondent for the "wall street journal." tempting to go down memory lane. good to see you again. can't waste anybody's precious time in the middle of this, shall i say, banking crisis. much as you can tell us, what are your hearing the last i could read between the lines, thinking i don't know maybe pause? >> well, i'm hearing the same thing everybody else is hearing. there's a case to be made for going by 25 and a case to be

made for skipping. i think really depends, kelly, what happens with the state of the markets, and this financial instability risk over the next few days you have people like former boston fed president eric rosenbrent saying you can't assume you're back to normal after an earthquake. probably wait and see if there will are aftershocks in the skip camp then you have quite a number of former fed officials and played them just before the break there saying, yeah probably do a quarter point, because before all of this happened, it looked like should have been doing a half point data's been very hot inflation still a problem. this is going to be an interesting one, kelly. >> so the consumer sentiment data this morning, felt it was important. june upsized before the first rate hike after consumer expectations inflation jumped and of course same day that had cpi report and today opposite this morning the one year i

think the three year, if not mistaken saw further declines. would that make those afraid of inflation go, okay maybe it's come down to consumer -- if, steve told us, most important thing make sure inflans doesn't get entrenched data says room to pause. >> the question what is the right tool for the job the fed has been pretty clear that this is not the place they want to be, where people are talking about them changing monetary policy to deal with a financial problem. on the other hand, you know, at a certain point, financial problems get serious enough you do have to use your monetary policy tool, but i think everything we've heard from the fed, before this happened was, we have the tools to deal with financial instability problems to keep our eyes on the prize resporing price stability. actions you've seen this week would be consistent with that. using the discount and the new bank term funding program. even the private sector actually yesterday, all about saying

things we can do without having to change interest rates and change direction of monetary policy, because inflation is still a problem. but now you're trying to determine, kelly, what are the lags in monetary policy, also the lags from the credit contraction you could see as these small banks pull back on lending. >> absolutely. look loan standards part of the leading indicators composite declining the last 11 months not like we got a fine economy and problems cropped up in the banking sector show you what's happening in the market expectations where the fed's fund rate is going probably already know. we don't have a january contract saying fed funds back below 4% we're aware how many cuts already pricing it feels like as the regional bank problems worsen watching tick down they seem to be telling us that is, as those problems get worse, the likelihood of potentially significant rate cuts by the end of this year are growing

>> well, you know, these have been all over the place the last few days right? head-spinning the moves you're seeing i think, again, it speaks to real difficult questions over what are the spillovers from this the question before all this happened was, where is the impact of all of this tightening you've seen a lot. 4.5 percentage points. i compare it to that keep hitting the bottle nothing comes out. hit it harder and everything comes out. probably isn't a situation the fed wants to get into. an instability mess and the other hand talked to former fed officials saying you don't want to risk a market melt-up because you decide to skip a rate hike next week and then there's a rally and you're easing financial conditions and the economy's overheating. definitely a difficult balancing act. like i said it isn't a place the fed wanted to find itself in, but where they are right now. >> and real quickly -- well, out

of time. two words, when we saw the two-year, three month the most inverted since 2000. emergency sort of out of the blue rate cut off that chatter picking up about anything like that on the table? >> i haven't heard -- have you no i don't see anybody talking about that right now but -- we'll see i mean, things are moving fast. >> yeah. well said. nick, great to see you thanks for your time today appreciate it. from the "wall street journal." and before we go, draw your attention to a recent tweet from bill ackman now saying hearing bank of america will buy signature bank monday. until we can ensure uninsured price of capital rising for smaller banks pushing them to merge or acquired by systemically important banks ackman says, i don't think this is good for america. does it for us, everybody. dow's down 365 like to know 11 ways to tell we're in recession, wrote it up in a cnbc white paper.

read it online or scanning that qr code on your screen. next on "power lunch," speaking of a slowdown with all uncertainty out there, trade on ain insurance name, jpmorgan says it will weather a potential crisis tyler's getting ready. joining him on the other side of this quick break. from all over the globe right at your fingertips. it's where businesses meet great remote talent and remote talent meets great opportunity. ♪♪ ♪ this is how we work now ♪ dad, we got this. we got this. we got this.

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(woman 1) i just switched to verizon business unlimited. it's just right for my little business. charges, expenses unlimited premium data. unlimited hotspot data. (woman 2) you know it's from the most reliable 5g network in america? (vo) when it comes to your business, not all bars are created equal. so switch to verizon business unlimited today. good afternoon, everybody. welcome to "power lunch. alongside kelly evans i'm tyler mathisen coming up, banks and beyond. financials the focus for global markets this week. two other groups making interests moves. break down big tech and the void. plus, investors eyes wide open the svb collapse revealing major flaws in boonking and corporate america looks for more potential problem spots. struggling ending the week dow's down 304