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Mike Mayo, Wells Fargo, joins 'Closing Bell' to discuss his top bank stock picks and sector outlook.
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Jamie Dimon is ‘cautious about everything’ as he sees risks to a soft landing
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JPMorgan Chase CEO Jamie Dimon thinks there’s a better-than-even chance that the U.S. is heading for a recession, though he doesn’t see systemic issues looming.
Speaking Monday from the JPMorgan High Yield and Leveraged Finance Conference in Miami, the head of the largest U.S. bank by assets said markets probably aren’t pricing in a strong enough probability that interest rates could stay higher for longer.
Dimon noted “there are things out there which are kind of concerning,” and he disagreed with the high level of probability being assigned to the economy missing a recession.
“The market is kind of pricing in a soft landing. That may very well happen,” he told CNBC’s Leslie Picker. “But the [market’s] odds are 70 to 80 percent. I’ll give you half that, that’s all.”
The comments come as the market indeed has had to reprice its expectations for monetary policy. Where futures traders earlier in the year had been assigning a high probability to an aggressive series of interest rate cuts starting in March, they now see the easing not starting until June or July, with three cuts now priced in â half of the prior expectations.
Along with the elevated rates, markets have had to contend with the Federal Reserve rolling off its bond holdings, a process known as quantitative tightening. While the central bank is expected to start tapering the program soon, it remains another factor in tight monetary policy.
“It’s always a mistake to look at just the year,” Dimon said. “All these factors we talked about: QT, fiscal spending deficits, the geopolitics, those things may play out over multiple years. But they will play out and they will have an effect and in my mind I’m just kind of cautious about everything.”
However, Dimon said he doesn’t expect a replay of some of the other serious downturns the U.S. economy has faced, such as the 2008 financial crisis that saw Wall Street plunge as banks were hit with fallout from the subprime mortgage industry collapse.
Higher interest rates along with a recession could hit areas such as commercial real estate and regional banks hard, but with limited macroeconomic impacts, Dimon said.
“If we have a recession, yes, it’ll get worse. If we don’t have recession, I think most people will be able to muddle through this,” he said. “Part of this is just a normalization process. [Rates] were so low for so long. If rates go up, and we have recession, there will be real estate problems, and some banks will have a much bigger real estate problem than others.”
As far as regional banks go, he labeled issues that hit institutions such as Silicon Valley Bank and New York Community Bank as “idiosyncratic” and said private credit could take hit but not at a systemic level.
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JPMorgan CEO Jamie Dimon on state of the US economy, commercial real estate risks and AI hype
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Jamie Dimon, JP Morgan Chairman and CEO, joins Halftime Report live to discuss the market, real estate, lending and more.
08:05
Mon, Feb 26 20241:36 PM EST
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JPMorgan CEO Jamie Dimon says AI is not just hype — ‘This is real’
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The burgeoning artificial intelligence tools from companies such as OpenAI still have their share of skeptics, but don’t count JPMorgan Chase CEO Jamie Dimon among them.
The Wall Street titan told CNBC’s Leslie Picker on Monday that AI is not just a passing fad and is bigger than just the large language models such as Chat GPT. He compared the current moment favorably to the tech bubble around the start of the 21st century, when investor excitement seemingly got ahead of the actual changes.
“This is not hype. This is real. When we had the internet bubble the first time around … that was hype. This is not hype. It’s real,” Dimon said. “People are deploying it at different speeds, but it will handle a tremendous amount of stuff.”
JPMorgan has done work on the ability to use the new technologies internally, with Dimon saying that AI will eventually “be used in almost every job.” JPMorgan created a new role of chief data and analytics officer last year, in part to handle AI.
Dimon said Monday that there are 200 people at JPMorgan doing research on the large language models that have recently been rolled out by tech companies.
While acknowledging that AI can be used by bad actors, Dimon called himself a “big optimist” about the emerging technology, mentioning cybersecurity and pharmaceutical research as areas where it can be helpful.
“It may invent cancer cures because it can do things that the human mind simply cannot do,” Dimon said.
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Jamie Dimon on Capital One’s $35.3 billion Discover acquisition: ‘Let them compete’
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Jamie Dimon, President & CEO,Chairman & CEO JPMorgan Chase, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 17th, 2024.
Adam Galici | CNBC
JPMorgan Chase CEO Jamie Dimon isn’t worried about the added competition from a bulked-up Capital One if its $35.3 billion takeover of Discover Financial gets approved.
“My view is, let them compete,” Dimon said. “Let them try, and if we think it’s unfair we’ll complain about that.”
Dimon, speaking to CNBC’s Leslie Picker from a Miami conference, acknowledged that if regulators approve the Capital One-Discover deal, his bank will be eclipsed as the nation’s biggest credit-card lender. But that didn’t stop him from praising Capital One’s CEO Richard Fairbank.
“I’m not worried about it really, but we do track everything he does,” Dimon added.
The deal has two major components: the credit card business and the payment network, Dimon noted.
“The credit card business⦠they’ll be bigger and [have] more scale,” Dimon said. “They’re very good at it. I have enormous respect for Richard Fairbanks and Capital One.”
It’s unclear if Capital One can create a true alternative to the dominant card networks in Visa and Mastercard with this deal, Dimon said.
He added that Capital One will have an “unfair advantage versus us” in debit payments, owing to the fact that legislation known as the Durbin Amendment caps debit fees for large banks, but not Discover or American Express.
“Of course, I have a problem with that,” Dimon said. “You know, like why should they be allowed to price debit different than we price debit just because of a law that was passed?”
This story is developing. Please check back for updates.
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Here’s why Capital One is buying Discover in the biggest proposed merger of 2024
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Capital One CEO and Chairman, Richard Fairbank.
Marvin Joseph| The Washington Post | Getty Images
Capital One’s recently announced $35.3 billion acquisition of Discover Financial isn’t just about getting bigger â gaining “scale” in Wall Street-speak â it’s a bid to protect itself against a rising tide of fintech and regulatory threats.
It’s a chess move by one of the savviest long-term thinkers in American finance, Capital One CEO Richard Fairbank. As a co-founder of a top 10 U.S. bank by assets, his tenure is a rarity in a banking world dominated by institutions like JPMorgan Chase that trace their origins to shortly after the signing of the Declaration of Independence.
Fairbank, who became a billionaire by building Capital One into a credit card giant since its 1994 IPO, is betting that buying rival card company Discover will better position the company for global payments’ murky future. The industry is a dynamic web where players of all stripes â from traditional banks to fintech players and tech giants â are all seeking to stake out a corner in a market worth trillions of dollars by eating into incumbents’ share amid the rapid growth of e-commerce and digital payments.
“This deal gives the company a stronger hand to battle other banks, fintechs and big tech companies,” said Sanjay Sakhrani, the veteran KBW retail finance analyst. “The more that they can separate themselves from the pack, the more they can future-proof themselves.”
The deal, if approved, enables Capital One to leapfrog JPMorgan as the biggest credit card company by loans, and solidifies its position as the third largest by purchase volume. It also adds heft to Capital One’s banking operations with $109 billion in total deposits from Discover’s digital bank and helps the combined entity shave $1.5 billion in expenses by 2027.
‘Holy Grail’
But it’s Discover’s payments network â the “rails” that shuffle digital dollars between consumers and merchants, collecting tolls along the way â that Fairbank repeatedly praised Tuesday when analysts queried him on the strategic merits of the deal. There are only four major card networks: giants Visa and Mastercard, then American Express and finally the smallest of the group, Discover.
Capital One and Discover credit cards arranged in Germantown, New York, US, on Tuesday, Feb. 20, 2024.Â
Angus Mordant | Bloomberg | Getty Images
“That network is a very, very rare asset,” Fairbank said. “We have always had a belief that the Holy Grail is to be able to be an issuer with one’s own network so that one can deal directly with merchants.”
From the time of Capital One’s founding in the late 1980s, Fairbank said, he envisioned creating a global digital payments tech company by owning the payment rails and dealing directly with merchants. In the decades since, Capital One has been ahead of stodgier banks, gaining a reputation in tech circles for being forward-thinking and for its early adoption of cloud computing and agile software development.
But its growth has relied on Visa and Mastercard, which accounted for the vast majority of payment volumes last year, processing nearly $10 trillion in the U.S. between them.
Capital One intends to boost the Discover network, which carried $550 billion in transactions last year, by quickly switching all of its debit volume there, as well as a growing share of its credit card flows over time.
By 2027, the bank expects to add at least $175 billion in payments and 25 million of its cardholders onto the Discover network.
Owning the toll road
The true potential of the Discover deal, though, is what it allows Capital One to do in the future if it owns the toll road, according to analysts.
By creating an end-to-end ecosystem that is more of a closed loop between shoppers and merchants, it could fend off competition from rapidly mutating fintech players like Block and PayPal, as well as buy now, pay later firms like Affirm and Klarna, who have made inroads with both businesses and consumers.
Capital One aims to deepen relationships with merchants by showing them how to boost sales, helping them prevent fraud and providing data insights, Fairbank said Tuesday, all of which makes them harder to dislodge. It can use some of the network fees to create new loyalty plans, like debit rewards programs, or underwrite merchant incentives or experiences, according to analysts.
“Owning a network allows us to deal more directly with merchants rather than a network intermediary,” Fairbank told analysts. “We create more value for merchants, small businesses and consumers and capture the additional economics from vertical integration.”
It’s a capability that technology or fintech companies probably covet. The Discover network alone would be worth up to $6 billion if sold to Alphabet, Apple or Fiserv, Sakhrani wrote Tuesday in a research note.
Will regulators approve?
The Capital One-Discover combination could fortify the company against another potential threat â from Washington.
Proposed legislation from Sen. Dick Durbin, D-Ill., aims to cap the fees charged by Visa and Mastercard, potentially blowing up the economics of credit card rewards programs. If that proposal becomes law, the competitive position of Discover’s network, which is exempt from the limitations, suddenly improves, according to Brian Graham, co-founder of advisory firm Klaros Group. That mirrors what an earlier law known as the Durbin amendment did for debit cards.
Chairman Dick Durbin (D-IL) speaks during a US Senate Judiciary Committee hearing regarding Supreme Court ethics reform, on Capitol Hill in Washington, DC, on May 2, 2023.
Mandel Ngan | AFP | Getty Images
“There are a bunch of things aimed, in one way or another, at the card networks and that ecosystem,” Graham said. “Those pressures might be one of the things that creates an opportunity for Capital One in the future if they have control over this network.”
The biggest question for Capital One, its customers and investors is whether the merger will ultimately be approved by regulators. While Fairbank said he expects the deal to be closed in late 2024 or early 2025, industry experts said it was impossible to know whether it will be blocked by regulators, like a string of high-profile takeovers among banks, airlines and tech companies.
On Tuesday, Democratic Sen. Elizabeth Warren of Massachusetts urged regulators to swiftly block the deal, calling it “dangerous.” Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee, said he would be watching the deal to “ensure that this merger doesn’t enrich shareholders and executives at the expense of consumers and small businesses.”
The Discover deal’s survival may hinge on whether it’s seen as boosting an also-ran payments network, or allowing an already-dominant card lender to level up in size â another reason Fairbank may have played up the importance of the network.
“Which thing you are more concerned about will define whether you think this is a good deal or a bad deal from a public policy point of view,” Graham said.
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Big banks have drastically cut overdraft fees, but customers still paid $2.2 billion last year
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Pedestrians pass a JPMorgan Chase bank branch in New York.
Michael Nagle | Bloomberg | Getty Images
The three biggest American retail banks collected 25% less overdraft revenue last year as the companies, under pressure from regulators to cap the fees, created new ways for customers to avoid the penalties.
JPMorgan Chase, Wells Fargo and Bank of America reported a combined $2.2 billion in overdraft fees in 2023, roughly $700 million less than in the previous year, according to regulatory filings.
Overdraft fees are triggered when a customer attempts to spend more than the balance in their checking accounts. At around $35 per transaction at many banks, the fees have been a lucrative line item for the industry, generating $280 billion in revenue since 2000, according to the Consumer Financial Protection Bureau.
The industry is girding itself for a battle over overdraft fees after the CFPB in January unveiled a proposal to limit charges to as little as $3 per transaction. Banks say overdraft services are a lifeline that helps users avoid worse options such as payday loans, while critics including President Joe Biden say the fees exploit struggling Americans.
The practice has brought unwelcome attention to big banks. During a 2021 hearing, Sen. Elizabeth Warren needled JPMorgan CEO Jamie Dimon on the fees. Dimon at the time refused her call to refund $1.5 billion to customers.
But even before recent efforts by regulators, banks’ haul from overdraft has been on the decline. Pandemic stimulus money helped Americans trigger fewer of the fees starting in 2020, and then firms including Capital One, Citigroup and Ally voluntarily ended the practice.
Those who kept the fees, including JPMorgan, limited the types of transactions that trigger penalties, got rid of fees for bounced checks and introduced one-day grace periods and $50 cushions to reduce their frequency.
Bank of America cut the fees to $10 from $35 in 2022.
“Whether folks eliminated some fees or dramatically reduced the cost of others, there’s been very significant shifts here,” said Jennifer Tescher, CEO of nonprofit group Financial Health Network. “Banks aren’t just getting rid of overdraft, they’re trying to find more customer-friendly ways of meeting their liquidity needs while making sure they aren’t overextended.”
Steady decline
Industrywide overdraft revenue totaled $7.7 billion in 2022, 35% below the 2019 level, according to a May CFPB report that included all U.S. banks with at least $1 billion in assets.
Recent regulatory filings show that the steady decline continued last year, though JPMorgan and Wells Fargo remain by far the largest players in overdraft.
JPMorgan had $1.1 billion in overdraft revenue last year, about 12% lower than in 2022. Wells Fargo saw a 27% decline to $937 million. Bank of America posted a 64% decline to $140 million.
More than 70% of overdraft transactions no longer incur fees, and customers can choose accounts that don’t allow the penalties, a JPMorgan spokesman told CNBC.
“Our customers continue to tell us they want and need access to overdraft protection, which helps them when they are temporarily short on money,” the JPMorgan spokesman said.
Wells Fargo declined to comment. A Bank of America spokesman noted that after the company voluntarily changed its overdraft policies in 2022, revenue from the practice fell more than 90%, and they now collect less than smaller banks.
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JPMorgan Chase shuffles top leaders as race to succeed Jamie Dimon drags on
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Jamie Dimon, President & CEO,Chairman & CEO JPMorgan Chase, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 17th, 2024.
Adam Galici | CNBC
JPMorgan Chase on Thursday said several executives considered frontrunners to one day take over for CEO Jamie Dimon had new or expanded roles.
Jennifer Piepszak, co-head of JPMorgan’s giant consumer bank, will now became co-head of the firm’s commercial and investment bank along with Troy Rohrbaugh, a veteran leader of the bank’s trading operations.
Piepszak’s former partner, Marianne Lake, will transition from consumer banking co-head to being its sole CEO, JPMorgan said. The business includes some of the country’s largest operations in retail banking, credit cards and small business lending.
The moves should give Piepszak and Lake more experience as the long-running succession race atop the nation’s largest bank drags on. When they were made co-heads of consumer banking in 2021, Piepszak and Lake were considered favorites to eventually succeed Dimon, who is now 67 years old. That year, the bank’s board gave Dimon a special bonus to retain his services for a “significant number of years.”
It wasn’t clear if there is a frontrunner for the job after the latest set of changes, or if Dimon intends to leave anytime soon.
The running joke within JPMorgan is that for Dimon, considered the top banker of his generation, retirement is always five years away. Over the years, several of his deputies have moved on to lead other organizations after losing patience that the top job would ever become available.
Rohrbaugh and global payments chief Takis Georgakopoulos round out the short list of potential successors along with Lake and Piepszak, who have both served as CFO before their current assignments, said a person with knowledge of the bank’s planning.
As part of the changes, the bank’s new commercial and investment bank run by Piepszak and Rohrbaugh now includes operations that had been a separate division run by Doug Petno. And Daniel Pinto, who had been CEO of the corporate and investment bank for a decade, relinquishes that title while remaining the bank’s president and chief operating officer.
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JPMorgan names new heads of expanded investment bank and consumer and community banking unit
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CNBC’s Leslie Picker joins ‘Closing Bell Overtime’ with breaking news on JPMorgan’s latest executive appointments.
01:42
3 hours ago
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As the S&P 500 enters bull market territory, here's what to consider before you invest
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People walk through the Financial District by the New York Stock Exchange (NYSE) on the last day of trading for the year on December 29, 2023 in New York City.
Spencer Platt | Getty Images
The S&P 500 stock index climbed to a new all-time high on Monday.
A bull market — by two definitions — is here. Last year, the S&P 500 rose more than 20% from its most recent low. As of Friday, it crossed another bull market threshold when it surpassed its previous high.
For investors who want to get in on the action, the good news investing in a fund that tracks the S&P 500 index is an easily accessible strategy.
But experts say it also deserves a word of caution: Past performance is not indicative of future returns. And while the S&P 500 was a clear winner in 2023 — finishing the year up 26% — it may not be the strategy that comes out ahead at the close of 2024.
What is the S&P 500 index?
The S&P 500 includes around 500 large cap equity stocks. The index is a market-cap weighted index, which means each company’s weighting is based on its market capitalization, or the total value of all outstanding shares.
The top companies by weight include Apple, Microsoft, Amazon, Nvidia, Alphabet (with two share classes), Meta, Tesla, Berkshire Hathaway and JPMorgan Chase.
Information technology represents the largest sector, with 28.9% of the index. A recent rally of big tech names has helped push the index to its recent highs.
How can you invest in the S&P 500?
Today, investors may choose from mutual funds or exchange-traded funds that track the index. Among the biggest ETFs are: SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF.
Vanguard in 1975 created the first index mutual fund that tracked the S&P 500. Vanguard founder John Bogle was famously a proponent of investing in a broad index fund.
“Simply buy a Standard & Poor’s 500 Index fund or a total stock market index fund,” Bogle wrote in his book, “The Little Book of Common Sense Investing.”
“Then, once you have bought your stocks, get out of the casino — and stay out,” he wrote. “Just hold the market portfolio forever.”
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Here’s where prices fell in December 2023, in one chartFor stock investors who want to keep their strategies simple, experts say the approach can work.
“Among the better decisions people can make is starting with an index-based fund tracking the S&P 500 because it works,” Todd Rosenbluth, head of research at VettaFi, recently told CNBC.com.
Over time, passive strategies have shown better returns than actively managed funds. Moreover, the cost of those funds is much lower compared to active strategies. Together, that combination is hard to beat.
“I don’t think individual investors or money managers can generally outperform the S&P 500,” said Ted Jenkin, a certified financial planner and the CEO and founder of oXYGen Financial, a financial advisory and wealth management firm based in Atlanta. Jenkin is also a member of the CNBC FA Council.
When does it pay to diversify?
The greater a portfolio’s exposure to the S&P 500 index, the more the ups and downs of that index will affect its balance.
That is why experts generally recommend a 60/40 split between stocks and bonds. That may be extended to 70/30 or even 80/20 if an investor’s time horizon allows for more risk.
Moreover, exclusively investing in the S&P 500 on the stock side of a portfolio may be limiting if other areas of the market prove more successful in 2024.
In 2023, the S&P 500 was up around 26% for the year, besting other strategies like a U.S. small cap index fund or an international stock index fund, noted Brian Spinelli, a certified financial planner and co-chief investment officer at Halbert Hargrove Global Advisors in Long Beach, California, which was No. 8 on CNBC’s FA 100 list in 2023.
It may be tempting to throw out those other strategies and just go with the one that did really well last year, Spinelli noted.
“But I wouldn’t go overboard,” Spinelli said. “You shouldn’t be 100% U.S. large cap and let it sit there and expect the same level of returns we’ve seen over the last five years.”
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How our banks Morgan Stanley and Wells Fargo performed against peers this earnings season
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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 1, 2023.
Brendan Mcdermid | Reuters
Earnings from America’s biggest banks are in, and they were messy.
Investors had to look past billions of dollars in special payments to replenish the government’s deposit backstop after the fallout from last year’s Silicon Valley Bank failure. Management teams were also trying to forecast the moving target of how many Federal Reserve interest rate cuts to expect this year.
Here’s how our financial names, Morgan Stanley and Wells Fargo, stacked up against their peers.
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American Express CEO says spending is strong, delinquencies are down from 2019
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Stephen Squeri, chair and CEO of American Express, speaks during an Economic Club of New York event in New York on Nov. 10, 2022.
Stephanie Keith | Bloomberg | Getty Images
American Express CEO Stephen Squeri on Friday said the credit card company saw “good consumer spending” during the holidays and signs of strong overall health for U.S. spending.
In particular, delinquency rates were “lower than they were in 2019,” Squeri told CNBC’s Scott Wapner in an interview at the American Express PGA Tour event in La Quinta, California.
“Our customers are high-spending premium customers, and they are continuing to spend,” he said.
The signs of resilient consumer spending run somewhat counter to persistent inflation. December’s consumer price index increased 0.3%, hotter than the 0.2% expected by economists.
But Squeri said he’s not surprised, adding he’s of the opinion that the U.S. is in the middle of a “soft landing,” slowing spending and bringing inflation down — without spurring a recession.
JPMorgan Chase CEO Jamie Dimon said earlier this week that he remains cautious on the U.S. economy, along with Goldman Sachs CEO David Solomon, who said it’s hard to imagine the number of Federal Reserve rate cuts that the market seems to be calling for in 2024.
“I mean look, recessions do happen,” Squeri said Friday. “The nice part about recessions is there’s always a recovery. … We’ll get through whatever we need to get through, and part of that is because of our customer base, and our colleagues that are supporting our customers.”
American Express reports its fourth-quarter earnings Jan 26.
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CNBC Daily Open: Could better data be a good thing for markets?
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[ad_2]Traders work on the floor of the New York Stock Exchange during afternoon trading on January 17, 2024 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Dow falls three days
The blue-chip Dow Jones Industrial Average fell for the third straight day Wednesday. Wall Street’s other two main indexes also dropped as better-than-expected retail sales data helped lift Treasury yields. In Asia, China stocks hit five-year lows, while Hong Kong stocks rebounded. Sectoral declines were led by mining stocks.Strong retail sales
U.S. retail sales came in higher than expected for the last month of 2023 in a sign that holiday shopping picked up. Retail sales for December increased 0.6% vs. the 0.4% rise expected in a Dow Jones estimate. The rise was driven by clothing, accessories and online shopping.Dimon in Davos
JPMorgan Chase CEO Jamie Dimon was one of the more highly anticipated guests at the World Economic Forum in Davos, Switzerland. Dimon discussed a variety of topics ranging from financial to geopolitical risks. He was also seen praising former U.S. President Donald Trump’s stance on the U.S. economy, immigration and taxes.Singapore minister face corruption charges
Singapore Transport Minister S Iswaran resigned as he faces corruption charges, the first for a cabinet minister in the island country. He pleaded not guilty to 24 charges of obtaining gratification as a public servant, two charges of corruption and one charge of obstructing the course of justice.[PRO] Citi says how to invest in the next AI boom
Citi says it is definitely “not too late” for investors to invest in the “exponential growth” of AI technology. And after Nvidia sparked the AI boom, soaring over 200% last year, the investment bank now names its top plays for 2024.The bottom line
It’s only the third week of the new year and markets are slowly heading into a cycle of good data being received as bad news — at least from an equity standpoint.
Treasury yields, however, have risen this week boosted by comments from Federal Reserve Governor Christopher Waller on Tuesday. The yield on the benchmark 10-year Treasury note continued to trade higher Wednesday, crossing the 4% mark on the back of better-than-expected U.S. retail sales for December.
The data showed American consumers somewhat loosened their purse strings in the last month of 2023. But for Wall Street, that was hardly any reason to celebrate based on how aggressively markets have been pricing in interest rate cuts by the Federal Reserve.
Waller’s comments on Tuesday at Davos about the U.S. central bank taking its time to cut rates this year, came as a sharp contrast to markets expecting the Fed’s first rate cut of 2024 to come as early as March.
“The Fed was already hammering away on its ‘no rush to cut rates’ message, and today’s stronger-than-expected retail sales won’t give them any reason to change their tune,” said Chris Larkin, managing director of trading and investing for E-Trade from Morgan Stanley.
About 55% of traders tracked by the CME Group’s FedWatch tool expect a 25 basis point rate cut in March, falling from 63% a day earlier.
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CNBC Daily Open: Good data, bad news?
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[ad_2]Traders work on the floor of the New York Stock Exchange during afternoon trading on January 17, 2024 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Dow falls three days
The blue-chip Dow Jones Industrial Average fell for the third straight day Wednesday. Wall Street’s other two main indexes also dropped as better-than-expected retail sales data helped lift Treasury yields. European stocks also fell, with British stocks leading regional losses after U.K. inflation clocked a surprise 4% year-on-year rise in December.Strong retail sales
U.S. retail sales came in higher than expected for the last month of 2023 in a sign that holiday shopping picked up. Retail sales for December increased 0.6% vs. the 0.4% rise expected in a Dow Jones estimate. The rise was driven by clothing, accessories and online shopping.Dimon in Davos
JPMorgan Chase CEO Jamie Dimon was one of the more highly anticipated guests at the World Economic Forum in Davos, Switzerland. Dimon discussed a variety of topics ranging from financial to geopolitical risks. He was also seen praising former U.S. President Donald Trump’s stance on the U.S. economy, immigration and taxes.Apple Watch sales banned in U.S. again
The U.S. Court of Appeals for the Federal Circuit reinstated a sales ban on Apple’s watches with blood oxygen sensors. The ban will take effect Thursday, affecting both the Apple Watch Series 9 and Ultra 2 models. The injunction stems from an intellectual property dispute with medical device maker Masimo.[PRO] Cheap energy stocks
The pros say some pockets of the energy market are poised for a jump after taking a beating last year. The energy sector was the second biggest loser on the S&P 500 last year. The CNBC Pro Screener Tool says they could still do well as companies in the sector are cheap and are seen rising over 10% their average price targets.The bottom line
It’s only the third week of the new year and markets are slowly heading into a cycle of good data being received as bad news — at least from an equity standpoint.
Treasury yields, however, have risen this week boosted by comments from Federal Reserve Governor Christopher Waller on Tuesday. The yield on the benchmark 10-year Treasury note continued to trade higher Wednesday, crossing the 4% mark on the back of better-than-expected U.S. retail sales for December.
The data showed American consumers somewhat loosened their purse strings in the last month of 2023. But for Wall Street, that was hardly any reason to celebrate based on how aggressively markets have been pricing in interest rate cuts by the Federal Reserve.
Waller’s comments on Tuesday at Davos about the U.S. central bank taking its time to cut rates this year, came as a sharp contrast to markets expecting the Fed’s first rate cut of 2024 to come as early as March.
“The Fed was already hammering away on its ‘no rush to cut rates’ message, and today’s stronger-than-expected retail sales won’t give them any reason to change their tune,” said Chris Larkin, managing director of trading and investing for E-Trade from Morgan Stanley.
About 55% of traders tracked by the CME Group’s FedWatch tool expect a 25 basis point rate cut in March, falling from 63% a day earlier.
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Jamie Dimon praises Trump, warns MAGA criticism could hurt Biden
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JPMorgan Chase CEO Jamie Dimon on Wednesday praised former President Donald Trump‘s record and admonished Democrats to be “more respectful” of Trump’s supporters, or else risk hurting President Joe Biden‘s reelection bid.
“I wish the Democrats would think a little more carefully when they talk about MAGA,” Dimon said on CNBC’s “Squawk Box,” referencing Trump’s supporters by the acronym of his “Make America Great Again” campaign slogan.
Biden has warned that Trump and “MAGA Republicans” pose an existential threat to American democracy. But he has also tried to distinguish between Trump’s most hardline supporters and “mainstream Republicans,” who Biden says make up a majority of the party.
“I think this negative talk about MAGA is going to hurt Biden’s election campaign,” Dimon said from the World Economic Forum annual meeting in Davos, Switzerland.
Dimon argued that using the phrase “MAGA” incorrectly links Trump’s supporters to the former president’s personality and character.
Democrats “are basically scapegoating them, [saying] that you are like him,” Dimon said. “I don’t think they’re voting for Trump because of his family values,” he said.
The remarks by Dimon, who has donated to Democratic candidates but previously described himself as “barely a Democrat,” came two days after the former president trounced his few remaining Republican rivals in the Iowa caucuses.
In November, Dimon heaped praise on one of Trump’s challengers, former United Nations Ambassador Nikki Haley, who finished third in Iowa on Monday.
Dimon also gave Trump credit for his policy record.
“Take a step back, be honest. He was kind of right about NATO, kind of right on immigration. He grew the economy quite well. Trade tax reform worked. He was right about some of China.”
“He wasn’t wrong about some of these critical issues, and that’s why they voted for him,” Dimon said.
Asked which candidate would be better for his business, Dimon said, “I have to be prepared for both. I will be prepared for both. We will deal with both.”
“And I hope whoever it is will be respectful of other people,” he added.
The White House did not immediately respond to CNBC’s request for comment on Dimon’s remarks.
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Jamie Dimon warns 'all these very powerful forces' will impact U.S. economy in 2024 and 2025
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JPMorgan Chase CEO Jamie Dimon said he remains cautious on the U.S. economy over the next two years because of a combination of financial and geopolitical risks.
“You have all these very powerful forces that are going to be affecting us in ’24 and ’25,” Dimon told Andrew Ross Sorkin on Wednesday in a CNBC interview at the World Economic Forum in Davos, Switzerland.
“Ukraine, the terrorist activity in Israel [and] the Red Sea, quantitative tightening, which I still question if we understand exactly how that works,” Dimon said. Quantitative tightening refers to moves by the Federal Reserve to reduce its balance sheet and rein in previous efforts including bond-purchasing programs.
Dimon has advocated caution over the past few years, despite record profits at JPMorgan, the nation’s largest bank, and a U.S. economy that has defied expectations. Despite the corrosive impact of inflation, the American consumer has mostly remained healthy because of good employment levels and pandemic-era savings.
In Dimon’s view, the relatively buoyant stock market of recent months has lulled investors on the potential risks ahead. The S&P 500 market index rose 19% in the past year and isn’t far from peak levels.
“I think it’s a mistake to assume that everything’s hunky-dory,” Dimon said. “When stock markets are up, it’s kind of like this little drug we all feel like it’s just great. But remember, we’ve had so much fiscal monetary stimulation, so I’m a little more on the cautious side.”
Goldman Sachs CEO David Solomon said Wednesday that while the market environment excluding geopolitical issues “feels better today” than a year ago, he was troubled by soaring U.S. debt levels.
“I’m very concerned about the growing debt,” Solomon said. “It’s a big risk issue that we’re going to have to deal with and reckon with, it just might not happen in the next six months.”
Dimon is no stranger to dire predictions: In 2022, he warned investors of an economic “hurricane” ahead because of quantitative tightening and the Ukraine conflict.
In Wednesday’s wide-ranging interview, Dimon discussed his views on Ukraine, former President Donald Trump, immigration, commercial real estate and bitcoin.
“We have to teach the American public that this is about freedom and democracy for the free world, and that’s why the battle is being fought,” Dimon said about the Ukraine conflict.
Read more: Jamie Dimon says ‘brace yourself’ for an economic hurricane caused by the Fed and Ukraine war
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CNBC Daily Open: The Fed's rude awakening
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[ad_2]U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on December 13, 2023 in Washington, DC.
Win Mcnamee | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Markets start week lower
U.S. stocks started the shortened week lower on Tuesday as investors closely watched fourth-quarter earnings, while tracking an uptick in Treasury yields after a Federal Reserve official said the central bank’s interest rate cutting cycle could be slower than what Wall Street expected. Stocks in Asia were lower, as Hong Kong led losses after tumbling 3%. China shares also fell after the country missed fourth quarter GDP estimates but met its year-end growth target of 5%.Slower pace of Fed cuts
Federal Reserve Governor Christopher Waller said there will be monetary policy loosening this year but the central bank could do it at a slower pace. “In many previous cycles … the FOMC cut rates reactively and did so quickly and often by large amounts.” For this cycle, he said, “I see no reason to move as quickly or cut as rapidly as in the past.”China’s growth
Official data showed China’s economy grew at a pace of 5.2% in 2023, exceeding Beijing’s 5% growth target for the year by a sliver. For the first time since the summer, China posted youth jobless rates which surged to 14.9% for December. The country temporarily stopped reporting the jobless rate for young people last year, saying it had to reassess its methods. Youth unemployment previously recorded a reading of over 20%.More Big Bank earnings
Goldman Sachs and Morgan Stanley reported earnings on Tuesday, wrapping up results for Wall Street’s biggest six lenders. Morgan Stanley’s fourth quarter revenue topped analysts’ estimates but the bank warned of economic and geopolitical risks. Goldman Sachs exceeded expectations, boosted by higher asset and wealth management revenue.[PRO] ‘Buy the dip’
Morgan Stanley highlights its key picks in Europe’s technology hardware sector after a “rollercoaster year” in 2023. The investment bank says the sector could recover as excitement grows around themes like artificial intelligence, advanced packaging, silicon carbide and gate-all-around transistors.The bottom line
Wall Street returned for the first day back after a long weekend, only to be rudely awoken by a reality check from a Fed official.
The blue-chip Dow Jones Industrial Average closed 0.62% lower, while the S&P 500 dropped 0.37%. The tech-heavy Nasdaq Composite ended with a 0.19% dip.
Federal Reserve Governor Christopher Waller said there’s “no reason” for the central bank to “move as quickly” in its approach to lower interest rates this year. His comments were in sharp contrast to the aggressive policy loosening that markets are expecting this year.
Traders still see a more than 64% chance of the Fed cutting interest rates by 25 basis points to 5%-5.25% range at its meeting in March, according to the CME Group’s FedWatch tool. Those bets came down substantially from a near 77% chance of rate cuts on Friday, when data showed producer prices unexpected dropped in December.
In Asia hours, China reported its highly anticipated economic growth figures along with an unexpected print on youth unemployment, which the country abruptly stopped reporting since last summer.
And perhaps for good reason too.
The December reading on jobless rate for young individuals came in at 14.9%, lower than record levels of 21.3% in June.
Dan Wang, chief economist at Hang Seng Bank told CNBC’s Street Signs Asia she was surprised by the improvement in youth unemployment: “I can see that it is a result of government efforts and not so much improving economic fundamentals.”
China’s economy grew at 5.2% for all of 2023, above the 5% growth target it had set for itself at the beginning of the year. For the fourth quarter, it also grew at a pace of 5.2% — falling short of a Reuters poll expectation of 5.3%.
Day 2 at the World Economic Forum in Davos saw plenty more discussions.
Artificial intelligence remained a hot topic, with Microsoft CEO Satya Nadella advocating for its uses, noting that more countries are now talking about AI in similar ways.
“I think [a global regulatory approach to AI is] very desirable, because I think we’re now at this point where these are global challenges that require global norms and global standards,” Nadella said.
Microsoft is a big player in the AI arms race.
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CNBC Daily Open: Fed's reality check
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[ad_2]A trader reacts as a screen displays the Fed rate announcement on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 13, 2023.
Brendan Mcdermid | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Markets start week lower
U.S. stocks started the shortened week lower on Tuesday as investors closely watched fourth-quarter earnings, while tracking an uptick in Treasury yields after a Federal Reserve official said the central bank’s interest rate cutting cycle could be slower than what Wall Street expected. European stocks ended the session lower, with fashion brand Hugo Boss tumbling 9% after lower than expected earnings.Slower pace of Fed cuts
Federal Reserve Governor Christopher Waller said there will be monetary policy loosening this year but the central bank could do it at a slower pace. “In many previous cycles … the FOMC cut rates reactively and did so quickly and often by large amounts.” For this cycle, he said, “I see no reason to move as quickly or cut as rapidly as in the past.”China’s growth
Speaking at the at the World Economic Forum in Davos, Switzerland, Chinese Premier Li Qiang said China’s economy grew by around 5.2% in 2023 — slightly better than the official target of around 5%. It comes as Beijing is set to release official GDP numbers on Wednesday. A Reuters poll also forecasts 5.2% growth for China in 2023. Premier Li also said innovations in technology shouldn’t be used as means to contain or restrict other countries.More Big Bank earnings
Goldman Sachs and Morgan Stanley reported earnings on Tuesday, wrapping up results for Wall Street’s biggest six lenders. Morgan Stanley’s fourth quarter revenue topped analysts’ estimates but the bank warned of economic and geopolitical risks. Goldman Sachs exceeded expectations, boosted by higher asset and wealth management revenue.[PRO] The hunt for quality stocks
Markets have cooled off from the massive gains in the latter part of 2023. Amid this loss of momentum, the pros say investors must look toward quality names. Quality stocks are defined as those that have robust earnings, low debt and a stock price that’s less likely to be impacted by a broad market selloff.The bottom line
Wall Street returned for the first day back after a long weekend, only to be rudely awoken by a reality check from a Fed official.
The blue-chip Dow Jones Industrial Average closed 0.62% lower, while the S&P 500 dropped 0.37%. The tech-heavy Nasdaq Composite ended with a 0.19% dip.
Federal Reserve Governor Christopher Waller said there’s “no reason” for the central bank to “move as quickly” in its approach to lower interest rates this year. His comments were in sharp contrast to the aggressive policy loosening that markets are expecting this year.
Traders still see a more than 64% chance of the Fed cutting interest rates by 25 basis points to 5%-5.25% range at its meeting in March, according to the CME Group’s FedWatch tool. Those bets came down substantially from a near 77% chance of rate cuts on Friday, when data showed producer prices unexpected dropped in December.
Looking across the Atlantic, the World Economic Forum in Davos saw plenty more discussions on the second day.
Artificial intelligence remained a hot topic, with Microsoft CEO Satya Nadella advocating for its uses, noting that more countries are now talking about AI in similar ways.
“I think [a global regulatory approach to AI is] very desirable, because I think we’re now at this point where these are global challenges that require global norms and global standards,” Nadella said.
Microsoft is a big player in the AI arms race.
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Janney's Mark Luschini has a 'less than favorable' outlook toward banks
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Mark Luschini, chief investment strategist at Janney Montgomery Scott, joins ‘Power Lunch’ to discuss big bank earnings and markets.
03:40
Tue, Jan 16 20242:58 PM EST
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