Closing Bell - Closing Bell: Stocks Volatile Following U.S. Rescue of SBV Deposits 03/13/23

Episode Date: March 13, 2023

Markets were on edge all session long with yields plunging as questions swirl about the future path of the economy and the Fed. DoubleLine’s Jeffrey Gundlach gives his exclusive take on the volatility. Plus, iCapital’s Anastasia Amoroso breaks down the banks where she’s seeing the biggest risks. And, EMJ’s Eric Jackson discusses where he sees the growth trade headed from here … and the stocks he is buying during this uncertain time. 

Welcome to Closing Bell. I'm Scott Wagner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the markets, which are volatile, both stocks and bonds reacting to the collapse of SVB, the government rescue, what all of it now means to your money. Here's your scorecard. 60 minutes to go in regulation. Markets on edge all session long. Stocks, as you know, by now gyrating quite a bit. Yields plunging, questions swirling about the future path of the economy and the Fed, and whether its own policy is now altered in a major way. That, of course, is our talk of the tape today. We have a special guest to ask that question to, Jeffrey Gundlach.

He's the CEO of DoubleLine Capital. He joins us now in an exclusive interview. Desperate times call for desperate measures. Jeffrey, I appreciate you being with us. Well, thanks, Scott. It's good to be here. Yeah. What what is your reaction to all this? Well, I've been thinking a lot over the past year or so about a quote from Mark Twain, which I'll paraphrase. It's it ain't what you don't know that gets you into trouble. It's what you think, you know, for sure. That just ain't so. don't know that gets you into trouble. It's what you think you know

for sure that just ain't so. And why I'm bringing this up is it occurs to me that all of us, even old geezers like me, who've been in the business for over 40 years, have experienced nothing but gradually, systematically declining interest rates. So interest rates 40 years ago, you know, it was the early 80s. And we had Volcker come around and slay the inflation dragon, and interest rates started to fall. I remember when I started in this business, and people thought a few years into my career that when rates got to 10%, they thought they were low. And when they got to 8%, they thought they were low, even though the inflation rate was at 4% and falling. And so what I'm getting at here, Judge, is we all think that we know things based upon our experience, and we try to extrapolate them

to help us navigate the future. But all that we've experienced, even an old guy like me, for 40 years has been either relatively stable or declining interest rates. And so now that template I've been thinking about might not be that valuable in helping to navigate what's going on now that interest rates are rising very rapidly, as they've done over the past year. And I've been thinking that, you know, maybe that this interest rate rise that hasn't really occurred for most people's career kind of blindsided people into thinking, hey, here are these treasuries that are down. There was a moment when the 30-year Treasury bond from its peak to its trough was down 50%.

And until about a week ago, it was still down in the 40%. And whenever you have a very large asset class particularly one that's viewed to be safe and it's even uh compelled institutions are compelled to own due to regulation dropping that much it's only sensible to think there's going to be some sort of fallout so this is a very important theme i think a lot of the things that we've come to think that we know just ain't so when it comes to rising interest rates. And obviously, that's the case with this regional bank crisis. And I suspect it's also going to be the case for credit, particularly very far down the capital structure in credit, like the lowest tier junk bonds and bank loans,

where everybody thinks they know what the default cycle looks like and how it develops. But that was only due to falling interest rates. Now that interest rates are much higher, maybe it's going to be more difficult for bonds to be rolled over at higher interest rate levels. I mean, has a high yield bond ever really matured? Aren't they all just default or refinance because there's stable and a step function lower in interest rates? And so companies over and over again got the ability to refinance, but they can't refinance now. So one thing that I'm thinking about in the markets is that with this sharp rise in short-term interest rates and obvious stresses developing in the system,

we should probably be very nervous about the lowest tiers of floating rate debt, like triple C rated bank loans, which we're having to pay about, I don't know, eight or nine, six or 8%. And now it's more like 10 or 12% with interest rates higher. So one thing that is curious about the last few days is the speed and, I would say, abandon with which the response came. I mean, it took forever back in the global financial crisis for people to change the rules and say that, OK, it's OK to default on mortgages and this type of thing, even though it's against the prospectus of the securities and so forth. Here we've already got this amazing situation where the Fed is accepting bonds that are worth 70, 80, 60, 55 cents on the dollar,

and they're accepting them against loans at par. So the rapidity of the response is impressive, I guess. But also, it suggests an inflationary outcome. The Fed doesn't have any money. The Fed is losing money. Dick Bovee was on CNBC Asia yesterday late in the afternoon talking about how the Fed's net worth, if you actually mark them in the market, is negative $1.1 million. So the only way to actually backstop securities that are worth, you know, 70 cents on the

dollar and loan 100 cents on the dollar against them is to print money. And so this is why I think that we have the yield curve movement that we have today, where the long bond is at this moment up in price less than the two-year treasury. So the yield curve is steepening tremendously, de-inverting is what I should actually call it, which is really the last signpost that the recession is coming sooner rather than later. So I'll stop there, Scott. This is moved. This is moved up, Jeffrey, your recession timeline, it sounds like. I think it has to, because this is one of the things that I use indicators that are again, maybe maybe I think I know something that I don't know because I'm using the past again. But I do think that one of

the indicators that had not been signaling recession was the yield curve was getting steeper and steeper. And in all the past recessions going back for decades, the yield curve starts de-inverting a few months before the recession comes. And so since we were at peak inversion last week, it was unlikely that we were going to go into a recession even in the next four to six months. But at this point, with the de-inversion happening, the four to six month time window is starting to seem much more plausible. You know, this event, people have been saying all day long and it's sort of obvious, has

to be massively disinflationary. Now that you have all of this concern in the market, you don't think so? Well, first answer that question, then I'll ask you about what the Fed does from here. I think that the inflationary policy is back in play with the Federal Reserve, obviously, putting money into the system through this lending program.

And so this resolution that Jay Powell has been adamant about since last August or September is no longer really in play. So, yeah, it could be disinflationary in the near term. But it seems to me that the response is one of instant backstopping. And to the extent that banks, regional banks have further pressure, which may or may not be the case thanks to this action. But if it is the case, there's just going to be more more inflation. So I think I think this is an inflationary policy. It might be it might be good for risk assets in the near term because risk assets love inflationary policy and expansion of the Fed's balance sheet, which has been out of the room for quite a long time.

But what's interesting is stocks are doing well today. What's not doing well are junk bonds, which are down in price, bank loans, which are down in price. Emerging market debt is basically unchanged. Even corporate bonds in the investment grade category are lagging or more lagging fairly substantially. Treasuries have started to give back some of their gains so uh i believe that that this is really throwing a wrench into jay powell's uh game plan because as you open the segment desperate times desperate measures and so you just kind of throw everything away and uh you know, I think there's the inflation fight is temporarily being abandoned.

So the economy might be have less demand. But the policies that are in response to this crisis are inflationary policies. When when you say the inflation fight is, quote, being temporarily abandoned, what does that mean mean you're suggesting about their policy moving forward? What happens on the 22nd of March and beyond? Well, I think the Fed at this point will probably raise just 25 basis points. I would say at this point, the chance, things are happening so quickly that even though it's a week away, a little over a week away, anything sort of happened. But things are happening so quickly. I just think that at this point, the Fed is not going to go 50.

I would think 25. And I know that people are wondering if they're going to go up at all. I just think to save kind of the program and their credibility, they'll probably raise rates 25 basis points. I would think that that would be the last really the last increase. Yes. I'm surprised to hear you say that. I would think that, you know, this has caused such an earthquake or certainly some pretty serious tremors that they might not do anything in in March. But you

actually think they still would go in the name of their own credibility i do think so uh... we'll see what the inflation numbers come up this week i mean who knows if they're really relevant in the context of of this banking crisis but i do think i i think the fed will will raise rates twenty five i i do i i i i i

i wouldn't do it myself. But what do you do in the context of all this messaging that has happened over the past six months? And then something happens that you think you've solved, or I think the administration thinks they've solved it. And although it's a sleight of hand, it's sort of a magic trick to accept bonds of power that are worth 70 cents on the dollar. But I think I think it has clearly calmed the waters. But but the Fed, I think, will raise rates 25 basis points. It's just I think in the market pricing, I think it's kind of a point flip right now. Wow. Because, I mean, you know, when you see what's happened with, let's say, the two year yield, which is, gosh, it was down 100 basis points over three or four sessions, you've always maintained the case that the Fed follows the two year. The suggestion that, Jeffrey, that the Fed

chair left us with last week was higher, faster longer that seems to be on the precipice right now no right i mean i'll put it this way it'll be proof positive that the fed follows the two-year if they don't raise interest rates proof positive because as you just said correctly judge one week ago one short week ago it was higher longer, longer, you know, more than before, and all this other stuff. And then a few days later, but they're going to go to no hike. Then they're simply, absolutely, positively, if the Fed doesn't raise rates next week, we should absolutely shutter the Fed and just use the two year, which I've been saying facetiously for quite some time. But at this point, it would just be blatantly obvious that they're following the two year

if they don't raise rates. I mean, maybe they're just reading that. Maybe they're just reading the room. Why wouldn't they just be reading the room and reacting to if they're so dependent? I mean, what gets what's a more credible piece of data than a bank or two banks collapsing? That's not an economic report or a, but you know. The room is the two-year treasury. That's what the room is. If you're reading the room, you're reading the two-year treasury. And so they would, they would not raise interest rates based upon the two-year treasury. And yet, again, it's so fascinating that officials didn't see this coming.

I mean, we've had a huge repricing of one of the biggest markets in the world, the U.S. Treasury market. And whenever you have a huge repricing of something, somebody's out there swimming without a bathing suit. And I'm not saying that Silicon Valley Bank did anything particularly wrong. They did the classic thing. They were borrowing short and buying long-term fixed-rate securities, which, by the way, is exactly what the Fed's been doing.

And that's why what Dick Beauvais is saying is correct, that they own all of these treasuries that are massively underwater. They did it in quantitative easing. So the Fed doesn't have any money. So the only response to crises right now is printing money. And that's why I think we have a steepening yield curve or a de-inverting yield curve. We don't have the long bond going up even as much as the two-year today. You mentioned one of these so-called carry trades, I suppose. Marco Kalanovic of J.P. Morgan sent out the following note just before you came on, and I want your reaction to it. He says, quote, there are many carry trades that they can't all be bailed out. When the economy is slowing down and financing costs are rising, all these implicit or

explicit carry trades are pressured to unwind, leading to an end of the cycle. We believe we are in that stage and remain negatively positioned on risky asset classes. As such, we maintain a defensive tilt in our model portfolio, further increase our underweight to equities versus raising our cash allocation. What's your reaction to that comment? I think he's on to something when he says you can't bail out every carry trade. And we've gone through so many bailouts in response to every recession. And the last one, you know, we had to bail out the entire banking system. And this time we might have to bail out the Federal Reserve. We have to run an inflationary policy when we have the need for counter cyclical

stimuluses. And yet we don't have any money. This is really this growing problem, the ultimate problem. I've been talking about, Scott, as you know, sometimes in the corners of the room, sometimes in the center of the room, we have 700 percent of GDP in unfunded liabilities. We cannot pay them back in today's dollars. It's simple arithmetic. And the Social Security system trustees say they're going to run out of money in nine years under the assumption of no recession for the next nine years. They're going to run out of money before then. We're going to have to deal with these problems. And unfortunately, the easy way to do it politically is to run more inflationary policies to never allow defaults so i agree with

the sentiment particularly in that note that you should be avoiding the lower tiers of credit particularly floating rate credit like the play this is a really really problematic situation where we have triple c rated bank loans yielding uh.7% to maturity, assuming no default. Obviously, the market is telegraphing very substantial defaults and insecurities. And the lending standards being tightened over the past year is a precursor to higher default rates, particularly when this recession, which now appears to be almost guaranteed to occur in 2023, really starts to gain momentum. So I'm sorry, before I let you run, I mean, has the as your own in your own mind, the investing playbook, has it changed somewhat given the events of the

weekend, the move that we've seen in yields? I can't tell you the number of people who've come on the network over the last many months and said, yeah, short-term treasuries, great trade. Bonds are so cheap, generational opportunity. I'm wondering what you think today. I have not changed my game plan because it's working very, very well. I've been advocating for quite some time

a barbell of long-term treasuries, 10 years and longer to offset the credit risk that one takes to get yield. And that's working very well, because the treasuries are playing their role. And credit is not really collapsing, but it's definitely stumbling. And I think that as the recession comes, we'll see greater tiering in credit. So I think that my game plan hasn't really changed. I've been moving up in credit for the past 18 months systematically and increasing treasuries, particularly at the long end.

And I've been sleeping very soundly these last several nights, even though there's a lot of anxiety in the air because this barbell portfolio with middle tier credit and long term treasuries is the perfect recipe to survive comfortably in this situation. I'm going to make that the last word. I told you I was going to take 15 minutes of your time. I've taken a few more and I hope you'll, you know, you'll forgive me for that. But we'll see you soon. No problem. You both got. Yeah, you as well. That's Jeffrey Gundl soon. No problem. You both, Scott. Yeah, you as well.

That's Jeffrey Gundlach, DoubleLine. Important to hear from him today, given all that swirling around, the way that bond yields have moved, what the implications are for the Fed. And you heard it there. He expects 25 basis points in a week or so, which, you know, is against the grain in some respects from what's being talked about on Wall Street today. You have a number of notes out. Barclays today says zero or 25.

Goldman Sachs has gone to none next week from Jan Hatsias as well. On that note, let's get to our Twitter question of the day. What will the Fed do? Will they pause? Will they go 25, as Mr. Gundlach suggests, 50 basis points maybe? You can head to at CNBC Closing Bell on Twitter. Please vote. We'll share the results a little later on. In the hour, we're just getting started here on Closing Bell.

Up next, iCapital's Anastasia Amoroso gets her instant reaction to Jeffrey Gundlach's big call there, plus her forecast for the banks, where she's seeing the biggest possible risks and bright spots in this volatile market. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back. We just heard from DoubleLine's Jeffrey Gundlach telling me moments ago he expects the Fed to raise rates another 25 basis points next week to save its credibility. Let's bring in Anastasia Amoroso of iCapital, chief investment strategist there. It's good to see you here. Good to see you, Scott. What's your reaction to that? I was kind of surprised to hear him say that. I was surprised, given the number of calls that we saw for zero rate increases. But actually, if you think about it, maybe it's not all that surprising. The reason the Fed, the FDIC and all the other policymakers

stepped in so quickly, so swiftly, is because we're there trying not to give up on the inflation battle. So what they're trying to say, look, we've sort of stabilized in their minds the banking system because all the depositors, whether explicitly or implicitly, have all of their uninsured deposits guaranteed. So that helps. And at the same time, the banks who need the extra liquidity, they have this new facility. So that should ring fence the regional banking sector so they can say, look, this financial instability situation should be stabilized. And at the same time, you know, we get the CPI report tomorrow. They're probably looking for some easing in CPI, but not enough. So they can still, you know, have the reason to raise rates 25 basis points.

So I think that's why we saw this weakness of the response. I almost feel like and I'd like your opinion to this, that why wouldn't the CPI, which is so backward looking at this point, be irrelevant? Just given the dramatic developments in the last few days? Who cares what the CPI says for last month? We had a crisis on our hands and we may still be in it. And we seriously don't know the full outcome or ramifications from what's just happened. I mean, the reality, this is a coin toss as far as zero twenty five basis points goes goes because so much could still happen between now and next week. And, you know, you're right to say that the CPI is sort of a nuisance when it comes to the totality of the financial dislocation. I think there's also a chance that the Fed can say, look, you know, the cost of, you know, the opportunity cost of increasing 25

basis points is just not that great when we have already raised rates by 475 basis points. So why not wait and why truly see this financial situation stabilize? So maybe the decision maker is going to be what do the regional bank stocks actually do? Does the price action stabilize into the FOMC meeting? And perhaps if it does, then we go for this 1 in 5 basis points. But if not, you look at credit spreads, you look at equity prices, and perhaps you do pause. I think everybody who comes on needs to be asked the same question of, does your investment playbook change today relative to where it was not even a week ago? Let's put ourselves on the aftermath of Powell on the Hill, higher, faster for longer. Here, we may be in a different environment. As your own thought process changed on that.

It hasn't much at this point, Scott, because of how quick the response has been. My thought process is that the S&P can hang around these current levels. And I don't think the recession is imminent at these level of rates. Look, this economy can withstand five, maybe five and a half percent rates. And I'm not talking about this locations we're seeing now. I'm talking about the consumer. For example, the fact that the consumer has $70 trillion of cash on the balance sheets and they're getting paid close to 5 percent. That's why they're pulling money out of some of these banks. You know, that's a big stabilizer for the economy. So I don't think we have to have a recessionary multiple. And the reason why we're seeing the price reaction we're seeing in the markets and maybe gives me a little bit more confidence is if the Fed pauses or if the Fed

steps down to 25 basis points, that's good for multiples. That's good for earnings as well. Well, I mean, Gundlach, you heard him say that it might be good for, you know, if they do nothing, it might be good for risk assets. That's right. I mean, this is an incredibly uncomfortable environment for investors because you really have to look at it week by week month by month and you can't really kind of you know play this out six months from now. Near term I do think this is the economy that by the way stabilizing consumer sentiment is picking up maybe last week notwithstanding you know and this is maybe somewhat inflationary so I think risk assets can at least stay stable but at the same time we know what happens next you know if things are so stable, indeed, that inflation is going

to start heat back up and especially in the second half of the year. And the Fed will have to say this economy can stand five percent rates. Let's go to six and a half. And so that's the risk that's looming out there. So I wonder if that risk, frankly, is off the table, given what we just saw happen from all that they've done, whether the highest calls for the six, and in some cases you've even had someone suggest seven in the last six months, that that scenario is off the table completely. I mean, the market would tell you that. The market are pricing in rate cuts in July.

But I wouldn't completely throw off the table because if this is an economy that's still stable and they manage to stabilize the banking sector, once again, all the depositors are safe. And if you look at inflation math and it tells you that year over year numbers are going to start to creep back higher, you know, start June or July, I think the Fed may have to say we have to do a little bit more. So, I mean, that's one of the biggest risks in the market that I think, you know, March may be a pause, maybe it's 25 basis points, but then there's huge repricing, you know, kind of in the back half of the year in the bond markets that may have to happen. Would you invest in financials or urge people to do so today? And I ask you this not because of perceived, you know, risk, but because of the changing landscape, maybe more regulation, maybe higher

interest on deposits, which changes the whole net interest margin game in and of itself and thus the profitability of banks. So here's the things that I would do or would not do. I would not try to catch the falling knife in regional banks because there's commercial real estate risks. There's still the debt interest margin pressures. There's the fact that they're not as liquid and the capital ratios are not nearly as good as the large G-sib banks. So I would not catch that falling knife. However, if you look at investment grade corporates, financials, for example, the spreads have widened out. They're trading close to 6%. This is a high quality asset.

I would absolutely look there. And the last thing, Scott, if, you know, whether it's zero basis points or 25 basis points, the Fed may have to sort of, you know, pause or consolidate here, which means it's good for tech. And that's why tech is one of the leading sectors today. Yeah. All right. Anastasia, thank you. That's Anastasia Amoroso again, iCapital, joining us here. Let's get a check on some stocks to watch now. As we head closer to the end of this session, Christina Partsenevelos is here with that. Christina. And today's theme that I'm going to focus on, safe havens.

Gold prices jumping today, hitting a four-week high, given the dollar's decline and fallout, of course, over SVB. The jump in gold futures is pushing up the gold miners ETF that you're seeing on your screen. The second line there up 2.2%, led by Harmony Gold and Goldfields, both at least right now above 10% higher. Goldfields up 12%. And then lastly, Nupon Corp, another huge miner jumping 7%. And volatility in treasuries is helping some of the sectors with above average dividend yields like utilities and real estate. So big wingers there are cell tower and storage names like SBA Communications and Public Storage. And then you also have Con Edison leading the utilities pack. It's up about 2.2 percent. The ETF XLU up about 1.4, 1.5 percent. Scott?

All right, Christina, thank you. We'll see you again before we're done. Up next, debating the growth trade. Is there still upside ahead in some more speculative stocks? Despite all of this uncertainty, we will discuss that with EMJ's Eric Jackson. He breaks down the names he's still betting on just ahead. Closing bell right back. We're back on closing bell. Nasdaq 100 attempting a comeback today as regulators cushion the fallout from Silicon Valley banks failure. Our next guest says the knock on effects should benefit tech and growth trades. Let's bring in Eric Jackson. He's the president and founder of EMJ Capital. It's good to see you

on this important day. Why is this going to benefit tech and growth? Well, in the last 24 hours, we've seen disinflation expectations soar. We've gotten assurances that depositors are going to be backstopped. We've seen the twos tens inversion basically go from minus 110 bps last Thursday to sort of cut in half to minus 55 today. Ten years dropped like a stone. All of these things are extremely bullish tailwinds for tech and for growth tech. And so, you know, there are probably plenty of other shoes to drop. So I can't declare victory or anything. I think we're going to have to see what happens over these next few days. But I think there's reason to be optimistic that if the economy can keep going,

the setup here from all of these changes in Fed expectations is going to be most bullish for growth tech stocks. I know I'm troubled, though, by you suggesting there are plenty of other shoes to drop. Those were your words, not mine. And then still urging me to look at areas of the market that are attractive. I'm confused a little bit by that. And you know, I'd be troubled if I'm sitting there trying to think about, well, should I go invest in the market right now or take advantage of some of the dislocations that we've seen? Even if I think Eric says, though, there could be more shoes to drop. Well, I think you need to be cautious in this environment. I mean, a week ago, Scott, I didn't expect, you know, to have this sort of mother of bank

runs in these past few days. I think a few others did. And so you just have to be humble and kind of, you know, take a wait and see approach. However, you know, mid last week before any of this stuff started happening, Goldman put out a note which said that the Nasdaq had started to outperform the S&P in something like six of the previous seven sessions. So there were reasons to think that the recent pullback in tech stocks in general had gotten to a point where now tech was ready to kind of resume some leadership. And someone picks up the snow globe and shakes it violently. Now we have people like Gundlach talking about easing. Dick Bovee was on CNBC late last night talking about the Fed's got to ease. And just having

that talk out there, that's just all extremely bullish for tech. So I think you want to look around. I didn't do anything today, but I certainly wasn't panicking in the morning trying to get out of positions because I thought that this was more bullish for tech and had the chances for a good setup. Things are going to clear over the next few days. Maybe it'll take a week, maybe a month. But I think that the opportunity is still there for a bullish environment for a lot of growth tech names, which have already been seeing their multiples really pounded down over the last couple of years. Well, we shall see. We definitely shall see. I know we'll talk to you again soon. I mean, by the way, I mean, Gundlach may have moved his time frame up of expectations for Fed easing,

but he still thinks, as he said, they're going to 25 basis points next week. We'll have to watch all that. We'll talk to you again soon. Eric Jackson, thank you very much. Stocks all over the map as we head into the close. Got about 24 minutes to go. Got you covered after this quick break. We'll keep it right here on Closing Bell. A volatile session for sure. Take a look at stocks here. The majors are holding on to the green. The Nasdaq's the outperformer today, still up 1%. Russell, though, is down about one and a quarter percent. Let's bring in Sandhill Global Advisors Chief Investment Officer Brenda Vangelo. She's with us now. It's good to see you. I mean,

with a name like Sandhill Global Advisors, I can only imagine you guys must have been in the thick of it this past weekend. What can you tell me about that? Yes, thankfully, our firm does not have exposure, but certainly have a lot of clients who are founders or who do personal banking at Silicon Valley Bank, even nonprofit organizations that were banking with Silicon Valley Bank. So it has certainly been a tumultuous last several days of lots of ups and downs, especially late last week when there was a lot of concern about not meeting payroll this week. So glad that that situation was remedied over the weekend. But I think it still doesn't help from an overall confidence standpoint. It's

still a mess. So certainly I don't think it's not great for sentiment in this part of the country where we already have a situation where many tech companies were doing layoffs and other things. It definitely adds to that bad sentiment. Yeah. No, I can imagine. I mean, has what you've seen and now thought about as a result of what you've seen changed or colored your investment perspective now? You know, when we entered the year this year, we actually took some exposure out of equity and added bonds because we felt that the risk reward was better on the bond side. And we started to doubt that decision in January. But now we're pretty thankful that we're still there and think that in this as there's potentially uncertainty grows. But I will say I'm hopeful that stays contained. For the time being but it is

certainly at. A sign that we've been waiting for something to break and it has broken. As so even though this may not be a systemic problem across the banking industry. It certainly is a standout with two of our you know essentially local

banks here with Silicon Valley bank and the now first Republic bank which looks like it's suffering from. Some similar problems. Yeah Brenda we'll talk to you soon. I appreciate you coming on today. That's Brenda Vangelo. As you see, Sandhill Global Advisors. It's your last chance to weigh in on our Twitter question of the day. What will the Fed do now at the next meeting? Pause, go 25 like Gundlach suggested earlier in our show or go 50?

Head to at CNBC Closing Bell on Twitter. The results are coming up after this break. To the results of our Twitter question, we asked, what will the Fed do at its March meeting, the decision coming next week? Will they pause like 25 as Gundlach suggested or go 50? 25 is what all of you think. The majority, anyway. 51.8, near 52%. Agree with Mr. Gunlock.

Up next, star Wedbush analyst Dan Ives is back. Get his take on the SVB fallout and the impact on tech. That's next. We're now in the Closing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Meg Terrell on Carl Icahn's fight with Illumina. Those shares surging today. And Wedbush's Dan Ives on how the SVB collapse could impact tech for years to come.

Mr. Santoli, we begin with you. We had Gunlock, top of the hour, about the Fed and everything else. Here's what he said about the Fed. Santoli, we begin with you. We had gunlock top of the hour about the Fed and everything else. Here's what he said about the Fed. We'll talk on the other side. The Fed is not going to go 50. I would think 25. And I know that people are wondering if they're going to go up at all. I just think to save kind of the program and their credibility, they'll probably raise rates 25 basis points. I would think that that would be the last the last increase. All right. That's Gundlach. I was honestly a little surprised. I thought he was going to suggest that the Fed wasn't going to do anything. Yeah, I think the Fed's preference is probably to

stick with at least a quarter point raise. You know, that is an assertion that normalcy has been restored. You know, we don't know exactly what spillover effects might be from the sort of regional banking crisis of confidence that we have going on right now. Maybe they'll actually have a little bit of a window on that in terms of gauging the utilization of this asset swap, you know, deposit backstop program that they started. But I think in general, clearly the CPI might matter a little bit but it's much more about trying to seem as if you know we were coasting to the end as opposed to panicking and reversing. So a lot depends I think on on how the economy operates here. What I do think is interesting is the dramatic moves in bond yields. Everyone saying wow now the bond market expects you, some big cuts later in the year. I mean, maybe. I just don't think we're getting a very clean read on this because what came before matters a lot. What came before was the two-year yield barrowed from 4% to 5% in five weeks.

Everyone got massively short the front end of the Treasury curve. And then there's been this huge squeeze that probably overstated the degree of the yield decline. All right. Meg Terrell, Illumina, that stock was surging today, right? I talked to Carl Icahn last night. He's ready for a fight. And Illumina is punching back today, right? Yeah, Scott, you know, this really brings me back to like a decade ago when Carl Icahn was really active in biotech and his proxy fights really caused things to happen. You saw Genzyme get sold to Sanofi as he got into that stock. However, he did lose his key lieutenant in biotech.

That was Alex Denner, who formed his own fund. He doesn't have a biotech guy now. These three folks that he has nominated to the board aren't coming from a health care background. And so that is really where you're seeing Illumina take issue with the arguments you're seeing coming from Carl Icahn here. In addition to his fixation, his focus on this Grail acquisition, that is probably why shares are going higher today, because you're hearing a lot of feedback from the biotech world saying some investors really do want Illumina to get out of this Grail acquisition. They see it as a headache. They see it as something that's dilutive or something that's just sort of dragged on for a long time. However, people who

support the deal really see this as a huge opportunity for Illumina. And from conversations that I've had around the biotech space, this is something that biotech companies are potentially interested in partnering with Illumina on because of the power of being able to potentially detect cancer at the very early pre-symptomatic stages with a blood test. So it's going to be a really fascinating thing to watch, Scott. But you can see that stock reaction, 17 percent. Yeah, they released a statement a little while ago in a full response calling ICON's letter neither recognizes the real value that grill can provide to Illumina shareholders

nor reflects an understanding of the regulatory process. So this thing is about to get pretty contentious, Meg. Yeah, it seems that way. I mean, I'm not sure you would know better than I because you know Carl Icahn so well, but does he do anything that's not contentious? So I guess we're going to have to see how it goes. Can they reach some kind of agreement here or does this go to a full on proxy battle? And then, you know, how does that end up shaking out when the vote is taken? All right. You raise a good point. We'll see what happens. Meg, thank you. That's Meg Terrell following Illumina today, which, as we said and showed you, is surging. Dan Ives, tech's doing pretty well, too. So what's your perspective here on all that's happened and what

you think it means? Look, I think SVB, I mean, they were the hearts and lungs of the banking community in the Valley. I think the ripple effect here is going to be significant for years to come because ultimately from an early stage and even mid-stage financing perspective, it's going to put a lot more pressure on these companies. And I think that's really the story here in terms of the ripple effect. I mean, when you think about the kinds of companies that you cover, generally speaking, the larger tech ones, does it have any impact whatsoever on your projections for what their earnings could be, whether the stocks are as attractive today as they were a few days ago?

Well, I think, look, there's about 12 to 15 percent of the end user base. When you go from Microsoft down across software, you're selling to startups, early stage, mid-stage companies. And I think that's something right now the worry is, OK, if some of, early stage, mid-stage companies. And I think that's something right now the worry is, okay, if some of those go away, they can't get financing, no longer the daddy warbucks of Silicon Valley in terms of SVB. Now you can't get those loans. You can't get that venture lines. What does that do? We believe ultimately it's going to lead to haircut and valuations. M&A is going to be accelerated. And I think really the clock struck midnight here. I think this is a big change for potentially a decade that we're seeing in the Valley. When you say, I want Mike's response to this too, when you say haircut valuations, for who are you talking about? Yeah, I think for a lot of

these companies still walking around with hubris in terms of where valuation was, I think ultimately this is a game changer. Because right now, from a venture line funding, that essentially goes away. Now you're going to have to seek alternative financing. VCs are going to have to ultimately tighten the belt on a lot of their startups and portfolio companies. And some are going to be left on the outside looking in. Mike? I mean, the process has been underway. I wouldn't be surprised if this accelerates it.

I mean, most of these companies are, you know, they're equity finance for the most part. It's not like they're massively leveraged. But it has everybody looking at the things they were already looking at just harder. Cash burn rates. What are your relationships with it? The risk appetite for, you know, backing any new or young companies, probably, you know, higher hurdle right now. I think from a public investor's perspective, you might have to make tweaks around the edges. But I think it's the stability of the very large,

you know, giants of the Nasdaq that matters more in a moment like this than whether we're going up or down a nickel in earnings per share this year. But do you think that money from investors could move away from some of those companies that you're talking about and only strengthen the investor base, so to speak, of the Microsoft, the Apples, etc.? I think the strong gets stronger. And I think ultimately Apple could potentially more aggressively go on the banking side. And I think from an M&A perspective, you're going to see right now an acceleration of M&A come out of that 415, 408 area code. All right. It's good to see you, Dan Ives. Thank you for being here. An important day. Mike Santoli, we've got about three

minutes to go here. I want to get your reaction to some of the other things that Gundlach had to say. Triple C rate bank loans, another area to watch. That's number one. And you always look down the risk curve in credit. He says the risky areas of credit, including high-yield corporate bonds, watch out for them, too. Yeah. No, they've started to notice, obviously, and they represent a tightening of financial conditions. So it's not really a rush away from these areas. It's definitely, though, we've seen the best times in terms of credit spreads and in terms of generous loan terms. And we're going to have to deal with what

that means for valuations right here. So, you know, I think that there's a good debate to be had as to whether this really did touch off the real countdown to some of the other things that people expect on the way to a recession. You know, talking about writing down commercial real estate assets, that's one of the reasons regional banks are getting smoked, is because they have a lot of other kind of losing assets that they haven't yet recognized. So, you know, on the other hand, I can look at this morning's action in the market and say, wow, that was a good little panicky flush we got in the morning before Europe closed. We got the VIX to 30. We were already getting a little bit oversold. If we're getting a Fed pause earlier than we thought we were, the cost we've assumed for it that we know

about right now in terms of Silicon Valley Bank and what's been done for it is maybe not that high economically. So I think there's a way to play both sides of this at this point. We don't really know that we've broken something that's irreparable. What we've known is we've got another little stress point in the economy, in the financial system. They're trying to address it. Whether it's contained or not, we don't actually have a sense right now. You have to believe, you know, the Fed, they're not naive to what they've done or thinking about the ideas of breaking something. But it seems like they were a bit caught by surprise, too, with the speed of this, how it all went down and how quickly they had to make a policy decision.

But if they didn't fully understand what their actions already have done. Right. And now they get a wake up call. I wonder how that influences them going forward. Here's the thing. The part that we were able to understand beforehand is we knew what bond values went down to. We knew what the haircuts on the hold to maturity portfolio and the available for sale portfolio at Silicon Valley Bank was. What the Fed or nobody else knew was the depositors are going to stampede away

from some unknown catalyst, right? They raise capital at this moment before they divulge what was happening with the losses. And that caused the deposit stampede away. You couldn't necessarily handicap that. I think one of the good parts of what we're seeing is, again, it's losses in bonds we knew about, right? We didn't have some surprise exotic securities that surfaced out of nowhere, which is what happened 15 years ago. So the Dow is going to go out with a loss today. Keep your eye on bond yields, too. The 10-year is under 4%. As I see it now, 398, a big, big...