Closing Bell - Closing Bell: Who is to Blame for SVB’s Collapse? 3/28/23

Episode Date: March 28, 2023

Where was the Fed and other key regulator as SVB’s practices were repeatedly flagged by officials for years? We debate who is to blame for the bank’s failure with Nick Timiraos of the WSJ. Plus, former US Deputy Treasury Secretary Roger Altman gives his expert take on the matter. And, we debate the resilience of the tech rally with Plexo Capital’s Lo Toney.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with this pressing question. Who knew what and when about Silicon Valley Bank's troubles? And why was it more done before the bank teetered on the brink of failure? We get into more of that in a moment. First, your scorecard. With 60 minutes to go in regulation today, stocks fighting it out all day long as some of this quarter's biggest winners lose a little steam today. Tech and com services dragging things down. The Nasdaq under the most pressure. You see it there. Names like Microsoft and Apple. There they are taking a bit of a breather today. Rates tracking higher, perhaps putting some pressure on the growth trade overall.

Energy, the leader looking to bounce back even more. All of this leading us to our talk of the tape. Where was the Fed and other key regulators as SVB's practices were repeatedly flagged by officials for years? By the time the sirens were really blaring, though, it was too late. The collapse, the second largest bank failure in U.S. history. For more, let's welcome in The Wall Street Journal's Nick Timuros. He does cover the Fed. It's good to see you. It is a pressing question because, as we know now, the bank was on notice since 2021 and throughout 2022. And we're going to show you on a wall that we made

all of the times that issues were flagged. And the bank's management is going to have to answer for that at some point. We know that. But here it is back since November of 2021. I want to know, in your mind, to what degree is the Fed culpable here? At the bare minimum, were they asleep at the wheel, Nick? Scott, that's the right question. And, you know, it's not satisfying to say it's too soon to know. Obviously, when a bank fails following a period of elaborate redesigning of regulation, which is supposed to stop these sorts of things from happening, and because interest rates were going up because the Fed was trying to get ahead of inflation, you know, that's a problem, that it required such aggressive intervention by regulators. So I think the question here is, did supervisors have their finger on the pulse of what was happening, but failed to escalate it in a timely way? And why not? Or did the board in D.C. not take the warnings from bank examiners and supervisors more seriously? Should they have been doing a better job of understanding what the effects were of their monetary policy on the banking sector? I mean, these are all questions that need to be answered.

They're going to get answered. I just don't know if we know the answers right now. Yeah. We know that the Fed was told in February of 23, right, last month, of some of the more severe issues that might be plaguing the bank. We don't know what happened after that, what the Fed thought, what the Fed did. Do you think we ever will? Well, I would hope that we will. I mean, eventually all the all the facts should come out. We had a story in the paper yesterday where we

talked to Eric Rosengren, the former president of the Boston Fed. And I think he made an important point, which is that, you know, the supervisory process is iterative. It is not built for speed. It isn't made to move rapidly. And so this may be, you know, the first sort of test of the 21st century potential for runs, right? These sort of social media. The fact that sort of shocked me really out of the hearing today was when Michael Barr, the Fed vice chair for supervision, said that after losing $42 billion in deposits on Thursday, the bank management told regulators on Friday morning they thought $100 billion more might go out the door on Friday. So 85% of your deposits could move that quickly. I do think that's a game changer for thinking about the stickiness of deposits, especially these business deposits

that were thought to be even stickier. You know, our own Steve Leisman was flabbergasted by that as well and tweeted as much, which begs the question, it's not like mobile banking, Nick, is new. Did the Fed not appreciate the degree to which money moves in our system? And if not, how in the world would that be possible? Well, yeah, it seems very likely that people didn't appreciate how quickly the money could move. This was the bank that didn't seem to be in obvious distress on Tuesday. But after that announcement of a capital raise on Wednesday night, all hell broke loose on Thursday. So, you know, the other fact that got my attention, which was in Marty Gruenberg's testimony, the chair of the FDIC, that the top 10 accounts or depositors at this bank in aggregate had $13.3 billion.

So the concentration risk and the ability for those concentrated deposits to move very quickly, I do think that's a game changer here in terms of thinking about, well, this is what we thought we knew about, you know, money and banks and deposit run risk. You know, I can't help but also think, you know, we whenever there's a change in any level of leadership within the Fed, we mention these titles, we throw out names of people and we say, well, you know, there no one has been confirmed yet. The seat hasn't been filled. And in this case, it appears to be so acute because the vice chair of supervision role went unfilled for nearly a year. At the very time, the issues that I showed you on our wall at the top of this interview were happening, which begs the question, do you think that played a role in any way? I think that's a really interesting question, Scott.

So, you know, Randy Quarles was the vice chair of supervision. His term had a fixed end date in September of 2021. Even though he was on the board after that for a few more months, he was no longer the vice chair of supervision. And of course, President Biden's nominee, which was a second nominee for the job and michael barr doesn't get confirmed until july 2022 so those mras and mrias

that you were referring to earlier a lot of that activity is getting flagged during a period where there's nobody in that top seat and it'll be interesting to see whether that could have had an effect if you don't have you know somebody somebody who's the king or the queen in that job, does that add an extra layer of inertia to this whole process? San Francisco Fed president. Mary Daly is still, you know, the chief, if you want to say the chief bank regulator in that region, if you want to characterize her as that, where was she? Well, I think that's going to be one of the questions here is, you know, were supervisors identifying what they needed to identify and flagging it to the right people? And was that information getting to the board? I mean, the board in Washington is ultimately responsible for the more aggressive consent orders and enforcement actions that need to happen. And so I think that'll be one of the very important pieces to come out of these reviews

was what was getting flagged? When was it getting flagged? How was it getting escalated? And did it get to the place where it needed to get to, to, you know, to get more aggressive if that's what was needed? And it does seem like that's what was needed. Yeah, I don't want to let you go without turning to the other obvious issue as it relates to the Fed. And that's what happens in the in the weeks and months ahead. I don't know if you had a chance to hear my conversation yesterday with Jeffrey Gundlach of DoubleLine, who suggested he thinks the Fed's going to cut two times this year. And I'm wondering when you hear people make predictions like that against a market that still thinks there's a 50 percent chance of another raise in

May, where the bar lies at this point to the degree at which the Fed would even consider cutting. Would it would it take another bank failure, greater seize up in the credit markets? What do you think? I don't know, Scott. I mean, I've been hearing since last July people talking about rate cuts six months ahead, eight months ahead. And obviously, the people who were saying that last July, you know, that that's not what's happened. But it does make sense for the market to price this into the extent that you have a Fed saying they think that the long run real rate or sorry, the long run nominal neutral rate is around two and a half percent. Well, we're well above that. And so once the Fed suggests they might be done, it's only natural for the market to price in cuts so long as the Fed says in normal times, we think, you know, two and a half percent,

give or take, is the right place to be. We're close to five percent now. So I'm not surprised to see the market pricing and cuts, but it's just way too hard to tell how much this is going to slow down the economy, when it's going to break more things in the kitchen here and how the Fed's going to react. Yeah, it's going to be fun to watch, to say the least. Nick, I appreciate your time very much. Nick Timmeros, Wall Street Journal, joining us here at the top of our show. We're going to get much more into this issue as well

when we're joined by the former U.S. Deputy Treasury Secretary, Roger Altman, in just a few moments. He has some big thoughts on this very topic that we've discussed, and we'll continue it. We do have just a few days to go in this wild quarter for stocks. The market defying many expectations led by the run in tech and growth. For more on what lies ahead, let's welcome in Dan Greenhouse of Solus Alternative Asset Management, Victoria Green of G Squared Private

Wealth joining as well. Also a CNBC contributor. It's good to have you both with us. Dan, I'll go to you first. Do you have expectations of cuts by the Fed? Because since we left it with Tim Morose there, let's entertain that first because more people seem to. Yeah, I don't know. Like, you know, Nick's point about how long people have been calling for rate cuts is apropos of the situation now in the sense that it's been probably about a year that people have constantly called for rate cuts. And truthfully, when you look back 25 years, the street is notoriously bad at forecasting where the Fed funds rate is going to be. Every time it's going up, each successive rate hike is the last one. When it's coming down, each successive rate cut is the last one. My gut is that inflation is still pretty high. The issues with the banking

sector right now are largely idiosyncratic. I don't think there is a systemic issue in the sense that people are using the word systemic and that the imminency of rate cuts is probably a little too much in terms of pricing. Are you surprised by how the market has held up? I mean, just given all that's happened. Yeah, the equity market. I mean, stocks were up last week. Yeah. I mean, listen, I think certainly it's been a pretty strong run. I mean, credit spreads have widened out Yeah, I mean, listen, I think certainly it's been a pretty strong run. I mean, credit spreads have widened out a little bit. You've had tremendous moves in the futures market and the treasury market in terms of rate hikes and rate cuts.

I will say with respect to the Nasdaq, which is where everyone's focusing. And rightly so. It's the way that tech stocks have just jumped ahead of everything. Sure, but I spent a little time. When you dig beneath the headline, it's a little weaker than the headline suggests. So like, for instance, if you break up the NASDAQ into quintiles, only the top quintile is up.

All four of the other quintiles are down. The cumulative advance decline line, how many stocks are going up versus how many are going down, has come straight down while the market's gone up. And the percentage of the market that's in an uptrend has declined as well. Yeah, well, the heavyweights punch the hardest.

Yeah, but yes, for sure, they have the largest weighting in a number of indices. But at the same time, we shouldn't be lured to sleep, so to speak, in saying that everything is all well in the NASDAQ or the S&P or wherever, if most of the carrying is being done by the top portion. So, Victoria, I mean, you have been more bullish than most of late. I think you even declared to me on this very program that we were in the midst of and the early stages of a new bull market. I'm wondering if you're reconsidering that, given the events that we've that we've had over the last few weeks. Yeah, I might want to walk it back a little bit, but honestly, it's been quite like we call a Teflon market. And as you pointed out, the heavyweights are punching hard. We've seen the resurgence of mega cap tech, but they're also being supported by a weaker dollar and the potential of a Fed rate hike, which should help growth stocks. So for us, we're kind of moderately just a tad bit bullish, but mostly neutral. I think the next 30 days we have a little reprieve before the Fed goes in early May.

And we've got to see what happens, what happens with PCE this week. We'll go back to data watching. You know, we'll see if we have another bank failure or not. But I don't think the Fed is ever going to signal hikes unless they feel they really have to. They're not going to make a policy change like that on a guess or a, hey, we might cut rates. They're only going to announce a rate cut if things have gotten so bad they feel that is the only option left on the table. So I don't think you're going to see it telegraphed. So the market right now is gambling a little bit. I don't think the Fed is going to cut unless they really see the banking contagion continue to pick up.

I'm just wondering how you can still be a tad bit bullish. I mean, I'm not suggesting that you shouldn't be. But if you don't think the Fed's going to cut, if you're still concerned about what lies beneath, so to speak, what allows you to even be incrementally more bullish than bearish? One, you didn't see the technicals completely break down. Yeah, we're in purgatory, no man's land. So we still have some solid supports in there. Number two, I do think stocks sometimes run when they're not expected.

If you look at how this market reacted, the financials and the energy sector sold off. But you saw almost everything else unilaterally hold up well. I do think you need quality. You need cash flow. You don't need companies losing money right now. I think you need to be prepared for a little bit of belt tightening. But we're seeing that. We're seeing layoffs and we're seeing the investors reward companies that are making hard decisions in order to protect their profit margins. And we see profitability. I think when we get into Q1 earnings, honestly, outside of financials and potentially energy, who do you think is really sucking back? We've seen continued spending.

We've seen people travel. We've seen people eat out. We've seen people continue to shop. So if you look at the consumer and the health of the country, I know we all expecting this horrible data deluge but it's just not coming we've seen continued strengths yeah we have we we know that the the bank crisis the mini one that we went through is is going to have and probably already has had some impact on on sentiment I I would ask you Dan the the idea that this has been the great offsides rally of 2023 so far, right? No one came in expecting tech was going to start to run away to the degree that it

has. You probably figured, well, I'll go with the 2022 playbook, energy, et cetera, et cetera. It's been reversed. Does it revert back or not? Yeah, listen, I think certainly there's nothing about a turn in the calendar that means your investment environment is suddenly different. If you look at like 08, for instance, you continued until March. In 2002, the bear market continued more or less until March, although obviously October was the bottom. I think like a lot of people, I slash we were caught off guard by the adjustment in the

markets to start the year. But that was also a function of the renewed optimism about the idea that whatever recession was forthcoming would be further down the road than originally thought. It was expected to be maybe in the first half of the year. And now I think the street's probably looking for a recession in the back half of the year. Or is it like, OK, rates have come down. There's concerns about growth. Sure. There's good cash flow with tech.

So, I mean, it's not that difficult to figure it out, right? No, it's not. But also to the point I made earlier, a lot of the heavy lifting is being done by the big names right now, which are less interest rate sensitive. I mean, the whole idea behind tech rallying with interest rates is in terms of discounting your cash flows. If you're Google and Microsoft and the like, a lot of your cash flows are happening right now. I don't have to wait five, seven, ten years to realize them. Obviously, some of the other names, that's less the case. But again, I think this gets back to the optimism that was built into the market to start the year

that ran into a bit of a headwall in the form of what happened with the banks. But again, I don't think the banks meaningfully changed the situation. If I could spend a whole segment on it, my views would be really, really arguing in favor of this just being an idiosyncratic moment in time rather than some sort of, at least as the worry, widespread issue that's going to sink a number of large banks. Victoria, lastly, quickly to you, do you buy into the tech rally or do you fade it? I do. I think right now they're kind of a safe place to hide. I know that's getting a little bit of pushback this week, but I think they've got the balance sheets, they've got the cash flow, and they have the earnings and they're not, I don't want to say they're cheap, God no, they're not cheap, but relative to where they have been trading, I think they're kind of a safe place to park with these companies that are a little bit less correlated to financials and energy, and they're not as expensive or slow growth as, say, a Staples right now. So I do think some of the mega cap tech is attractive, especially as a hiding place right now. All right. Good stuff, guys. Thank you very much. Talk to you soon. Victoria Green, Dan Greenhouse. As we head out, it is our Twitter question of the day. We want to know who or what is to blame for

the SVB failure. Regulators, bank management, the Fed's monetary policy or all the above. You can head to at CNBC Closing Bell on Twitter. Please vote. We will pose that question as well to former U.S. Deputy Treasury Secretary Roger Altman. He joins us after this quick break. You're watching Closing Bell right here on CNBC. Welcome back. 40 minutes left to go in the trading day.

We're negative across the board, as you can see. Let's get a check now on some of the top stocks to watch as we head towards the close. Christina Partsenevalos here with that. Christina. Well, let's start with Affirm. Those shares are sliding to session lows as Apple unveils a new buy now, pay later feature for Apple Pay users where they can split purchases into four payments spread over six weeks. Your interest, no fees. Affirm did put out a statement not too long ago, just maybe about an hour,

and they said the more payment options displacing credit cards, the better. Quote, the prize remains massive and Affirm is well positioned to win. Affirm shares, though, down 80% in a year. Lucid right now is the worst performing stock on the Nasdaq 100. It's down about 7% on an insider report that the company is planning to lay off 18% of its workforce. CNBC.com has reached out for confirmation, but the stock is down, what, about 17% this month alone after competitor Rivian laid off 6% of its staff last month. And then Tesla cut prices on some EV models. So definitely taking a hit. You

can see shares down almost 7%. Scott. All right, Christina, thank you. See you in just a bit. The failure of Silicon Valley Bank, the topic on Capitol Hill today, as key regulators testified before the Senate Banking Committee. Among the revelations that SVB was flagged multiple times since 2021 for issues regarding its management and risk taking.

It raises the issue of who knew what and when and why more wasn't done to rein in some of the bank's more questionable practices. With us now, Evercore founder, senior chairman, the former U.S. Deputy Treasury Secretary Roger Altman. Mr. Altman, it's good to see you. Welcome. Thank you for being here. Hi, Scott. How are you? Who holds the blame here, do you think? Well, I saw your poll question, and my answer would be all of the above.

Obviously, a supervisory failure. I think that's screamingly clear. I'm not sure what the board of directors or the senior management of Silicon Valley Bank were thinking, but they didn't do their job. And if you step way back, this banking crisis, and hopefully we're turning a page on it now, was avoidable. Why was it avoidable? Because if the Fed had not originally misjudged inflation to the degree that it did, then it would not have boxed itself in and been forced to engineer the most rapid tightening in decades. And interest rates therefore wouldn't have risen as rapidly. And the duration mismatch, which was the downfall of Silicon Valley Bank and some others in that system, wouldn't have happened to the same degree, if at all. So this is unfortunate because it didn't have to happen. Having said that, I mean, nothing like 2008, nothing at all. Right. I mean, it's

easy to say, OK, you know, bank management, they mismanaged their risk. The Fed was late to the game. They waited too long, then raised too fast. And it caused many of these issues to happen. Unless you look at the timeline of how things transpired, the flags that were raised, the sirens that actually started to go off. Fed Vice Chair Barr today revealed the bank was rated a three by regulators, indicating it was not well managed. Those were his words. Also deemed to be deficient, quote unquote, at the holding company level, also indicating that it was not well managed, again, his words. So what responsibility then was it to the regulators, the Fed? Where was Treasury? Where was the Fed? Where were others when it seemed for more than

a year that there were simmering issues at this bank and nobody did anything until it was too late? Well, let's parse that question. First of all, the Treasury is not directly a regulator. And the Treasury does not have any supervisory responsibility relative to financial institutions. Secondly, this episode has revealed that at least part of the 2018 rollback in Dodd-Frank was a mistake because the idea after that rollback that you had to have 250 billion of assets or more to be subject to the most conservative ratios on capital liquidity leverage and the most frequent stress tests uh was in retrospect uh a bad idea because silicon

valley bank uh as we can all see was systemically important uh otherwise the united states government wouldn't have uh moved mountains uh uh to rescue it at least in terms of the depositors and so forth. And yet it wasn't subject to the right types of controls. So this is just a very broad failure. And I know, because they've said so, that the Fed and the San Francisco Fed in particular is going to do a top to bottom review of how this happened and how do we be sure it doesn't happen again. But it's there's a lot of blame here. I mean, it sounds like this the San Francisco Fed is going to be doing a review of itself.

I mean, in some respects, because there are, you know, some who would say they're the ones who are especially asleep at the wheel. It was their region. And I know that it's fashionable now to suggest that the rollback in regulations from the Trump administration are, you know, at least high up in the conversation of where the blame should lie. But maybe it's not the regulations themselves. Maybe not all of that rollback. Part of it. Sure. But maybe it's not the regulations themselves. Maybe not all of that rollback. Sure, but maybe it's more the response than the regulation themselves. I mean, again, the flags were raised, the rollback had already taken place, and yet nothing was done. Yes, but ask yourself if that bank at its size

that we saw just before it failed shouldn't have been subject to the most frequent stress tests. Of course it should have been. Or the tightest ratios in terms of the measures I'd mentioned a minute ago. Of course it should have been. So there has to be, I think, a big review of the deposit insurance system, which I think has been revealed is out of date and a full review of Dodd-Frank, which clearly needs another revision. You know, the other thing and I'll leave I'll leave it with this last question to you because you raised the issue of stress testing. I mean, the Fed changed the rules so that this bank wasn't stress tested. And if it was, it wouldn't have made a difference anyway because the banks were stress tested for an environment of falling interest rates, not rising ones. Can you get your arms around that at all?

Well, wait a minute, Scott. Wait a minute, Scott. I mean, we've now been in a period of rising interest rates for many months. Well, a year, more than a year. Okay, more than a year. And if you'd been on the board of directors of that bank or the chief financial officer, I think you would have asked yourself, okay, we're looking at the steepest or most rapid tightening of monetary policy in 50 years. And we've seen the federal funds rate go to nearly 5% from zero. What impact is all that going to have on our stability and on our portfolio?

And you would have looked into that. I mean, for that matter, you could probably ask chat GPT for this minute, what happens if we have all these characteristics and interest rates rise a lot? And it probably would have told you that what happens is pretty bad. So it wasn't exactly a new development that interest rates had risen a lot there. No, but that's why we have regulators and supervisors to, in essence, protect people from themselves, from making dumb decisions. There's supposed to be somebody watching out for the bad decision-making, right?

Yes, look, it was a supervisory failure. I think everybody who's looked into this agrees on that, but it was also the failure of the board of directors and the management. And if my memory serves, the CEO of Silicon Valley Bank was on the board of the San Francisco Fed. That was probably not a good thing. Yeah. Yeah.

And like I said at the outset, the bank's management is going to have to answer for many, if not all, of these issues. Roger, I think we know that. We look forward to the day that all of that happens. I appreciate your time so very much. We'll talk to you soon. All right, Scott. Thank you. All right.

That's Roger Altman joining us here. Closing bell programming note, too, for more on the Senate Banking Committee's hearing on the collapse of SVB. Do not miss former FDIC chair Sheila Baer in OT in the next hour. Certainly don't want to miss that interview up next. Debating a tech rally, the sector cooling off a bit today after what's been a red hot run. Could there be further upside ahead? We discussed that with Plexo Capital's Lo Tony after this break. Closing bell right back. Welcome back to recent rally in tech, taking a bit of a breather today with interest rates back on the rise. The space does remain one of the standout performers this year, though, as investors return to the mega cap world amid more market volatility.

Joining me now to discuss Low Tony of Plexo Capital. It's good to see you again. Good to see you, Scott. I mean, it is this really incredible run that we've witnessed that, you know, as I said at the outset, barely anybody was positioned for. What do you make of it? Do you think it has the possibility of lasting into the new quarter? How do you see it? Well, I'm excited to see the attention, but we have to recognize what environment we are currently in, and hopefully we're in the back end of it, which is what's happening in the banking sector. And, you know, it appears that people look to investors, look to the tech sector as almost a safe haven of sorts with the run-up that we've seen with some of these stocks. But, you know, I think we do need to recognize

that a lot of the dynamics that were impacting the tech stocks last year, namely rising interest rates, concerns about a slowing economy, those are still in place. And I think what we're seeing now is we see the abating financial crisis being averted. People are turning their attention back to interest rates. Does that how it does it feel that way? I mean, you're you're really in the in the heart of of where all of this took place right out out in silicon valley um does it feel like the fire is out or does it feel like the fire is out but the site is still smoldering and you're not sure whether there's going to be another flash up flare up yeah without question you know i think when we look at the issues that faced silicon valley bank and some of the others, as your guest, I think, appropriately pointed out, a lot of these were due to mismanagement of the duration of the instruments

that Silicon Valley invested into, namely mortgage-backed securities, with the excess deposits that resulted from the big run-up in venture capital. And, you know, that led to the ultimate demise, along with sounds like there wasn't some oversight that was also needed. So I think with regard to the private companies, we still are not out of the woods entirely. In particular, there is a big void to be filled that Silicon Valley offered as a result of all the products now what we think back how that relates to the public sector looked at i don't think we're going to have any immediate impact i don't think

that there's necessarily another shoots and drop specific to s v b for the public sector however i think we do have some other things to watch out for in the public sector. However, I think we do have some other things to watch out for in the public sector for those stocks. You know, I'm looking at shares of Affirm. Before I let you go, I can't help but ask you about this one. Down 9% today on this Apple Pay Later announcement. What do you make of what Apple's going to do and what the impact is going to be on Affirm and others

who thought they you know had a pretty good stake in this space this is classic apple playbook uh... as angela stranger a sixteen z pointed out every company is now becoming a financial services company apple has paid push to increase the amount of services revenue right now it's at about eighty80 billion for 22.

And think about that. That's more than the revenues of Nike, Boeing, Coca-Cola, and that's just their services revenue. So that's about 20%. And what Apple wants to do is they want to increase the amount of services revenue. And having this option to buy now, pay later is a great way to do it. It's low friction. It'll be the Apple experience. So it will be a better experience than the financial services companies can do. And they've got a low customer acquisition cost because it's really easy to just tap into their existing base. So, you know, I think these are the types of moves that we should watch. You know, this is brilliant on the part of Apple because they're increasing the stickiness of their overall ecosystem so that they can reduce their reliance on iPhone sales to drive revenue.

Interesting. We'll talk to you soon. Lo, thank you very much. Thanks for having me. Yeah, you bet. That's Lo Tony. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is back with that. Christina. What consumer slowdown, Scott? One retailer stock is soaring on strong demand for its close. I'll have that and much, much more after this short break.

Christina Partsenevelos is back with the key stocks to watch as we head towards the close. Christina. Let's start with Chinese e-commerce giant Alibaba splitting into six separate groups, each with the ability to raise outside funding and, of course, go public. Alibaba shares spiked on the news as this represents the most significant reorganization since Jack Ma founded the firm 25 years ago. Shares are 14 percent higher. PVH shares continue to soar today, up almost about 20% right now after the parent company of Tommy Hilfiger and Calvin Klein reported strong top line growth, excluding

currency, of course, for both brands. Credit Suisse raised its price target to $93 for the name with a buy rating. You can see shares are at $88, so still some room to grow. But can Lululemon do the same? Expectations for Lulu are low for the retailer's earnings out after the bell. Scott. All right, Christina, thank you very much. Last chance to weigh in on our Twitter question. We asked who or what is to blame for the collapse of SVB? Was it the regulators, the bank management, the Fed, its monetary policy or all the above? You can head to at CNBC closing bell on Twitter. The results after this break. Let's get to the results of our Twitter question. We asked who or what is to blame for the collapse of SVB? 47 percent of you said

bank management. All the above getting 39. Up next, the countdown to Micron, that company reporting in OT tonight. We have an analyst standing by with what he's watching for. When those results hit the tape, we're back 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, along with Citi's Scott Cronert. He has his sector picks ahead of Q2. Wedbush's Matt Bryson with a preview of micron before it reports moments from now in ot we begin

with mike santoli all right so tech's giving a little bit back today com services as well what somebody who emailed me said was convenient i mean there's a lot of belief in this trade still i would say that it's convenient there's belief in this trade still. I would say that it's believed, there's belief in the trade, but also I think acknowledgement that it had run far and fast going into the weekend. So you have something like Microsoft down 2% in a couple days this week. We're legitimate to ask the question on Friday, could the market sustain that? Could we handle that? Could you absorb that bit of selling? And we have. I mean, the equal weight S&P is dead flat today.

The market's giving almost everybody on either side enough time to kind of lose their conviction in their trade because the levies are holding in terms of the bank deposit flight at this point. So if you were doomsday, you don't really get some reinforcement on that. But if you're really bullish, the market sort of has a lack of energy, if nothing else. Yeah. Rates up a little bit. Yeah. Not enough to really upset people. You know, there's sort of where's the trend going is the bigger question. And the answer is, who knows? Is we don't know because we've been all over the map in the last couple of weeks. So therefore, you have to go really far to sort of figure out if there's a new trend or if we're just stuck.

Scott Kroener, speaking of conviction or a lack thereof, I look at your sector recommendations and I feel like you don't have any on where this market is going. Why do I say that? Overweight industrials and energy in case there's a recession. Overweight health care and REITs play defense. Overweight comm services and software for growth exposure. I mean, come on. It sounds like you want a little bit of everything. Well, at this point, in terms of the overweights, I do. On the underweights, we're pretty clear.

We're underweight financials and consumer discretionary. And there we think that this concern regarding lending standards, credit conditions tightening are a net negative for the earnings trajectories for those two sectors. But yeah, away from that, I think we're trying to keep our powder dry and have some exposure across these various defensive, economic sensitive and growth areas of the market. Do you believe this tech move, is it time to fade it? Well, okay, so we're overweight software. We went overweight last week and we offset it with the downgrade

and semis to an underweight. So basically what we're playing here is some conviction that we're looking at a little bit lower 10-year yield than we had been at before, which is reflective of recession concerns. And against that backdrop, yeah, I want some exposure to this growth cohort. We're doing it versus via software. And we also went overweight communication services, which gives us exposure to those cash rich Internet names.

Appreciate it very much. We'll see you soon. Now to Matt Bryson as we wait for Micron in OT. It's Matt. Matt, it's good to have you here. You just heard our guests say that they moved to underweight

on semis. Does Micron tonight confirm that that was a good move? I think Micron is going to have a difficult quarter. Just memory pricing is only getting worse right now. What reverses that? I think we're starting to see the moves a little reversed out from the memory companies. So you get cuts in capex.

Potentially we see more talk about future spend getting cut. That lowers future capacity. You see capacity come offline. Micron and Hynix have already done that. And then lastly, demand just needs to catch up to supply and and that does just takes uh... bit of time which chip stock in your university most high on right now then uh... probably talk once i mean

uh... you have uh... soon uh... sherry's uh... going on so even though it looks like it's a difficult year generally or for semis I think Taiwan semi outperforms because of Apple shift towards armed ships that they manufacture because in AMD's outperforming Intel so their share gains there because they won new business at Qualcomm and NVIDIA. It's good to have you with us, Matt. Thank you. Mike Santoli, I turn back to you. Should we look at this in any way

as a litmus test for the current state of chips? It's an input. I'm reminded of back, I think it was in the September reporting period for Micron last year, when we did kind of rejoice in the fact that Micron reported a bad quarter, which was expected to be pretty bad. And the stock didn't go down because it really was at the lows. Now, it did kind of revisit those lows in October. So it wasn't like some kind of a final bottom. But I think it can be a little bit of an early tell on how investors are postured toward earnings,

whether we really do have expectations washed out or not. Now, Micron is incredibly unique in this way because since that end of their fiscal year last August, this particular quarter, at that time, the consensus was for a $0.94 profit. The current consensus is for a $0.67 loss. For the full fiscal year that we're in right now. They were supposed to earn five bucks. Now they're supposed to lose 260. So just the massive overhang of the inventory and pricing issues are really undercutting anything like you would consider to be a decent fundamental case right now. You just have to kind of make the so bad it's good type of argument. Also on a technical technical thing, I mean, just an absolutely perfect double bottom last year, right under 50. We're not that far above that right now. But those are the two things I would watch. Yeah, I mean, NVIDIA met the moment when it was its turn, right?

And we said, well, this is a big deal for the overall market for obvious reasons. Market cap much different size than Micron. But in some corners, this will be viewed as the most current test for that. Sure. For memory, absolutely. For whether, in fact, we have taken enough medicine in this cycle on inventories and all the rest of it. Absolutely. You're going to try to read through it because we don't have much else to go on right now, to be honest, because the market really is just kind of trying to test all the different macro theses that are out there. And it's not really coming up with really a clear answer on those things. The market's held in better than most would have expected.

And yet I think if I had to ask who has the greater belief in the fundamental case, it's people who believe a recession is imminent and people who think that the bond market is telling you that story. And I would argue that the bulls are more about, well, maybe the lows will hold from October and meanwhile migrate to quality. Right. That's not a table pounding bull case. Speaking of bulls, at least as it relates to certain names, Warren Buffett continues to buy Oxy. I mean, his position now is I I think it's 23.5%, somewhere north of 20. Oil, you know, up again today. Not much, but it's over $73 again.

This is a bounce worth keeping an eye on for crude and for the energy stocks are also up again. Just on this idea that we're just the pendulum swinging the other way, and you actually have some of the inflation beneficiaries and some of the cyclicals doing a little bit of work today. So I would watch it. When it comes to Oxy and Buffett, I mean, he's at a point where he owns so much of it. And you buy a little bit more, and you've got to put the filing out there. And it goes up, and you're benefiting your existing position because you bought a little more. I'm not saying he's trying to goose the stock, but that's the net effect of what he's doing there. You know, he's not loading up on every other oil name. This is a particular situation. Obviously, it feels like Berkshire feels like it knows well, and it seems like it'd be willing to own as much

as it can pick up. It certainly seems that point. I mean, he's added to it on numerous occasions as we watch energy try and get a little bounce back bid. I'm just looking at Apple, just trying to bring it full circle to where we started things on the show. Microsoft giving some back, Apple giving a little bit back, but not all that much at all. Nope. You know, Apple has probably done better than it had any business doing in this period when the overall market has kind of held up there. I've always said a market where Apple is your big outperformer is probably a pretty tough market at this point. But it absolutely has done well. This is a no-growth fiscal year for this company.

Everyone knows that. It is, in a sense, kind of bond-like in a long-term way. And, you know, again, the sturdiness of the balance sheet is the main calling card in this little period right here. And even though Apple wants to get down to zero net cash, they can't get there with any speed at all. All right, maybe the cheering is in part for some of the bodies that we've had over the close. Because we had a pretty good move here as we head towards the end here.

Again, looking for Micron in a matter of seconds in OT with Morgan and John. I'll see you tomorrow.