Banks Surge On Results… And CPI’s Impact On The Fed 1/15/25

0:01Live from the Nasdaq market site in the heart of New York City's Times Square this is Fast Here's what's on tap tonight. A big bank boom. The major financials getting earnings season off to a strong start. Is this just the start of an even bigger rally to come? We'll debate that. Plus, a rate cut revival. Treasury yields sinking. On the back of this morning, inflation report. Did the CPI print put a Fed move back on the table or is it the action premature? And later, lackluster lily. Why the weight loss heavyweight failed to rebound from yesterday's losses. Private equity diving in to college sports.

0:32Will it be a smart investment? And two more acronym reveals. One's totally tubular, and the other doesn't quite play by the rules, but we'll allow it this time. I'm Melissa Lee, coming to you live from the studio, be it the NASDAQ. On the desk tonight, Tim Seymour, Karen Feynman, Guy Adami, and our very special guest trader tonight, Joe Moglia, the former chairman and CEO of TD Ameritrade, a friend to this show for all 18 years of our existence. Joe, welcome. Thank you, Melissa. Clap on me. Great to have you there, Joe. I'm honored to be on. Thank you. Thank you. We start off with today's massive rally on Wall Street.

1:04The Dow gaining more than 700 points for its highest close of the year. The Nasdaq up nearly 2.5 percent on a cool inflation print. The major indices all seeing their best day since the election. We'll get to the CPI in just a bit, but first a barrage of big bank beats. Wells Fargo, Goldman Sachs, Citi, J.P. Morgan, all surging today on the strength of this morning's earnings reports. And there are still more to come. Bank of America and Morgan Stanley both up to bat tomorrow morning. Will these reports confirm what we heard this morning? Karen, very optimistic. Yeah, I think so. I mean, this was really, really good on so many fronts.

1:37And for all the banks, I think a lot of things went right. Net interest income, very good. Some of the capital markets business, really good. For some, investment banking, better than for others. But I think that the consumer is in good shape. And, you know, I think the animal spirits idea, we'll see mergers. That's great for investment banking, even if we didn't see it in this quarter. So there really was a lot to like for for both Citigroup, Citibank and J.P. Morgan. I, of course, listened to the J.P. Morgan call first. But, you know, I like the idea of Jamie. It sounded to me like staying a few more years, maybe.

2:15But I think things are going on just about all cylinders. It was really an excellent report across the board. And I think the read through for the economy is really good as well. Not just the banks, but more broadly. Yeah, the CFO of J.P. Morgan specifically used the phrase animal spirits. We are in animal spirits mode right now. The Goldman Sachs CEO said something to the effect of there's been a meaningful shift in CEO confidence since the election specifically. So we're setting up, Tim, for what may be a very good age for the banks. It is. And while today I still think market action was really about a CPI, we're going to talk about that.

2:50I do think the bank messaging was fantastic. And I think when you think about J.P. Morgan and Citibank and you think about old versus new, J.P. Morgan has really kind of kept pace with both innovation on the fintech side in terms of balance sheet efficiency. Citibank, the big issue all along was that they were not. There was always so many inefficient investments. There were disparate places around the world where they were deciding to take a shot. What we heard today is that actually the long-term capital prognosis for this bank is fantastic. A$20 billion essentially repurchase and the dynamics around the cost efficiency that will get better in 26 from what we hear means.

3:26I think there's a lot more to go at Citibank. And I know this means nothing. If you drew a chart back in Citibank, obviously because of all the dilution there, this is still a horrific story. You're back at like Jan 2008 levels or 2009 levels after still being down almost 80 percent. But it's tomorrow's money. And I really think Citibank is an incredible story that has an ability to outperform. But banks did send a great message. You sit in the CEO seat, Joe. So how would you feel with this backdrop? Well, I think one of the things that you need to pay a little bit of attention to, I think we went, is it 793 days or something like that with an inverted curve?

4:03Karen's already referenced the significant growth that we've seen in the net interest margin. with a positive yield curve, that's only going to enhance the earnings as far as the banks go. So, I mean, I could not be more bullish in the financial sector at all. First of all, as you said at the top of the show, this is a man that's been a friend of this show since the inception. Was steadfast. Which isn't easy to do, by the way. Not easy to do. Given who was on the show. Fordham University, by the way, one of the great Jesuit institutions in the country. Home of Vince Lombardi. Alex Wojohowicz, one of the seven blocks of granite.

4:40They named their football field what? Mowgli a field. So a legend is amongst us. Myths of greatness. What was the question? I'm kidding. No, you know, I think, you know, Tim's spot on about Citibank. And we have actually, listen, as wrong as I am all the time, City's one we've gotten right. And we have pointed out today, for example, they said tangible book is basically 97 bucks. And we have made the point that, listen, I get J.P. Morgan a two and a half times tangible book. Maybe it's deserved. But Citibank, like 80 percent of it doesn't make a lot of sense. So I thought for a while Citi could trade up to 80.

5:13Here we are. But now that they've sort of raised the bar, I'm with Tim. I think you can go higher from here. I also just think the messaging from banks that we're all talking about is that NCO and expenses are going to stay the same. All profitability is going straight to the bottom line. This is a story where I think these banks have been underestimated by the analyst community. I think this is a case where you're going to see not only upgrades based upon EPS, but on multiple or whatever multiple of tangible book you want to put on it. So I think we've been slowly going through this for about four years with banks.

5:42It was disrupted by SVB back in May of 23. But I think it's a case where people have a lot more confidence, both in the capital base, the stewardship of these big institutions. And look, as Joe said, I mean, it's a time for businesses to be reinvesting. It's a time for businesses. J.P. Morgan, 90 billion alone in net interest income. So building on the sentiment, do you look at the banks and think, I want the bank with a little bit more of the turnaround sort of aspect to it? So, for instance, Citi, the commentary today was this is a waypoint, 7 percent return on tangible common equity. This is a waypoint, not our destination.

6:16So we're going to improve, improve, improve. And then, of course, there's Wells Fargo, which had, you know, had a nice little pop before. Yeah, I mean, I love the quality of J.P. Morgan, but, you know, his guy references the price to book is the highest, and as it should be. But so I do like a city that's, well, just by its own appreciation, getting to be a bigger position. Wells as well. But also for all of them, the idea that their capital requirements could go down, right? And so what that does for loan growth and that margin and just the higher NIM and the more loans under the NIM, a lot of good things can happen.

6:53Yeah. No, I think in terms of you mentioned a big piece of this for me is leadership. And, you know, Tim mentioned the Silicon Valley Bank thing. Remember the chaos and the horrible disaster we had with that? Well, the job of every major brokerage firm and every bank is to protect their clients deposits and assets. OK, now the government was supposed to come in and make all these changes. That was four years ago. There's not been one change since then. So when you think about who you might want to bet on going forward, I would bet more on. because everybody's going to do well in the financials going forward, I would do a better job.

7:26I would focus more on the companies that have been consistent and well-run and have better management teams. I think over the long haul, you get paid back pretty well for that. We went seven minutes, and we should bring up Goldman Sachs because I thought that was a pretty remarkable quarter. That's another name I think we've done a decent job. It's had some ups and downs, but here we are within sort of a whisper of its all-time high, deservedly so, I think. And, you know, we talk about Jamie Dimon all the time for a myriad of different reasons, Karen. I only talk about it for one reason. But I don't think we bring up David Solomon enough.

7:56And I'm not trying to curry favor here. I'm not looking for a job. But under his leadership, that company's, listen, they've made some missteps. He's been outspoken about it, but they've made a lot of right choices as well. All right, let's turn now to the other report fueling today's gains. December's CPI rising 2.9 percent in line with estimates. X food and energy consumer prices rose 3.2 percent. A tick better than estimates down from November. The market breathing a sigh of relief here. The 10-year Treasury yield pulling back. The dollar easing back from its red hot run. Bitcoin briefly topping 100 ,000 mark again as investors get their risk on Mojo back on.

8:29Is this going to last, Tim? What does this tell you about what the Fed's next move is? Well, I think the Fed should still be on hold. That's a little bit of what I think and a little bit of what I think is going to happen. One CPI number doesn't do it. And 3.2 on the core is, while it's the best downtick we've had in about six months, it's not where they want to be. I think if you look at the components of CPI, the breadth here of inflation is actually going higher. It's broadening. And I think it's a big issue. This is one data point in a series of ones that haven't helped. The bottom line is the market was so scared for this report.

9:01I mean, the positioning going into this, we were overinflated. And we were so worried about where things were going. This reaction doesn't surprise me. It doesn't mean that inflation outlook has to change that much. Yeah, I agree completely. I mean, it's nice. That's, you know, a tenth of the base point is nice, but still we're still higher than where we need to be. And I think that the animal spirits we just talked about does not, to me, read as lower inflation. Right. In fact, it reads higher inflation. So nice to get that bounce back after that big Friday move. But I agree with you completely.

9:32I really don't think the Fed should do anything. Do you guys think that there's actually going to be a shift in terms of we've been talking about the Fed now for Anupadina for the last couple of years? and that we know that this year we might get one, we might get two, we might get zero. Well, we know that. But are we now at the point, I think, where the investment community has got to start to look at the economy itself as opposed to just whether or not the Fed's going to ease or not ease or pause or increase rates? Focus on the economy. Focus on the fundamentals behind the individual sectors and the individual companies.

10:02I think that's a shift that I'm starting to see with regard to the marketplace as far as valuation goes. I think that's fair. And, you know, you said it on the call earlier today, and I've said it. I'm not a fan of the Federal Reserve. I'll be outspoken. But I think Jerome Powell, on the margins, has done a really good job sort of signaling what they're going to do. He's made some mistakes as well. But here we are at the market, effectively, at all-time highs, and they've been able to sort of navigate. But Joe is right in terms of is about the economy. But then you sort of look under the – like Empire State Manufacturing came out today.

10:29I think it was down like 12 percent or somewhere either side of 12 percent. Street was looking for basically flat to slightly higher. So there's some things under the surface that should be concerning. And I'll say again, you know, people talk about the strength of the consumer. Yeah, they spend money. Consumer, though, if you look at it, I mean, the balance sheets are on the wrong end of things, especially a higher interest rate environment. I just I think the economy and the strength is really exciting. I think there are a lot of pieces of the economy, though, that got used to being funded at zero.

10:59And I think this higher for longer dynamic, I don't think rates need to go down a lot. I don't think they're supposed to go down. In fact, we're all saying they're kind of normalizing. So you get to a place where I think there will be credit issues out there. But in the meantime, I do think the message is that the economy is in better shape. I think speaking of that, you know, the empire manufacturing, I think, you know, PMIs, but manufacturing ISM and those dynamics, they've been in a bear market for two and a half years. I actually think we've started to see some bottoming in some of the manufacturing, and I don't think it's critical either way.

11:29But I do think actually you could see a surprise. And I think some of the industrials, which have been big underperformers, look interesting. I think it's interesting the point about there will be credit issues. Yes. But to Joe's point, I mean, it may not matter at this point how much the Fed does. We know it's going to be sort of just incremental to where we are right now. And what have rates done in, you know, despite what the Fed has done since September? Well, the Fed can only can only have power over the short end. To your point, the economy is growing. Right. Term premium. We've talked Andy Constant talks about that all the time.

12:00That's that's we're going to see. The Fed has no control over what the 10 year is going to do. I think one thing, too, with regard to Powell, your point, Guy, about he made mistakes. Of course he made mistakes. But he does say what he's thinking. Even when he made mistakes, he said, you know, this is going to happen, we're going to have it. It's transitioning. It's all those things. But at the end of the day, he's telling you what he's really thinking he's going to do. And then unless he gets a whole series of different data to change his perspective, that's what he's delivered on. And a lot of times the market's guessing what he's going to do, estimating what he's going to do.

12:33And the market's been wrong. last two, three years. Can I just add one little thing? Yeah. They were finishing hiking, but they didn't cut all last year and the market did fine. Right. That's a good point there. But was that because they anticipated the cutting? Somewhat, but yet still a lot of businesses were doing fine. Yeah. Well, Joe has been very bullish on the market since the election just days away. We are awaiting the inauguration of President-elect Trump. He will reenter the Oval Office. A lot of the bank CEOs were talking about this, about the change in sentiment, the change in confidence, the animal spirits because of this new administration.

13:06And you think that this will carry over across the markets, not just in the banking sector. I do. I think it's the entire market. So you've got a president now who, number one, is he likes the market. You're going to try to take care of them. Number two, he's a business guy. Number three, everybody who's apporting with regard, almost everybody with regard to the decisions he's making there, are people that have business or investment backgrounds. And frankly, they bring a pragmatism to the table that a typical politician politician or somebody from academia doesn't bring. So he's not fooling around when he talks about deregulation.

13:37So deregulation, we kind of know what that means, but what it really means for individuals and different divisions within companies, you've got more people having more time to be able to spend more energy on stuff that matters. And don't underestimate the massive, massive compliance budget because of all these regulations at every one of these firms. That has a chance now to be reallocated into different areas where you may have greater growth. M &A is going to explode. I don't think there's any question about that. I think we all would agree with that. And at the end of the day, we're finally getting real clarity with regard to crypto.

14:11He wants to be the crypto king. He wants to be the crypto president. He wants United States to be the crypto country of the world. The people that he's hired to are pointing. Most of them are invested in the crypto world. Now, every one of the obstacles that have existed over the last decade, they're gone. They're gone. So when you think about that in terms of going forward, we would all say you should never fight the Fed. I think we've got to say you should never fight Washington. You know, and as if I were still CEO, I would love this operating environment that I believe we're heading into now.

14:41And as an investor, I don't think I've ever been more bullish. And I think you've got to own technology. I think you've got to own crypto. And I think you've got to own financials. It's hard to disagree with the things you've said. I will say this is just me. I think Scott Besson, out of all the nominations, he's to me the most inspired one. I think he's the right choice for that job. But my concern around this has been, and it would have been the same if the other side had won this election, policy is going to be inflationary, I think almost by definition. And I don't think this economy is set up for higher interest rates on the back of that.

15:11So that's a concern. And we have a lot of Treasury auctions coming this year. So today was a day where yields went lower. I get it. We're one bad auction away from being right back to 4.8. Yeah. Is that a concern, that all what you're talking about is inflationary? I think there isn't any question that there's going to be volatility in terms of going forward. And tariffs, you know, the tariffs could be used strategically. That could be a benefit for our economy. Or they could be blustery and wind up turning out to be a major problem for our economy. But I think, I think with the people around him, as they start going down a bad path, I think they figure that out.

15:46All right. Let's hope so for the sake of our country. Joe will be with us for the entire hour. Coming up, a lily lull. The farmer giant unable to really bounce back after yesterday's big drop. My investors weren't buying this dip, and if those losses will continue. But first, the latest out of California as first responders continue to battle the wildfires and dangerous winds. An update on containment and the massive economic impact as insurers start to process claims.

16:14This is Fast Money with Melissa Lee, right here on CNBC.

16:29Welcome back to Fast Money. President-elect Donald Trump is considering an executive order that would halt the nationwide ban of TikTok set to take effect next week. This, according to a Washington Post report in just the last hour, social media stocks, Snap and Meta, each falling in the extended session. We were just talking about this and how the beneficiaries of a ban may not, in fact, be any of these social media publicly traded companies here. Yeah, I mean, it was just, you know, it was last week or even we were talking about the benefit. Careful, there's some confetti. Don't don't get hurt.

16:58And, you know, you had this dynamic that actually, if anything, you know, Snap is benefiting disproportionately. Snap's issues are snaps alone, by the way. You shouldn't be buying this on a TikTok ban or not. You should be buying it on where they sit in the in the ad funnel and where they get, you know, at least most of their revenue. But I actually and I actually think Snap's kind of interesting. There's a couple upgrades this week. These headlines are going to move stuff around as they have. It's not a reason to do anything. Yeah. Yeah, it's certainly not a reason to buy or sell here. No, I mean, Meta is down 10 bucks, you know, one and a half percent in the aftermarket.

17:28I don't know if they're let's say you had a one third shot. So a 10 point move on a one third. OK, that really happens. Then that would be down another 20 bucks if it does. Still, I agree. I'm not trading around the tick tock ban. All right. Insurance companies starting to process claims from losses tied to the California wildfires. This is dangerous. Winds continue to hamper firefighting efforts in the L.A. area. CNBC's Contessa Brewer's got the very latest. Contessa. And we've been seeing them carry that fire retardant still up over the mountains, Melissa. In the meantime, State Farm has just erected this customer care center staffed by specially trained catastrophe representatives from all over the country.

18:07The insurance giant says this is, in fact, the largest fire, the costliest in terms of claims that it has ever responded to in California. At last report, the company has received more than 7 ,400 home and car claims. Now, insurers can use aerial imagery and other technology to process the claims even before the adjusters are permitted back into neighborhoods. And State Farm says it has already begun cutting these initial checks. But in California, State Farm has the largest share of homeowners insurance policies, 8 million across the state, 250 ,000 property policies in L.A. County and 880 ,000 auto policies.

18:48Last year, though, it joined its publicly traded competitors in significantly lowering its exposure to the riskiest regions in the state, not renewing policies or not accepting new policies. It says that the state just wasn't allowing rates that reflected the true cost of the risk. Today, they say, though, their focus is completely on the clients they have. The company spokesperson told me they're on a mission to reassure these customers they will get paid what they're owed. And we just learned that State Farm yanked its Super Bowl ad for February. It says it needs to focus on its customers. So those are the updates here from the state's largest insurer, Melissa.

19:28Contessa, thank you. Contessa Brewer. There's going to be a need. In the last hour, Contessa was talking about there's not going to be a big developer like Atoll Brothers to go in and rebuild. These are all individuals rebuilding their homes, hiring contractors. And you know what? If there are tariffs imposed on Canada and Mexico, materials are going to be much more expensive to rebuild. Sky high. Yeah, sky high. I mean, that'll affect everything in terms of the ability to rebuild. You know, we know there are people out there in Hollywood, L.A., et cetera, that have plenty enough money they can do that.

19:59But the typical person in our population doesn't have enough money to be able to do that. So for them to be able to replace their home in the area they want to be able to live, they may have to relocate and wind up going someplace else altogether. I mean, you know what I find really, really sad? We used to prepare for the 100-year flood that we'd get every decade. Now, every year, there were four or five major, major natural crises. And it happens again and again and again and again. And watch the reason for that. Global warming, I don't know. But these things take a very serious toll on the individual family.

20:34There might be people watching in North Carolina right now that had a similar disaster that seemingly everybody's forgotten about, and they're still struggling. So to Joe's point, and it's going to really pain me to say this, but we're tasked with trying to figure out what goes up and what goes down. All the insurers topped out like late October, early November. For example, pull up a Chubb chart, and you'll see exactly what I'm talking about. I mean, you look at these names, and, you know, you're not buying them for these reasons. But just on a valuation alone and their ability to continue to earn, I mean, these become very interesting after these sell-offs.

21:04Yeah, I mean, to Guy's point, for us to try to translate bad news, good news, whatever it is, into what does that mean for the market, if you look at names like Home Depot and Lowe's, you know, you could see a big bump there, Restoration Hardware. Hardware for you. I mean, it's going to take a while. Yeah. But I mean, there's going to be a lot of rebuilding. There's a lot more Fast Monday to come. Here's what's coming up next. No rebound love for Lilly. Investors pass on scooping up the beaten down pharma giant after yesterday's root. The guidance that's keeping them on the sidelines and whether that stock can see a pharma flip.