First Republic Heads Toward Receivership, and Markets Eye Apple Earnings and Fed Decision 4/28/23

0:01Right now in Fast Docs close out the week with a two day rally as tech names like Meta and Microsoft power the positive vibes. But next week, the Fed takes center stage. Will Powell bring the bulls back to reality? Plus, the final thanks, that's a report next week. Apple's been a high flyer this year, up nearly 30%. Can it keep the mojo going when it reports on Thursday? And later, our chart of the month, an energy name that's up nearly 8 % in April, while the price of oil has only climbed less than 2%. We'll take a look at what is powering its gains. I'm Melissa Lee. This is Fast Money. We're live at the Nasdaq MarketSite on the desk tonight.

0:33Tim Seymour, Steve Grasso, Dan Nathan and Guy Dami. We start off with the latest developments in First Republic Bank. Shares are sinking right now, another almost 50 percent, 48 percent in the after hours on headlines that the FDIC is getting ready to put the troubled regional into receivership. The stock, which is worth more than 26 billion dollars at the start of February, now has a market cap of less than 400 million. Let's get more on the latest headlines from Leslie Picker. Leslie. Hey, Mel, yeah, the Flight of Capital here reportedly making a private market rescue deal for First Republic untenable at this stage.

1:08Reuters reporting a short while ago that the FDIC is preparing to place First Republic into receivership imminently. That's the word they used imminently, citing a source familiar with the matter. Now, the report said that the deterioration in First Republic's position does not allow for more time to find an alternative solution through the private sector. This mirrors our David Faber's reporting from this morning, which said that a receivership is the most likely outcome for First Republic. First Republic and the FDIC did not immediately respond to our request for comment this evening. But you can see just the massive plummet in shares there, which really started in earnest earlier this week.

1:49Of course, the stock is down 97 percent this year, but have been more than cut in half this week after showing that deposits had really just flew the company this this quarter. And despite the 30 billion dollars worth of deposits that were infused from larger firms. Now, it's worth noting, and Mike Santoli was touching on this a short while ago, that the broader industry doesn't appear too concerned about major contagion from First Republic, at least these recent headlines with KBWR in the green today, despite the potential for First Republic to be in receivership now. All right, Leslie, thanks.

2:26Leslie Picker. And this just coming in moments ago, the FDAC says no comment on any of this so far. But we can see the shares are down 43 percent. Leslie hit on the perfect thing, which is, you know, the KRE, it was up one and three quarters percent. And maybe that speaks to everything in terms of why they kept First Republic on life support for so long to gain the stability of the industry. And so is this any sort of a green light, Tim, in your view, to start investing in regionals once again? Well, if we were in film class, would we ask, is this the denouement? I mean, but it's not the end. It's not tying it all together.

3:01It is a moment in time. And the KREs rallied, you know, 4 % or 5 % over the last couple of days. Look out. You know, maybe is this time. I'll tell you what. I kind of like some of these banks here. I like PNC. I like U.S. Bank. And I like them for the following reason. We've changed from a question of liquidity to more of an earnings question. Earnings are going to be affected. Regulation's coming. I'm not saying ego piling in there. I'm saying three weeks ago, this was no touch and we needed to wait to hear from earnings. We need to understand where earnings were going to be impacted. But more, we needed to hear about capital adequacy, slower buybacks, more regulation, higher cost of deposits and a very different business model for some means.

3:41They are going to get downward revisions. They're going to trade at different multiples. It's a different game. But if you look at a lot of these banks and again, best of breed in that space to me are PNC and U.S. Bank. I think they kind of look interesting. Did you get a lollipop with that haircut? Wow. Did you get a joke book? Okay. So I was going to quote a very wise man who said, he who forgets will be destined to remember. So, you know, it's really interesting. I remember one guy said that. Yeah. Nothing, man. So here's the deal. Back in 2008, in mid-March, Bear Stearns was taken under, okay, by J.P.

4:13Morgan. In the two months after that, it was kind of interesting. We thought that whole crisis at the time was contained to that one bank and this big bank coming in and taking it over. The S &P over the next two months rallied 15 percent. The BKX, the banking index rallied 20 percent into mid-May. And when you think about the totality of the banks that have gone under, OK, and that have actually gotten life support or backstop, it's bigger than Bear Stearns. OK, so I guess what I would say is we could continue to rally and it doesn't mean we're out of the woods. And when you think about what's happened with FRC going into receivership, all of the big banks, The five billion by the five largest ones that put in those deposits in mid-March, you know, they're all going to actually suffer some losses, I suspect.

4:54But they're also going to have to pay more into that FDIC insurance fund going forward. And if there are others like First Republic, there are going to be losses by all the banks here. So to me, I just think that if we have a little bit of a bounce here, we have a bit of a rally. I just think we have to go back. I'm not saying that there's the sort of systemic risk that we had back in 2008. But there's no shortage of other small regional banks that must really be feeling the heat right now. That's the key, though. It's systemic risk. And if we don't have that systemic risk, that's what makes this time different than the last time.

5:26So I don't know if I would be a buyer. I'm in First Horizon, but I'm on that because that was an agreement with Toronto Dominion Bank above$20. So I'm still in that one. That one is not taking a hit. That one has bounced and remained higher than where it bounced from. J.P. Morgan is the bank I would buy, bar none. I don't want to be messing around with regionals because it's so arbitrary to me, this whole process. And it was arbitrary to Dan's point, the financial crisis originally with Bear Stearns and with Lehman. There was so much going on. Who got saved, who didn't. Exactly. And this one, it feels a lot like that time for just the regionals now.

6:04And I think this process is taking way too long for regionals to really flush out. I'm happy waiting it out in JP Morgan. And the market doesn't really seem to care at this point about regionals. So I've heard a couple of things, Guy, tonight. And this is on the day when the Fed released its report reviewing why SVB went under. And what they found was basically, you know, just a bureaucratic supervision. There was some supervision at the Fed level, some supervision at the regional level. They got 31 supervisory notices, but nothing got done about any of them. I mean, just a mess here. And what it was telegraphing, this report, was that regulation is coming.

6:46Regulation is coming. And ultimately, the cost of all this is going to be borne out by the customer and by the banks. So in this environment, Guy, everything has changed. How they're doing business is going to change. So can you get on board? Even though Tim says, oh, I like PNC. I get that. I understand that sentiment, especially with super regionals. But the game is changing, isn't it? 100%. We've talked about it. And listen, Tim is right, I think, to point out U.S. Bancorp. Just for a trade, if you look where it recently traded down to, go back to the 2019 low, if we could throw up a four - or five-year chart, you'll see it's sort of interesting here for a trade.

7:21And quite frankly, it's probably some of the most, I would say, secured or smartest group of, I guess the word is, overseers at that bank, for lack of a better phrase. But with that said, your point is spot on. I mean, I think by definition, who's going to bear the brunt of this? The customer is, without question. The banks will pass it on. But again, you have to ask yourself, I mean, what's next in this line? Greg Ip had an article in the Wall Street Journal. Pension funds, mutual funds that own debt in an environment where interest rates moved 500 basis points in a year, there's more shoes to fall.

7:55We have three major banks failing in the course of a month and a half and the S &P is higher. That's somewhat counterintuitive. And I think the credit problems are just on the horizon now. Again, I want to at least caveat and qualify comments that I, again, I think PNC and U.S. Bank are different. And I think a lot of banks are different than FRC. Is this an environment where you want to go out and buy banks? I think we can have a conversation independent of FRC and say, hey, you know, there's credit coming. There are headwinds to earnings. They're certainly going to be downgrades and there's more regulation.

8:26So those are all reasons. But again, FRC is a situation that, along with SVB and Signature and a couple other places, are things that have captivated us because of the size and the mass move and the speed in which these institutions fell apart. Some of these other banks have totally different exposure. And I think it's important to understand the difference. I think it's also important to understand the difference between what regulators know now versus what they knew before all this. And again, markets always start rallying when regulators start scrambling. And I'm not saying this is exactly where we are, but I just want to point out the difference and that those two banks to me appear very different.

9:05You know, it's interesting. And it really is hard to put these things in buckets. But Schwab was a focus a few weeks ago. Schwab really is barely above where it was trading just before it reported earnings. And supposedly, you know, they said the right things and, you know, are doing the right things about the capital flight. And listen, you know, again, I think there's so many stocks out there. There's thousands of them, and some of them look like they're back in bull markets. These things look broken. These things have a lot of uncertainty about them. And again, I go back to a little of the PTSD that some of us have from these prior periods, and there's one group that you do not want to mess around with when you have total failures.

9:41Think about how many stocks in other industries, in other sectors, right, go to zero. Not many of them, right? I mean, think about through the course of your career. Banks do. So in the middle of something that you can't put your finger on what the problem is, why do you have to go be a hero? I get what you're saying with J.P. Morgan or some of these other ones. That's fine. You know what I mean? But they're going to be the beneficiary of a lot of this sort of stuff. And one last thing. J.P. Morgan is going to be the one. Who did Yellen make her first phone call to? It was Jamie Dimon. That doesn't mean the stock is a good buy.

10:11Well, it could mean if you're worried about regulation, who's going to be writing that regulation? It's going to be Jamie Dimon is going to have his fingerprints all over that regulation. And I'm hard-pressed to find something that Jamie Dimon does that's going to be a detriment to J.P. Morgan's stock. But what I'm worried about now, the next shoe is commercial real estate, that maturity wall. That's the one that's going to get hit. And that's going to hit the larger banks, too, but I think we have some time. Let's put this all in the context of the broader markets, because what we saw today was a continuation of a very strong run.

10:43Markets closing near their highs of the day here, adding to yesterday's big rally. The major indices all positive for the week and for all of April, the S &P, Dow and Nasdaq all up in three of the last four months. So what do we make of this action? I mean, it does seem like the markets are OK with banking turmoil, with the possibility of other shoes to drop, because we have the leadership of big tech, which, guys, seems to be infallible right now. Leadership of big tech. But ask yourself really why. Was the Microsoft quarter that outstanding? Yeah, it was good. It was not great. And again, so much of these moves in big tech, again, just my opinion on OK earnings have been it's basically multiple expansion.

11:24If you're OK with multiple expansion, again, an environment where regulation is coming down. The consumer seems to be pushing up against the wall here. We're obviously going to have tighter lending conditions. It's somewhat counterintuitive. I mean, clearly it's caught me by surprise because I think the market's going lower. But all this move, to me, most of it, if not all of it, is predicated on people just willing to pay more for a dollar's worth of earnings, which I think is the wrong tactic in this environment. If you look at the VIX, we closed, I think the last time we were this low was probably before the Fed was taking back the word transitory.

12:00So it's really bizarre to me, but it kind of makes sense if next week is the week where the Fed goes 25 and everybody thinks they're done. Is this an environment where mega cap tech should trade at a premium? It kind of is. Doesn't mean they should trade at a premium to where they have traded, but they should probably trade at a premium to the market. They should. For all the reasons we just said, we're scared about regional banks and other things. These are fortresses, these balance sheets. These are companies that are adding to buybacks. These are companies that didn't say enterprises spending is dead, et cetera.

12:31But I'm troubled by this, too. I mean, a 16 VIX is a revision, a reversion to mean moment. And I think the VIX is too low. And I think 4 ,300 is a level it's going to be tough to get through. So to me, these two things that we're talking about right now, the strength of Megacap Tech and the good earnings picture that is presented, generally good by Megacap Tech, but also the sort of unknowns of the banking crisis, these are reasons why the Fed may actually want to go ahead. Yeah, I think the best case scenario is that you have a dovish hike. And we've already seen Fed fund futures kind of like starting to tick up for June here.

13:02And I look at, to Tim's point, we have a VIX under 16 of where it was in early November of 2021 when the Fed did say that the battle inflation is going to start raising interest rates. We have a Fed funds that's going to be basically 5 percent here. And so when you think about what's happened in the last year and a half or so, I mean, to me, higher for longer, though, is going to be the thing that really does slow the economy. And when I think of, you know, the bond market, we have the spread that we have between Fed funds and where the 10 year that's really telling you that the economy is slowing.

13:29So I don't think valuations make a lot of sense here. That doesn't really matter here. But I think we're going to look back at Amazon and we're going look back at that time that we spent last night on this show 24 hours ago and to see a 15 % change in a stock that is literally a$1.2 trillion name, and we're going to say that was the canary in the coal mine. I mean, we were talking about it at the time, and I don't care what Google had to say about their cloud, and I don't care what Microsoft had to say about their cloud. There's a lot of exciting things that are wrapped up in those two names right now that investors are looking to put past.

13:57I think what happened this week in some of those names, that 10 % move in Microsoft, I think it's ludicrous. Actually, you should be running for the hills based on that sort of investor behavior, in my opinion. I don't mean sell them all. I mean, get ready, because if the Fed is not dovish with that hike, and they are a bit hawkish, I think we're going to see stocks sell off pretty hard over the next couple of weeks. Coming up, we're gearing up for another big week of earnings. And the list of FAANG names, the last of the FAANG names to report is on the calendar. What the chart master sees for Apple heading into that print.

14:26Let's talk about the chart of the month. The stock hit its highest level more than its 100-year history as a public company. Wow. What is it? Find out straight ahead.

14:40Welcome back to Fast Money. Apple will round out the FAANG earnings reports next week. But how will the stock hold up compared to its big tech peers? Let's ask the chart master, Carter Fraxenworth, of Worth Charting. What do you see, Carter? We shall see. Of course, my bias is that it's priced in a whole bunch. We have a well-defined series of lower highs since its peak. And we know, of course, it peaked the same day the market did. It set the high for January 2021. And the issue is interesting. The implied move in earnings would take you right back to the August high from last summer. So we close around 168.70.

15:12That high is 176. 3.9 % would get you to that high. Either way, I think you would be right to hedge going into earnings. and in the event that it pulls a pop like a Microsoft or something like that, I would sell into the pop. How do you see the pop that a Microsoft had, for instance? Is that a sustainable pop? Does it mean anything good in the future for Microsoft, or is this just a pop? Right. Well, so the magnitude of a gap up or down often determines how much is priced in. And, for instance, when a bank drops and gaps 30%, it finds a floor. Or when you gap up like a meta, notice meta doesn't move now.

15:48If the pop is small, 3%, 4%, 5%, you can get follow-through or the drop. But when it's epic, you know, 10%, 12%, 15%, markets are pretty efficient in repricing a security to where it belongs. So in the case of Microsoft, I would start to reduce exposure, certainly meta. So how do you look at, for me, the big shiny number of Apple is that 182.86, the$3 trillion market cap number. Well, that's the former high. So when you look at that, it's either a magnet or it's kryptonite for these stocks. And usually it's kryptonite first, and then it becomes a magnet. I feel as if they're chasing that number and everyone's put it into their algorithms as their sell stops, basically.

16:31But then it breaks through. Markets have a way of breaking through. What do you feel about that number? Sure. So the first key level is that August high, the high that set the market high for the S &P and for Apple. were we to get through that, right, then you are looking at the former high. When you first approach a former 52-week high or low, before you go through it, you contend with it. This is a matter of technique, right? So when a stock goes quickly to a 52-week low, it typically doesn't crash through. It backs and fills and then goes lower. So to your point, it is a magnet. I don't think we're going to get there in this earnings print.

17:04But if and as we were to get ultimately to the high, you almost never break out initially. you contend, which is to say you back away or you back and fill. Carter, we'll see you shortly in options action. Thank you, Carter Braxton. Worth or worth charting. Guy, how are you feeling about Apple? Well, Laura, it's clearly, as Tim pointed out earlier, I mean, big cap, high valuation tech, which Apple is, by the way, is a flight to quality. It's what we're seeing over the last couple of weeks. And I understand it. When banks are a scary place to be, people want to go into these great balance sheets.

17:37It makes sense. But it comes down again at some point to valuation and slowing growth. And that's been the story about Apple over the last few quarters. Regardless of what people want to believe, if you just look at the numbers, things have been slowing down and the valuation continues to get higher. So lower highs, lower lows. Makes sense to me. You're taking profits here. Tim. Yeah, it's the setup into Apple is different than the setup into the other stocks. I mean, every other mega cap tech stock, depending on even what they did afterwards, is they all reacted somewhat differently. But the numbers were such that it was it was a relief week.

18:08It really was interesting. By the way, Apple's reports so much later than the rest of mega cap tech. I'm not even sure why that is. We usually get them all on the same day. So Apple's now sitting out there mid next week. If you look in this, my putting my Carter hat on on a relative basis to the S &P, you know, we're back up to this level that it's been at a couple of times over the last year on a on a ratio chart where I think you run into resistance. And again, outperformance of the S &P of almost 23 percent in the last four months is heroic. And it makes sense. We know why. And a lot of that came after SVB.

18:39So, no, I think like others, it sounds like Apple's probably going to need to really knock your socks off. And that may not be enough. Yeah. Most important thing to me is Apple's obviously the largest component in the S &P and in the Nasdaq. Both of them are below their February 2nd highs. Given everything that's happened this week, that to me is a little bit shocking. I don't think Apple's going to break out the indices. Coming up, one stock fueled up and in a rally mode this month. Whoops, that was a clue. So what is a stock? We'll reveal the name and the trade. You're watching Fast Money live from the Nasdaq MarketSite in Times Square.

19:08Back right after this.

19:20Time to reveal the chart of the month. It is Exxon surging almost 8 percent since the start of April. The company reporting record Q1 profits before the bell today. Those results boosted by higher output in the face of lower energy prices. Meantime, crude oil closing out the month at$77 a barrel, up just one and a half percent in April. Still like Exxon here, Guy. Yes, and I think Tim will agree as well. I mean, they're just running their business so much better. And as we've said, the best thing that happened to Exxon, one ESG, two the Biden administration, and three, if you want to throw it in there.

19:53If you remember, we went down to a$39 negative print a couple of Aprils ago in WTI. $23,$24 billion in CapEx. I'm sure you hear over the weekend demonizing the$86 billion in revenue. But it's just a very well-run company. I think the stock will continue to go higher. I actually think a lot of these names have topped out. I was looking for higher crude prices and lower equity prices on the large cap integrated names. But I think if you look at PXD, everyone's the rumor mill, the whisper mill about Exxon maybe being an acquirer of another name. And that might not be such a bad idea for Exxon at this point in their cycle with that stock having an incredible last year.

20:38Maybe they want to buy somebody. I'd rather be a buyer of PXD than an Exxon. You snuck it in. I snuck it in. Would you rather? Sorry. Tim, I'll go to you. Well, Exxon rallying in the face of oil that's maybe even rolling over says a lot about what people think about what oil companies are doing differently. Exxon's cash balance exceeds its now$32 billion. At$80 Brent, they will generate another$8 billion in cash flow that they could kick back out to investors, which they're doing. And some of these longer cycle projects that they would have jumped at in the past are things that they're thinking about.

21:10And some they're actually crossing off the list on a let's not do it. That's the difference in the space. I think energy names go higher. I like oil services because I think they are going to have to be drilling more. All right. Time for the final trade. Let's go around the horn. Guy Dami. Rangers-Devils game six melt tomorrow. I know you're going to be watching with bated breath as will I. Las Vegas Sands, LVS continues to grind higher. Tim. In the meantime, you get the New York Knickerbockers. So let's do that. Actually, you get them on Sunday. But the sequence for this weekend for New York fans is important.

21:42So Slumberjay. That's another one of these companies that I think just reported great numbers and is continuing to roll. Steve. You know I like to go against the trend. I didn't hear a lot of bullishness on Apple, so Apple's my final trade. Dan. Snap. This is definitely contrarian. I put a call calendar on looking at July expiration, so that's a bullish trade idea. That does it for us here on Fast Money. Stick around. Don't go anywhere. Options Actions up right after this quick break.