Banking Drama Is Back

By Matthew Gutierrez and Shawn O'Malley · February 1, 2024

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?? This is not a drill: Three of the Magnificent 7 reported earnings Thursday afternoon, leaving markets’ fate up in the air.

The outlook? Investors saw their shadow, meaning six more weeks of bull market ahead.

Kidding aside, with its nearly $3 trillion market cap, investors paid particularly close attention to Apple’s earnings today.

While the company was coming off four straight quarters of annual revenue declines, Apple reversed that trend, growing sales 2%.

Meta also reported earnings, surging 12% in after-hours trading after beating expectations and announcing the company’s first-ever quarterly dividend payment of $0.50 per share.

Amazon’s stock moved higher, too, climbing 5% after reporting a 14% jump in revenue.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• Regional banking woes resurface
• Why the U.S. might no longer be spoiled with cheap oil
• The Fed is fed up with data revisions

All this, and more, in just 5 minutes to read.

POP QUIZ

What’s the estimated cost for Apple's new Vision Pro headsets? (The answer is at the bottom of this newsletter!)

Chart of the Day

In The News

?? Regional Banking Troubles Are Back

Nearly a year out from 2023’s panic in regional banks, marked by the collapse of Silicon Valley Bank (SVB) and First Republic, problems at not-too-big-to-fail banks are rearing their head again.

New York Community Bancorp’s stock plunged 38% on Wednesday after slashing its dividend to stockpile cash. Consequently, the KBW Regional Banking Index, which became widely followed during last year’s banking panic, had its worst day since SVB’s implosion.

• Adding to investors’ unease was Aozora Bank. While based in Tokyo, the bank’s stock plunged over 20% on Wednesday, too, following warnings about its investments in U.S. commercial real estate.
• Meanwhile, Deutsche Bank quadrupled its provisions for losses on U.S. real estate to $133 million.

It’s a reminder that commercial real estate has yet to fully bounce back from a pandemic-era downturn, and banks worldwide — financiers of many such buildings — are feeling the pain.

• Billionaire investor Barry Sternlicht didn’t help with the market’s nerves, either, predicting office properties may lose over $1 trillion in value due to remote work trends.

Why it matters:

At New York Community Bancorp (NYCB), beyond the dividend cut, investors punished the stock on reports that Moody’s is considering cutting the bank’s credit rating to “junk.”

• Given that a bank’s whole business is built on providing credit, a bank with a poor credit rating of its own doesn’t exactly inspire confidence. Kinda like your neighbor on his third marriage with no shortage of relationship advice.

Mounting uncertainty: We shouldn’t just pick on NYCB, though. Bloomberg reports that...