Great to sit on the Daily Diary for Dougie, when the market showed signs of stabilization and green across the board after the recent spike in volatility. On the day, the Nasdaq rose around 2.5%, while the S&P 500 was up just under 2%. Crude oil ended in the black after a few big downward moves while the 10 Year Treasury yield rose over 10bps on the day. Stabilization of banking shares both here and Europe were the key theme of the day bolstering investor sentiment. It is yet to be seen if measures being taken have resulted in a key inflection point, or today was just a one day boost in investor confidence in the sessions ahead. Regardless, it was nice to indexes end nicely in the black this Thursday.

Equity levels haven't changed much since our last update. Hopefully markets can hold their gains of the day as we head into the final hour of trading. Inflation continues to be felt throughout the economy.

Today Alphabet (GOOGL) announced it is raising monthly prices for its YouTube TV subscription to $72.99/month from $64.99/month, amid rising content costs.

First Republic Bank (FRC)  was trading in green after being off big to start the day. It is being reported that the nation's biggest banks are close to a deal to deposit about $30 billion into First Republic, a step meant to halt financial contagion fears across the regional banking sector after the recent failures of Silicon Valley (SIVB) and Signature (SBNY) banks.

More economic fallout from the increasing pressure on non-major financial institutions. Morgan Stanley's auto analyst is out stating, "auto investors should prepare for light vehicle supply to rise and financial institution willingness to lend to fall at the same time."

Further, "bank loan auto delinquency rates now nearing pre-COVID levels, while aggregate subprime ABS data is seeing delinquency rates near the Great Recession levels" and "Bank auto lending standards have been tightening for 3 quarters, and outside of the sharp pullback seen in 2Q20, are at their tightest levels since the survey began tracking auto in 2011. Our banks team has been looking for total loan growth to slow in 2023as banks tighten their credit boxes."

Tougher times and additional layoffs for Ford (F) and General Motors (GM) could very well be in the offing if the reading is correct.

The markets continue to strengthen on hopes that necessary steps to strengthen the regional banking system are in the works. The Financial Select Sector SPDR ETF (XLF) is now up 3% on the day, while the Nasdaq is up better than 2%.

Mortgage rates fell for the fifth straight week on fears of financial contagion following failures at two major banks in the past week. The average 30-year mortgage rate was 6.60% for the week, down from 6.73% last week but still much higher than the 4.16% level a year ago.

Credit quality at the 'not too big to fail' banks continue to deteriorate. Synchrony Financial's  (SYF) credit card delinquency rate in February was 3.9%, a bit higher than 3.8% in January, and significantly worse than 2.9% in February 2022.

Capital One (COF) reported similar credit trends earlier this morning. Not surprisingly, higher end consumers are faring much better in the current economy. American Express's (AXP) U.S. consumer credit card delinquencies in February rose marginally higher to 1.1%, compared with 1% in January.

Following the recent collapse of Silicon Valley Bank (SIVB) and concerns about its impact on the broader
banking sector, Goldman Sachs (GS) is raising its probability of a U.S. recession over the next 12 months
to 35% from its previous 25% prediction. Curiously, Goldman had lowered its projection from 35% to
25% in February due to "persistent strength in the labor market and early signs of improvement in
business surveys."
Suffice it to say, given the conflicting signals the market is getting from economic
readings and the recent turmoil in the banking system, the economic "situation" is likely to stay fluid at
least over the next few weeks.
Crude oil has stabilized today after a few days of utter bloodletting. Berkshire Hathaway (BRK.A)  took
advantage of the bill pullback in the energy sector to scoop up another over $450 million in Occidental
Petroleum (OXY) , bringing their stake to just north of 23% in the big E&P concern.
JPMorgan Chase (JPM) , Morgan Stanley (MS)  are discussing a potential deal with First Republic Bank (FRC) , which hopefully leads to a significant capital infusion into the regional bank. This news has helped
turn equities green across the board since our last update. The SPDR S&P Regional Banking ETF (KRE)  is
now flat for the day compared to down over three percent at our last update.

Markets are down across the board in early trading, but off their worst levels of the day. Investor sentiment has been undermined today by a 50bps rate hike from the European Central Bank. While understandable given the current high levels of inflation across the continent, the market was hoping for a 25bps rise with the existing turmoil in the financial markets.

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The jobs market continues to be strong. Weekly jobless claims fell to 192,000 today, compared to a consensus figure of 205,000. In addition, building permits and housing starts moved up sharply in February, significantly exceeding expectations. However, the Philly Fed's gauge of business outlook for March came in at -23.2, far below the consensus of -15.6. Investors are probably going to have to navigate conflicting economic signals for a while.

Adobe Inc (ADBE) is bucking the downward tilt of the overall market with a 3% gain. The company beat on both the top and bottom line with its fourth quarter results which posted just after the closing bell Wednesday.

The regional banking system continues to be under pressure. First Republic Bank (FRC) is down 30% in early trading today as it pursues 'strategic alternatives' or outright sale. SPDR S&P Regional Banking ETF (KRE) is off just over 3% as well.

And the layoff list seems to continue to grow by the day. Virgin Orbit (VORB) announces it is furloughing almost all of its employees. It plans to pause work for a week as it seeks funding to stay afloat. That can't be an easy task in this environment.

Speaking of which, the FDIC is having trouble finding a suitor for the assets of Silicon Valley Bank (SIVB) . Reportedly, JP Morgan Chase (JPM) and Bank of America (BAC) are two of the major names that passed on acquiring the bank before the FDIC shuttered the 16th largest bank in the U.S. last Friday.

In some closing the barn door after the horses have escaped already news, Fitch has placed a 'BBB+' Long-Term Issuer Default Rating on Western Alliance Bancorporation (WAL) as well on as its associated debt and deposit ratings on Rating Watch Negative. In addition, First Republic Bank (FRC)  was down a quarter in premarket trading amid a report that it's evaluating strategic options, including a potential sale.

If we had a playlist to the Daily Dairy today it would be heavy on Florida, Katy Perry, Alicia Keys and Chris Brown as it is feeling more and more like 2008 in the financial markets.

It is not just the health of the regional and small financials that are concerning. The health of the average consumer seems to continue to deteriorate after 22 straight months of losing buying power to inflation and as savings accumulated during the pandemic get spent down.

Capital One (COF) is reporting that its delinquency rate came in at 3.72% in February, from 3.65% in January. Delinquency still slightly trailing the 3.88% rate recorded in February 2020, before the pandemic. Net charge-off rate came in at 4.16%, up from 3.81% in January and down from 4.68% two years ago.

Futures were flat less than an hour away from market open.

It is good to be standing in for Doug Kass this Thursday. It's likely to be another volatile day in the markets, so there will be plenty of topics to discuss.

The last week has been one where the Federal Reserve finally raised rates high enough where the central bank has "broke something." I have been anticipating this event in my columns since the middle of last year. After witnessing the second and third largest bank failures in U.S. history over the past week, I think it is safe to say we have reached the point in the monetary tightening cycle where something has officially broken.

The Fed faces a trap of its own making, both in keeping interest rates low or near zero since the financial crisis and then increasing the money supply by 40% over two years in response to the pandemic and its associated lock downs. Waiting too long to recognize inflation was neither "transitionary" nor "temporary" in 2021 just compounded the problem.

How the recent blowup in the credit markets wasn't anticipated by more investors is somewhat shocking to me. The last tightening regime the Fed implemented was in 2018 and the Fed Funds rate never got to 3%, let alone near 5%, before the central bank was forced to back off and reverse course. And that was when the government had less debt, better leadership, no proxy war in Ukraine and the economy was much stronger to boot. It was always just a matter of when and where monetary policy would expose large cracks in the financial system, not if.

The recent challenges in the regional banking sector caused Goldman Sachs yesterday to reduce their 2023 GDP growth projections for the U.S. economy from 1.5% to 1.2%. Personally, I will be somewhat shocked if the country is not in a recession by year-end. Meanwhile, Goldman boosted its growth projections around China, which is benefiting from cheap oil from Russia thanks to western sanctions, from 5.5% to 6%.

The Swiss National Bank has opened the liquidity spigots for embattled Credit Suisse (CS) , which has borrowed just over $50 billion to shore up its balance sheet. Will that be enough to save the bank? Only the Shadow knows as my late father liked to quip. Credit Suisse is up some 10% in early pre-market trading while futures are slightly down overall. I don't think this means much given the recent volatility of the markets. So, buckle up campers, it is likely to be another eventful day.