Raphael Stevens

Axel Lehmann, chairman at Credit Suisse Group AG, speaks during the Institute of International Finance (IIF) annual membership meeting in Washington, DC, on Friday, Oct. 14, 2022.
Ting Shen | Bloomberg | Getty Images

Check out the companies making headlines before the bell.
Credit Suisse — Shares of Credit Suisse were down 21.5% after the firm’s biggest backer, Saudi National Bank, said it won’t provide it with further financial help. Credit Suisse and several other European banks, including Societe Generale, Italy’s Monte dei Paschi and UniCredit, were halted from trading as prices plummeted.

Bank of America, Morgan Stanley, Wells Fargo — Shares of larger financials were in lower early Wednesday as the Credit Suisse tumble sent ripples across the global banking sector. Bank of America lost 2.9%, Morgan Stanley dropped 3.2% and Wells Fargo declined by nearly 4.2%.
Lennar — Shares of the homebuilder rose more than 1% in premarket trading after Lennar beat estimates on the top and bottom lines for its fiscal first quarter. Lennar reported $2.06 in earnings per share on $6.49 billion of revenue. Analysts surveyed by Refinitiv expected $1.55 in earnings per share on $5.93 billion of revenue. Home deliveries increase 9% year over year, but gross margin and new orders decreased.
PacWest Bancorp, Comerica, KeyCorp — Several regional banks led Wednesday’s fall after rallying on Tuesday. PacWest and Comerica lost 7.7% and 3.4%, respectively. KeyCorp’s stock price dropped 1.4%, Regions Financial was down 4.2% and Zions Bancorp lost 5.5%. Shares of San Francisco-based First Republic bucked the trend, gaining 3.8%.
Royal Caribbean — Shares of the cruise line were down 2.8%. The company recently refunded guests after mistakenly offering a non-existent ‘Premier Pass’ on its website. The company also announced it would be expanding its sales team. Rival cruise operators were also down.
— CNBC’s Hakyung Kim and Jesse Pound contributed reporting.

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Retail egg prices fell by 7% in February, according to the consumer price index.
A dozen large Grade A eggs cost $4.21, on average, down from $4.82 in January, a record high.
Egg prices rose in 2022 amid a historic outbreak of bird flu.
They may stay elevated as Easter approaches due to generally strong demand.

Matthew Hatcher | Afp | Getty Images

Retail egg prices retreated in February, according to federal data issued Tuesday, delivering relief to consumers who saw prices spike at the grocery store in recent months.
Average egg prices fell almost 7% in February relative to January, according to the consumer price index, a key barometer of inflation.

A dozen large Grade A eggs cost $4.21 in February, down 13% from $4.82 in January, which was a record high, according to federal data tracked by the Federal Reserve Bank of St. Louis. The monthly decline was the first since September.

Why egg prices increased rapidly

That dramatic increase in egg prices, economists say, largely stems from a disease called highly pathogenic avian influenza — known as bird flu.
The disease is contagious and lethal in birds. It killed a record number, including egg-laying hens, in 2022.
In past years, the virus has typically disappeared after the spring. It reappeared in the fall last year, crimping egg production while heading into peak demand season for eggs around the winter holidays, experts said.

Lower prices now partly reflect a decline in consumer demand early in the year, which is a typical seasonal pattern, said Brian Moscogiuri, a global trade strategist at Eggs Unlimited, an egg supplier.
There also hasn’t been a new confirmed case of avian flu among commercial table-egg farms since December, giving suppliers some time to recover.
“Do we expect crazy, record pricing again? No,” Moscogiuri said.

Egg prices may pop again around Easter

However, prices may rise again heading into Easter, which is in April, due to generally strong demand around that holiday, experts said. There’s also a chance that bird flu could surface again at egg farms.  
General inflationary pressures are also serving to keep egg prices elevated. Those include higher corn and soybean prices, which make it more costly to feed hens, and costs for labor and transportation, Moscogiuri said.
Average wholesale egg prices increased 16% so far in March, according to Angel Rubio, senior analyst at Urner Barry, which tracks the wholesale market.
It generally takes about a month for those prices to trickle through to consumers, and the price moves are often more muted, Rubio said.
Ultimately, retailers such as grocery stores determine the timing and amount of the price increase for consumers.

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Moody’s Analytics chief economist Mark Zandi thinks the Federal Reserve is unlikely to raise interest rates at its March meeting as there is a “boatload of uncertainty” around the recent bank failures.
The financial turmoil of the past few days will certainly affect monetary policy decision making when the Federal Open Market Committee meets next week, he added.
“I think they’re focused on the bank failures that roiled the banking system and markets over the last couple of days,” Zandi told CNBC’s “Street Signs Asia” on Wednesday.

Moody’s Analytics chief economist Mark Zandi thinks the Federal Reserve is unlikely to raise interest rates at its March meeting as there is a “boatload of uncertainty” around the recent bank failures.
The financial turmoil of the past few days will certainly affect monetary policy decision making when the Federal Open Market Committee meets next week, he added.

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“I think they’re focused on the bank failures that roiled the banking system and markets over the last couple of days,” Zandi told CNBC’s “Street Signs Asia” on Wednesday.
“There’s a boatload of uncertainty here,” as a result the Fed will want to be cautious, he added. “I think they’re going… [to] decide not to raise interest rates at the meeting next week.”
His comments follow U.S. regulators shutting down Silicon Valley Bank on Friday and taking control of its deposits in the largest U.S. banking failure since the 2008 financial crisis — and the second-largest ever.
On Sunday, policymakers scrambled to backstop depositors at both SVB and Signature Bank, which was also shuttered, to stem the panic around contagion risks.

Inflation ‘moderating’

The Fed’s calculation on interest rates could get complicated as the U.S. economy continues to fight high inflation. The latest consumer price index data on Tuesday showed inflation rose in February, but was in line with expectations.

While inflation remains a problem for the U.S. economy, “it’s moderating” and moving in the right direction, said Zandi.
“But it is very high. I think… more rate hikes may be in order. But at this point in time, it is much more important to focus on what’s in your face — that is the potential for bigger problems in the banking system,” he explained.
Zandi isn’t alone in calling for a pause on rates hikes. On Monday, Goldman Sachs said it does not expect the Fed to hike rates this month. But the market is still pricing in for a 25 basis point hike next week, according to a CME Group estimate.

Bank downgrade

On Tuesday, Moody’s Investors Service cut its view on the entire U.S. banking system from stable to negative.
The rating agency noted the extraordinary actions taken to shore up impacted banks. But said other institutions with unrealized losses or uninsured depositors could still be at risk.
“I’m not in the ratings agency and don’t have any comment on the ratings action, that’s independent,” said Zandi. But he noted the move make sense in the context of higher interest rates, which could put pressure on the banking system.
Still, at the fundamental level, the economist believes the U.S. banking system is in a “pretty good spot.”
The failed institutions were unusual in that they catered to the technology sector in the case of SVB and the crypto markets, in the case of Signature, Zandi noted.
“There are banks that are in trouble, but they’re idiosyncratic,” he said. They’ve got tangled up with the problems in the tech sector and the crypto market. Outside of that, the system is well capitalized, highly liquid, with good risk management. ” 
Regional bank stocks and a slew of household names took a hit earlier in the week as jittery investors feared that government action and the takeover of both banks would spread to the broader sector. But bank shares rose sharply on Tuesday as regional banks attempted to rebound from a deep sell-off.

Aggressive action

Policymakers’ “very aggressive intervention in the market,” helped a lot said Zandi, as well as signals that the government “is going to do whatever it takes to support the banking system.”
Despite the reassuring moves, the economist said the Fed should still pause its rate hikes to gauge just how much conditions have tightened, and what the impact is on the broader economy and ultimately inflation.
He expects the Fed to make two more quarter-percentage-point rate hikes — 25 basis points each time, at the May and June FOMC meetings.
For now, Zandi reiterated it’s better for the Fed to “just take a breath here, pause and see how the banking system responds to all this and how much of a restraint that’s going to be on the broader economy,” and could resume to raise rates again later in May should inflation remain a problem. 
 — CNBC’s Jeff Cox contributed to this report

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“The challenging adjustment to the exit from zero-COVID, for both borrowers and lenders, will weigh on banks’ asset quality and profitability over the next 12-18 months,” said Moody’s analysts in a note Wednesday.
Moody’s had changed its outlook on China’s banks to “negative” from “stable” in November due to “deteriorating operating environment, asset quality and profitability.”

Pictured here is Shanghai’s Lujiazui Financial District on June 7, 2022.
Vcg | Visual China Group | Getty Images

BEIJING — Ratings agency Moody’s said Wednesday it maintained a “negative” outlook on China’s banking sector as a result of a drawn out recovery after Beijing’s Covid controls ended.
China’s economy missed a national growth target in 2022 due to the spread of the highly contagious omicron variant and a prolonged slump in the massive real estate sector. While Beijing ended its stringent Covid controls in early December, the economic rebound so far has remained muted.

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“The challenging adjustment to the exit from zero-COVID, for both borrowers and lenders, will weigh on banks’ asset quality and profitability over the next 12-18 months,” Moody’s said in a note Wednesday.
“Our outlook on the banking sector remains negative,” said Vice President Nicholas Zhu and Associate Managing Director Chen Huang, the authors of the report.
Moody’s had changed its outlook on China’s banks to “negative” from “stable” in November due to “deteriorating operating environment, asset quality and profitability.”
The ratings agency affirmed its negative outlook earlier this month. Wednesday’s report focused on fourth-quarter data on Chinese banks’ operations.

The pandemic damaged corporate and individual balance sheets over the last few years, and it will take time to repair them, even as the overall economy is recovering, China’s National Bureau of Statistics spokesperson Fu Linghui told reporters Wednesday.

The statistics bureau’s latest data showed slower-than-expected industrial production growth, retail sales that were in line with expectations, and better-than-expected fixed asset investment for the first two months of the year.

Risks from bad loans

Chinese banks’ asset quality face risks from non-performing loans, the Moody’s analysts said.
Although those bad loans aren’t growing significantly, they said the economic environment makes it difficult for lenders and borrowers to find new sources of growth.
“New NPL formation will likely remain high amid the challenging adjustment to the exit from zero-COVID,” the report said. “We expect banks to steadily dispose of bad debt over the next 12-18 months to keep the NPL ratio stable at the current level of 1.63%.”

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Chinese banks’ assets grew by 10.8% last year, faster than the 8.6% growth in 2021, the report said.
“We expect loan growth to pick up over the next 12-18 months in response to authorities calling for increased financing as the economy reopens.”
Meanwhile, the analysts said they expect constraints on bank profits from lower asset yields. They noted the banks’ average return on assets declined by three basis points year-on-year in the fourth quarter.
Moody’s said it expects Chinese banks’ capitalization to remain stable, with adequate liquidity.
In addition to modest increases in government stimulus, Moody’s said it expect Beijing will put greater emphasis on maintaining financial stability, including the prevention of banking system risks.
Preventing and defusing risks was one of the government policy priorities Premier Li Qiang laid out in remarks to the press on Monday.

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Silicon Valley Bank’s collapse is likely to be felt across the technology landscape globally over the coming years.
Investors who spoke to CNBC said there could be issues for startups trying to access their funds and credit lines to pay workers.
Startups may also need to tighten their belts while others may collapse with little access to funding, experts said.

Silicon Valley Bank’s collapse could have ramifications for the technology landscape over the coming years, analysts and investors said.
Nikolas Liepins | Anadolu Agency | Getty Images

Silicon Valley Bank was the backbone of many startups and venture capital funds around the world. The effects of its collapse, the biggest banking failure since the 2008 financial crisis, is likely to be felt across the technology landscape globally over the coming years.
“With SVB in essence the Godfather of the Silicon Valley banking ecosystem for the past few decades in the tech world, we believe the negative ripple impact of this historical collapse will have a myriad of implications for the tech world going forward,” Dan Ives, analyst at Wedbush Securities, said in a note on Tuesday.

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SVB’s collapse began last week when it said it needed to raise $2.25 billion to shore up its balance sheet. Venture capital firms told their portfolio companies to withdraw money from the bank and other clients looked to get their cash before it became unobtainable. This effectively led to a bank run.
The bank had to sell assets, mainly bonds, at a massive loss.
U.S. regulators shut down SVB on Friday and took control of its deposits. Regulators then said Sunday that depositors at SVB would have access to their money, in a move aimed at stopping further contagion.
But the episode has the potential to impact the technology world in several ways, from making it harder for startups to raise funds to forcing firms to change their business model, according to investors and analysts who spoke to CNBC.

‘Last thing we needed’

SVB was critical to the growth of the technology industry, not just in the U.S. but in places like Europe and even China.

The 40-year old institution had an intimate link to the technology world offering traditional banking services as well as funding companies that were deemed too risky for traditional lenders. SVB also provided other services like credit lines and lines to startups.
When times were good, SVB thrived. But over the past year, the U.S. Federal Reserve has hiked interest rates, hurting the once high-flying technology sector. The funding environment has got harder for startups in the U.S., Europe and elsewhere.
SVB’s collapse has come at an already difficult time for startup investors.
“This whole Silicon Valley Bank thing is the last thing we needed and was completely unexpected,” Ben Harburg, managing partner of Beijing, China-based venture capital fund MSA Capital, told CNBC.

Startups have had to tighten their belt while technology giants have axed tens of thousands of workers in a bid to cut costs.
In such an environment, SVB played a key role in providing credit lines or other instruments that allowed startups to pay their employees or ride out hard times.
“Silicon Valley Bank was very paternalistic to this sector, they not only provided payroll services, loans to founders against their illiquid credit, but lines of credit as well. And a lot of these companies were having trouble already raising equity and they were counting on those lines to extend their runway, to push out the cash burn beyond the recession we all expect.” Matt Higgins, CEO of RSE Ventures, told CNBC’s “Street Signs Asia” on Tuesday.
“That evaporated overnight and there’s not another lender that’s going to be stepping in to fill those shoes.”
Paul Brody, global blockchain leader at EY, told CNBC Monday that a crypto firm called POAP, which is run by his friend, has half of the company’s money tied up in SVB and can’t get it out. The amount at SVB is “more than payroll can cover,” suggesting it might be hard to pay employees. A spokesperson for the company wasn’t immediately available for comment, and CNBC was unable to independently verify Brody’s comments.

‘Reboot’

The SVB collapse will also likely put the focus on startups to pivot to profitability and be more disciplined with their spending.
“Companies will have to reboot the way they think about their business,” Adam Singolda, CEO of Taboola, told CNBC’s “Last Call” on Monday.

Hussein Kanji, co-founder of London-based Hoxton Ventures, said that over the next three years there will be more restructurings at companies, though some are holding off.
“I’m seeing a lot of ‘kick the can down the road’ behavior which isn’t that helpful. Do the hard things and don’t delay or procrastinate unless there is very good reason to. Things don’t often get easier in the future simply because you wish for them to,” Kanji told CNBC via email.
Wedbush’s Ives said that there could also be more collapses, adding that early stage tech startups with weaker hands could be forced to sell or shut down.
“The impact from this past week will have major ripple impacts across the tech landscape and Silicon Valley for years to come in our opinion,” Ives said in a note Sunday.
—CNBC’s Rohan Goswami and Ari Levy contributed to this report.

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Famed investor Carl Icahn believes the U.S. economy is in trouble because of poor corporate leadership and stubbornly high inflation.
“The system is breaking down, and we absolutely have a major problem in our economy today,” Icahn said on CNBC’s “Closing Bell” Tuesday. “One of the worst countries in the world as far as corporate governance.”

Icahn has been a longtime activist investor and corporate raider, making profit from forcing changes to corporate policy. He credited his success to his ability to take advantage of questionable governance at the corporate level.
“Leadership is worse than mediocre. And that’s why we’re so successful. I mean, not because we’re geniuses, but because you go into a company today … It’s really horrible what you find,” Icahn said.
Meanwhile, Icahn said another major issue in the economy right now is surging inflation and the Federal Reserve has no choice but keep raising rates to squash it.

“I think Powell really has to raise interest rates sooner than later,” Icahn said. Inflation is the worst thing the economy can have…. I don’t think you have a choice. If you don’t keep going on, I really believe that the problem of inflation can become such that it’s very, very difficult to get out of it.”
Inflation rose again in February with the consumer price index increasing 0.4%. The annual inflation rate is now at 6%, which will likely keep the Fed on track for another interest rate hike next week, despite recent banking industry turmoil.

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