Fed Decision Day, Regional Banks After the Sell-off, AMD and Yum Brands CEOs 5/3/23

David Faber (0:00)

Market Insight and Analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Good Wednesday morning, everybody. Welcome to Squawk on the Street. I'm David Faber, along with Jim Cramer. We're live from Postline at the New York Stock Exchange. Carl has this morning off. Let's give you a look at futures as we get ready to start trading a half hour from now. You can see we are, I don't know what you call that, not much.

Jim Cramer (0:20)

No, inconsequential.

David Faber (0:22)

Thank you, inconsequential open. That's what we're going with right now, but we'll see what we get 30 minutes from now. Let's get to our roadmap. It does start with FedWatch, of course. Wall Street is expecting another rate hike and then hints of a pause. But will the ongoing regional bank volatility perhaps change the path of rates? Plus we're keeping an eye on shares of AMD and Yum. They're both down in the pre-market, that following quarterly results. We're going to have the CEOs of both of those companies join us in this hour.

And FTC Chair Lena Kahn is calling for new regulations on AI and pointing to raw material controls as a path forward to do so.

Let's start with a countdown to today's Fed decision amidst course of concerns about regional banks, particularly yesterday as I was getting ready to leave. Milken, we were watching, you know, many of those shares declined dramatically, Jim. Let's start off on the Fed though. I assume you don't have any new thoughts, or do you in terms of incorporating some of these continued concerns about parts of the banking sector?

Jim Cramer (1:23)

Well, I mean, I've been saying that this is a hundred basis point problem, that you're getting a hundred basis points of tightening. You know, even, down to the granularity, you go listen to the Ford call, which I felt was excellent, Mark and Dr. Fleck, you know, people are talking about, how do you buy cars? Cars are done by regional banks.

There are parts of the economy that are not controlled by regional banks. A terrific quarter by Simon Properties last night. Simon Group Properties does not need a regional bank. But when you do a transaction, when you typically get, say, your retailer, a smaller retailer, and you have to have inventory, that's a regional bank. And the regional banks don't want to watch their stocks. We get a number of stories today saying that it's very easy to knock these stocks down using an ETF. And then the banks have to spend a lot of time defending.

And if they have to defend, they're not gonna loan. So it's kind of a vicious cycle downward right now.

David Faber (2:18)

Right, the stock price can get people concerned. And as we've pointed out so many times and what is so different now about really the state of affairs, even not that many years ago, is the ability to rapidly move your money at the stroke of your finger.

Jim Cramer (2:35)

And one of the worst things, David, is that we're not gonna get these, how much is insured until the end of the quarter. So it's very possible that a lot more is insured than you realize.

But if the FDIC were simple to say, listen, we're going to insure, buy bank, that would take away the pressure. But right now, the FDIC, which failed miserably this weekend because it gave it, 3 a.m. it gave it to JP. Morgan without any thought about maybe it's important to have regional banks be strong. The FDIC doesn't seem to have a plan for a PAC West. They don't plan for Zion.

David Faber (3:08)

I assume it would be over time encouraging consolidation. I mean, I just had a number of conversations in the last couple of days, given how many people are at Milken from seeing people in advance. No, but you go there really to have the off-camera conversations, obviously. And this idea that we're going to need another period of consolidation now, unclear how that will be viewed by regulators, but perhaps it should be encouraged to the sense that you need to create even more superregionals. We still have more banks by far than any country in the world. We have this tradition of having these smaller regional banks and community banks.

Jim Cramer (3:45)

Historically, we like that because it's good for the community. Now, take a really excellent bank like Kidd. They have a ridiculously high yield right now because the stocks have been pressed down.

They've got remarkable management. They are one of the best operators that I've come across. Should they be so-called wiped out? Chris Gorman, who's done a remarkable job, because their yield's 8.44 and they happen to be in an ETF.