CNBC Daily Open: Stricter rules for banks after SVB bankruptcy?

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Banks could be regulated more strictly in the future if the regulators had their way.

• Alibaba will split into six business groups, the Chinese tech giant said. Each entity will have its own CEO and be able to go public (except for the trading group, which will remain fully owned by Alibaba). US-listed shares of Alibaba rose 14.26%. The news comes a day after Jack Ma, founder of Alibaba, was spotted in China.

• PROFESSIONAL Generative artificial intelligence will boost global economic growth by $7 trillion and boost productivity by 1.5% over the next decade, Goldman Sachs said. The bank highlighted stocks that could benefit.

If you squint a little, Tuesday looks like a “normal” trading day – almost. That means the US markets were concerned yesterday with fears of inflation and interest rates, not with a banking crisis.

The most important news of the day was of course the Senate hearing on the collapse of the SVB. Banks slipped after regulators said they favor tougher rules for banks. But the movement — the SPDR S&P Regional Banking ETF falling 0.09% — was marginal compared to the sharp swings of the past two weeks.

Interest rates arguably had a larger impact on market movements. US Treasury yields rose again – the 2-year yield hit 4.08%, breaking above the 4% mark for the first time in almost a week, and the 10-year yield rose to 3.571%. The rise in yields suggests that traders are becoming increasingly confident that the banking turmoil is abating and are turning their attention back to inflation.

Indeed, the Conference Board’s Expectations Index showed that consumers believe inflation will remain at 6.3% over the next 12 months and that their near-term prospects are at levels consistent with an impending recession. (Although it must be admitted that the consumer outlook has improved slightly since February, even after the collapse of the SVB.)

As a result, the rate-sensitive Nasdaq Composite fell on the second day, losing 0.45%. It might seem like a small drop, but Solus Alternative Asset Management’s Dan Greenhaus warned “only the top quintile [of the Nasdaq] is above; all four other quintiles are down,” suggesting the index is “a bit weaker than the headline suggests.” Other major indices did not fare better. The S&P 500 fell 0.16% and the Dow Jones Industrial Average slipped 0.12%.

“For now, investors seem to be looking beyond the challenges in the financial sector and realizing that US economic growth remains resilient,” said Brian Levitt, global markets strategist at Invesco. Bizarrely, while that’s bad news for inflation, it’s probably good news for anyone who’s been consumed by banking fears over the past few days.

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