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Stocks and bonds drop on rate outlook.

Wall Street weighs data. Photo: Michael Nagle/Bloomberg

Stocks Drop | US stocks and bonds fell on Thursday after surprisingly strong economic data caused traders to reduce bets that the Federal Reserve will cut rates this year. Rate-sensitive real estate and utility companies were the biggest casualties as the S&P 500 had its worst day in May. The yield on 10-year Treasuries climbed to the highest in more than a week. Nvidia, which on Wednesday reported better-than-expected results and a bullish outlook, bucked the trend by climbing 9.3% to a record high. Tech was the only S&P 500 sector to close higher, but even the Nasdaq 100 fell.

Prime property | Luxury home prices in select Asian cities are soaring, bucking a downward trend in more established markets including New York and London. Prime property prices — defined as the top 5% of the market — fell more than 2% in New York and London in the first quarter compared with the same period a year earlier, according to real estate consultancy Knight Frank. Hong Kong and Berlin also posted declines. But in Manila, Tokyo and Mumbai, luxury home prices surged, gaining 27%, 13% and 12%, respectively.

Up & coming | Businesses in Japan may be reluctant to raise prices as consumers suffer from a rising cost of living, according to Bloomberg Economics. That likely contributed to slower inflation in April. Japan’s headline inflation probably slowed to 2.4% in April from 2.7% in March, according to the median estimate of 28 economists. The core inflation measure, which excludes volatile and seasonal items like fuel and food, is also expected to have fallen. Slowing inflation is unlikely to deter the Bank of Japan, which is expected to raise rates again later this year.

Traders on the floor of the New York Stock Exchange on May 16, 2024. Photo: Brendan McDermid | Reuters

All hands on deck as US moves to T+1 settlement on May 28

Stakeholders in the trade execution ecosystem are cautiously optimistic ahead of the May 28 compliance date for shortening the securities settlement cycle in U.S. markets. Over the last 15 or so months, work behind the scenes — spearheaded by Sifma, the Investment Company Institute, and DTCC — has gone well, and with the big day nearly here, the industry players are working toward a smooth transition. “We’re throwing all the oars in the water, rowing in the same direction into this transition weekend,” said Thomas Price, managing director of technology, operations, and business continuity at SIFMA. (Pensions & Investments - free link | May 22) see also US stock settlement switch faces early resilience test (Reuters | May 20)

G7 finmins once again sidelining their debt load

Despite a trajectory of rising borrowings and the International Monetary Fund’s declaration last month that “now is the time” to restore sustainable budget policies, that subject didn't appear on the formal agenda for G7 central bankers and finance ministers gathering in the lakeside town of Stresa. (Bloomberg Economics | May 23)

SEC’s $10 million fine of NYSE owner shows focus on cyber disclosures

The Securities and Exchange Commission’s $10 million fine of Intercontinental Exchange over its handling of a 2021 cyber incident shows the regulator is zeroing in on how companies report hacks, though some commissioners said the amount is too high. The SEC said ICE’s lack of communication caused nine wholly owned subsidiaries, including the New York Stock Exchange, to fail to promptly inform the agency of a cyber breach as required under its rules. The company agreed to pay the penalty without admitting or denying the claims. (The Wall Street Journal | May 22)

Caveat creator: GenAI giants’ pledges won’t pre-empt copyright suits

One year after Wall Street banned the use of generative artificial intelligence (GenAI) bots, the prevailing defensive stance towards the technology has shifted to one of active exploration. Even banks — known for their conservatism and risk aversion — are now racing to experiment with hundreds of use cases. Some are already opening up access to GenAI’s possibilities to many employees. Tech vendors offer indemnities on generative output, but end-users need to check the fine print, warn IP lawyers. (Risk | May 21)

Chicago Fed research points to systemic risk from private credit

Economists at the Federal Reserve Bank of Chicago warned of the potential for systemic risk stemming from the rush of life insurers into private credit. Ballooning allocations – in particular, to ‘esoteric’ private credit — could be hard for firms to exit should those firms face a wave of surrenders from policyholders, the economists. (Risk | May 20) see also US regulators reconsider capital hike for big banks (Reuters | May 19)

The FBI seized the BreachForums hacking site. Again.

The FBI and a coalition of international law enforcement agencies seized the notorious cybercrime forum BreachForums on Wednesday. For years, BreachForums has been a popular English-language forum for hackers and cybercriminals who want to advertise, sell, and trade stolen data. BreachForums has proven resilient. Last year, authorities seized a previous version of the site, three months after arresting its administrator, Conor Brian Fitzpatrick, aka Pompompurin.

— TechCrunch

SEC advises companies on voluntary cyber breach reporting

Companies that voluntarily report cybersecurity breaches should rely on a separate regulatory filing to distinguish them from new mandatory disclosures of significant attacks, according to the SEC's staff guidance on Tuesday. Only breaches that companies determine to alter their financial results materially or that they expect investors would deem significant should rely on a special type of filing that’s dedicated to reporting “material cybersecurity incidents.” That form is known as 8-K Item 1.05, according to the statement from Securities and Exchange Commission staff.

— Bloomberg Law

Cyber threats rise along with scrutiny of how companies handle hacks

As cyber threats rise, nearly half of the compliance professionals surveyed by the Wall Street Journal said they had only a basic or novice level of expertise in overseeing cybersecurity-related compliance. Nine out of 10 companies said cybersecurity risks rose, with nearly half saying the risk shot up substantially. Almost all midsize companies — those with between $50 million and $1 billion in revenue — said they felt cyber threats had increased. 

— The Wall Street Journal

Photo: stephanehumbertbassetn | Instagram

France issues scratch-and-sniff baguette postage stamps

Leave it to the French to find a way to pack the aroma of a freshly baked baguette into a postage stamp. La Poste, the French postal service, is out with scratch-and-sniff stamps of their best-known bread with art from Paris-based artist Stéphane Humbert-Basset. The stamps depict a baguette wrapped in a blue, white, and red ribbon and the text “La baguette, de pain française,” for “The baguette, the French bread.”

— Fast Company

Where do shadow banks get their money? Your deposits.

Shadow banking is back. A constellation of less-regulated intermediaries — from insurers to private investment funds — is increasingly taking on the traditional business of banks, making trillions of dollars in risky loans and occupying a central role in the economy. Will this end badly, as it did in the 2008 financial crisis? Not necessarily — if authorities act to address the growing dangers.

— Bloomberg Editorial | opinion

Big companies remain dividend holdouts four years after pandemic began

Dozens of big companies that dropped dividends during the pandemic haven’t resumed them, raising the question: “Is this the equivalent of long-term Covid?” Nearly 200 US-listed companies stopped paying dividends in 2020, but most have restored them. Four years later, almost 50 are holding off as inflation and higher interest rates slow their path to full recovery. 

— The Wall Street Journal