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US stock outlook remains rosy.

Optimistic outlook | A sturdy economy will sustain the bull-market run in US stocks even without Federal Reserve interest-rate cuts, said Bank of America’s Savita Subramanian. Although optimistic that the economy will avoid a severe downturn, Subramanian said the biggest challenge will be if growth slows while inflation remains elevated. She also sees the Fed trimming interest rates as early as December, or possibly not this year. Stocks halted a two-day drop, with Nvidia leading gains in chipmakers. The S&P 500 topped 5,060, while the tech-heavy Nasdaq 100 climbed 1.3%. In late trading, Apple climbed after reporting that sales declined less sharply than feared last quarter, helped by stronger-than-expected demand in China. Elsewhere, Treasury 10-year yields fell five basis points to 4.58%.

'Dead' strategy | Bill Gross, who pioneered the “total return” strategy in the 1980s that revolutionized the bond market, says the approach is now “dead.” Instead of just picking up steady interest payments like his peers did at the time, the co-founder of PIMCO created the firm’s Total Return Fund in 1987 to take active positions in duration, credit risk, and volatility. More than just clipping coupons, bond investors can also benefit from capital appreciation as bond prices rise and yields fall. In an outlook published Thursday, Gross noted that what’s different now is that yields are much lower than when he first coined the concept, leaving investors less room for price appreciation. “Don’t let them sell you a bond fund,” he wrote. At about 4.6%, the 10-year Treasury yield compares with the nearly 16% peak in 1981.

Up & coming | It’s a holiday in Japan on Friday and Monday, but that won’t be much of a break for currency traders as they stay on high alert after two suspected yen interventions this week. Many speculated that Japanese authorities stepped in to support the embattled yen on April 29, a local holiday, and again on Wednesday. In the US, all eyes will be on the monthly employment report. Economists surveyed by Bloomberg forecast a 240,000 gain in nonfarm payrolls, which would be the slowest pace since November. Eurozone unemployment is also on tap on Friday.

New bank capital rules could be finalized by August. Photo: Bloomberg

Wall Street seizes opportunity to gut SEC trading surveillance

After 14 years of debate, the Securities and Exchange Commission is in the final stages of bringing a powerful new surveillance tool fully online. But Wall Street is seizing on the ideal political environment for a last-ditch attempt to kill it. The Consolidated Audit Trail is a database, one of the largest ever created, that is set to revolutionize how the agency monitors trading activity and spots potential misconduct. By its May 31 industry compliance deadline, it will collect almost all US trading data, as many as 500 billion records a day, and give the SEC a live window into activity across markets. (Bloomberg Markets | May 2)

Bond market liquidity squeeze keeps regulators alert to risks

For cyber leaders, cyber risks are becoming personal. In 2023, new US rules around the disclosure of data breaches heaped more pressure on companies’ security staff — in particular, chief information security officers (CISOs) — just as agencies and courts were signaling that individuals could be held liable for incidents. (Financial Times - free link | May 2)

US discusses finalizing bank capital rules as soon as August

The Federal Reserve and other top US regulators are forging ahead with their landmark plan to make big banks hold more capital despite calls from some critics to scrap it. Key officials have decided to adjust the original proposal rather than start over, and some of them are pushing to finalize it as soon as August. The US effort is tied to the Basel III international agreement that started more than a decade ago after the financial crisis. Banks have argued that they are already well-capitalized to withstand a crisis and that the proposed changes would ultimately hurt consumers. (Bloomberg Industries - Finance | May 1)

Investors scour the globe for shelter as Wall Street shakes

Global investors are eyeing European and emerging market assets to protect themselves from further turbulence in US stocks and bonds as stubborn inflation causes bets on the timing of Federal Reserve interest rate cuts to be revised. April was a washout on Wall Street, with the S&P 500 share index and US Treasuries posting their biggest monthly loss since September. Money managers are now looking for ways to limit losses if the trend does not reverse. (Reuters | May 1)

Federal Reserve says interest rates will stay at two-decade high until inflation further cools

The Federal Reserve on Wednesday emphasized that inflation has remained stubbornly high in recent months and said it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are slowing sustainably to its 2% target. The Fed issued its decision in a statement after its latest meeting, at which it kept its key rate at a two-decade high of roughly 5.3%. Several hotter-than-expected reports on prices and economic growth have recently undercut the Fed’s belief that inflation was steadily easing. (Reuters | May 1)

Security key: encryption can help keep data safe in the cloud. Photo: Getty Images | Vetta

Banks moving into the cloud prompt forecasts of security risk

Migrating banks’ old technology to cloud computing systems is creating a cyber security nightmare for their IT and risk teams. Experts warn that cloud adoption can also be highly risky for banks and financial groups because cybercriminals are increasingly exploiting security “holes” and misconfigured settings in cloud platforms to steal data, defraud customers, and disrupt operations.

— Financial Times | free link

Why cyber risk managers need to fight AI with AI

Artificial intelligence technology presents new risks and opportunities to financial institutions, which hope to improve their cyber security and reduce fraud. Banks and financial services groups have grappled with cyber-attacks for decades, as their financial assets and huge customer databases make them prime targets for hackers. Now, though, they are up against criminals using generative AI, which can be trained on images and videos of real customers or executives to produce audio and video clips impersonating them.

— Financial Times | free link

Cyber risk is increasing . . . and this time it’s personal

For cyber leaders, cyber risks are becoming personal. In 2023, new US rules around the disclosure of data breaches heaped more pressure on companies’ security staff — in particular, chief information security officers (CISOs) — just as agencies and courts were signaling that individuals could be held liable for incidents.

— Financial Times | free link

Non-fungible tokens, or NFTs, can now be embedded into bitcoin and appear as unwanted ‘dust’ in bitcoin ETF wallets. Illustration: FT montage

Vomiting frogs and other ‘dust’ prove vexing for US bitcoin ETFs

US exchange-traded funds that invest directly in Bitcoin are building up stores of digital assets they did not buy and cannot sell after inadvertently receiving them as “gifts” attached to their cryptocurrency purchases. Digital artworks of frogs vomiting rainbows and other cartoonish imagery have shown up in Bitcoin wallets run by ETF providers.

— Financial Times | free link

These Mother’s Day gifts are so much more than merely useful

Buying a gift for Mother’s Day can be one of the most challenging. How can you show — in just one item — how much you love, appreciate, and cherish your mom (or the mother of your children) for all she does? Buying a “useful” present is always tempting since she’ll probably say she doesn’t need anything. But what’s the fun in that? Here, we’ve found 11 ways to go beyond a gift that simply does the job. 

— Bloomberg Pursuits

The man who killed Google search

When Raghavan joined the company, Yahoo held a 30.4% market share — not far from Google’s 36.9%, and miles ahead of the 15.7% of MSN Search. By May 2012, Yahoo was down to just 13.4%, had shrunk for nine consecutive months, and was getting beaten by the newly released Bing. That same year, Yahoo had the largest layoffs in its corporate history, shedding nearly 2,000 employees — or 14% of its overall workforce. Under Raghavan, Google has become less reliable, less transparent, and is dominated by search engine optimized aggregators, advertising, and outright spam.

— Where's Your Ed At?