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US stocks climb as bonds tumble.

Equity rebound | Stocks climbed, and bonds tumbled as data on retail spending and the labor market underscored the strength of the US economy, allaying fears the Federal Reserve would be risking a deeper slowdown. As economic jitters abated, equities extended a rebound from last week’s meltdown into a sixth straight session. The S&P 500 rose about 1.6%, while the Nasdaq 100 added 2.4%. Treasury yields surged, with the move led by shorter maturities. US officials have been trying to use higher rates to ease inflation without causing the economy to contract — a scenario known as a “soft landing.” 

Avoiding rout | George Soros and Stanley Druckenmiller’s investment firms trimmed their “Magnificent Seven” holdings before the tech run-up gave way to a major downturn. Soros Fund Management sold some of its Alphabet stake totaling $58 million and about $15 million of Amazon, filings show. Druckenmiller’s Duquesne Family Office sold more than 1.5 million shares of Nvidia. Meanwhile, David Tepper’s Appaloosa Management cut Meta, Amazon, and Microsoft holdings, three of its largest positions. Wildcat Capital Management's David Bonderman also sold out the firm's Meta stake.

Climate funding | The US supplanted China as the world’s top market for climate-tech financing in the first half of 2024, even as the amount invested fell, new analysis from BloombergNEF shows. While US firms raised $6.7 billion, down from $9.8 billion in the first six months of 2023, they still topped investments in China, where companies raised $5.1 billion, down from $14.5 billion during the same period last year. US importance in the sector comes as no surprise gi en the outsized role of its climate policy.

Loose legal covenants on junk debt means creditor conflicts are rampant as struggling companies race to refinance. Illustration: Christian Blaza

Big investors wary after rout. Buy-the-dip mentality replaced by fear.

Big investors are bracing for this summer's stock market rout to run into the autumn, fearing a broader wave of selling will follow the turmoil sparked by US recession concerns and the Bank of Japan wrong-footing currency speculators. But asset managers overseeing hundreds of billions of dollars of investments said they were more likely to carry on selling stocks than buy back in, with signs of weakness in the US jobs market and global consumer trends lowering the bar for market aftershocks. (Reuters | Aug 15)

Google breakup?

The US Justice Department is considering a push to break up Alphabet Inc.'s Google after a court ruling found the company monopolized the online search market. The move would be Washington’s first push to dismantle a company for illegal monopolization since unsuccessful efforts to break up Microsoft Corp. two decades ago. Less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products, said the people. (Bloomberg Law | Aug 14)

Investors return to bonds as recession fears stalk markets

Investors are piling back into bonds as recession replaces inflation as markets’ main fear, and fixed income proves its worth as a hedge against the recent stock market chaos. US Treasuries and other highly rated debt staged a powerful rally during last week’s equity rout, pulling yields to their lowest level in more than a year. While the sharpest moves subsequently reversed, fund managers say they underscored the appeal of bonds in an environment where growth is slowing, inflation is falling, and the Federal Reserve — along with other major central banks — is expected to deliver multiple cuts in interest rates by the end of the year. (Financial Times - free link | Aug 13)

Investors face steep losses as leveraged trades unravel

Investors who leveraged heavily during the market rally earlier this year are now facing significant losses as market unrest has led to a wave of deleveraging. Positions on the Japanese yen, tech stocks, and cryptocurrencies have particularly suffered. The deleveraging process, exacerbated by the summer trading lull, has forced many to sell assets to cover losses, causing further market volatility. (The Wall Street Journal | Aug 12)

Hedge funds smell blood as lenders turn on each other

It’s the opening scene to an increasingly familiar story. So-called “creditor-on-creditor violence,” where lenders scrap over how much money they can get back from ailing companies, isn’t a novel concept in the rowdy world of distressed debt. And yet it’s never been as rampant as now. With many businesses desperate to lower crushing interest costs, they’re becoming cutthroat. Pitting one set of creditors against the rest, to try to snag the best possible refinancing terms, is the order of the day. (Bloomberg Markets | Aug 11)

Illustration: The Wall Street Journal

Why AI risks are keeping board members up at night

Company directors are trying to get a handle on artificial intelligence as its use soars, bringing potential productivity gains — but also raising the prospect of employee blunders. At one recent bank board meeting, directors were treated to a surprise. They listened to the chief executive talk strategy — except it wasn’t actually the CEO talking. It turned out to be a voice-cloning model that was trained, using the CEO’s prior earnings calls to generate new content. More boards are undertaking such staged exercises to better grasp the impact — and potential risks — of generative artificial intelligence.

— The Wall Street Journal

Companies prepare to fight quantum hackers

National security authorities have warned for years that today’s encryption will become vulnerable to hackers when quantum computers are widely available. Companies can now begin to integrate new cryptographic algorithms into their products to protect them from future hacks. Some companies have already taken steps to replace current forms of encryption with post-quantum algorithms. The National Institute of Standards and Technology, an agency of the Commerce Department, published three new algorithms for post-quantum encryption Tuesday.

— The Wall Street Journal

Dozens of financial groups to pay nearly $400mn in SEC texting probe

Twenty-six Wall Street companies have agreed to pay $393mn to the Securities and Exchange Commission to settle the latest round of charges over employee texting and messaging on platforms such as WhatsApp about business matters. Industry advocates protested the inquiry’s expanding parameters, saying the SEC was overstepping its bounds because money managers' record-keeping rules are slightly different.

— Financial Times | free link

Putting pets in your will is no longer just for eccentric billionaires

Putting pets in your will is no longer just for eccentric billionaires

Leaving money in a will for a cat or dog was once a thing the ultrawealthy did. Now, with Americans of all stripes lavishing more money and time on their animals, pets are part of the typical estate plan. Estate lawyers say they routinely ask about pets when taking on new clients, given how many had raised worries about the future of their cats and dogs. Online estate planning companies such as Trust & Will helped democratize the process, adding automatic prompts to include pet guardians. Clients often dedicate thousands of dollars for them.

— The Wall Street Journal

Gamblers are dumping stocks to bet on sports

As sports gambling takes off in the US, quickly turning into a multi-billion dollar business, a worrisome trend is starting to emerge: Americans appear to be yanking money out of their stock-brokerage accounts to fund their online betting. The phenomenon is most acute among the most financially strained households, potentially the same ones attracted to get-rich-quick schemes in financial markets like meme stocks and speculative options.

— Bloomberg Markets

The End of Spam: Robocalls and texts… your days are numbered:

For years, the FCC resisted calls from consumer advocates to strengthen its lead generation rules, but that changed last year. The agency released new guidelines on what marketing companies are allowed to do with the data they collect, placing liability on lead buyers and the generators themselves. As the industry braces for the rules to take effect next year, Americans could soon see a precipitous drop in the number of calls and spam texts they get.

— Sherwood