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Stocks fall as traders await PCE.

Awaiting PCE | Wall Street traders sent stocks down and bonds up after the latest round of economic data signaled a slowdown in momentum. Data showed the US grew at a softer pace than previously estimated — as both spending and inflation were marked down. Economic cooling means officials could have room to cut interest rates this year, but that might also be a concern for consumption and corporate profits. The S&P 500 dropped to 5,235, led by tech losses, while the Nasdaq 100 fell 1%. Federal Reserve Bank of New York President John Williams said he expects inflation to continue falling. Treasury two-year yields dropped five basis points to 4.92%. The dollar retreated. Ahead, traders are focused on the Fed’s preferred price gauge. Economists expect the personal consumption expenditure price index minus food and energy to have risen 0.2% in April, the smallest advance so far this year. Separately, Trump Media & Technology Group shares dropped as much as 15% after a jury found Donald Trump guilty of multiple felonies at his hush-money trial, making him the first former US president to be convicted of crimes.

Rein 'em in | US officials have slowed the issuing of licenses to chipmakers like Nvidia and Advanced Micro Devices for large-scale AI accelerator shipments to the Middle East, sources told Bloomberg. It’s unclear how long the review will take, nor is there a concrete definition of what constitutes a large shipment. Officials are particularly focused on high-volume sales as countries, including the United Arab Emirates and Saudi Arabia, look to import massive quantities of the chips used in AI data centers. The slowdown in exports is meant to give Washington time to develop a comprehensive strategy around how the chips will be deployed overseas.

Up & coming | Traders can look to a slew of data from the region Friday. There’s Japan’s industrial production, which likely posted a modest rise in April after a jump in March. There are China’s official PMI surveys for May, which will likely show manufacturing continuing to grow at a modest pace, supported by solid production, and India’s GDP numbers, which will show growth likely slowed to 7% year on year in the first quarter from 8.4% in the fourth quarter. Elsewhere, the US will see consumer income and spending data, and in Europe there’s euro area CPI.

Photo: Brendan McDermid | Reuters

Trade fails are steady as Wall Street adjusts to T+1 settlement

The proportion of US securities transactions failing to settle remained largely steady on Wednesday, as Wall Street aced the first major test of its move to a faster trading system. Data released by the Depository Trust & Clearing Corp. show the “Fails Rate” recorded in its Continuous Net Settlement system — a platform that aims to minimize the exchange of securities between counterparties by netting off trades — was 1.90% on Wednesday. That compares to a daily average of 2.09% last week, before new rules halved the time allowed to complete every transaction to a single day. For matched trades processed outside of CNS the fails rate was 2.92% versus a 3.35% average last week, the DTCC data show. (Bloomberg Markets | May 30)

SEC win drives insider trading rethink

Some businesses are thinking about scaling back insider trading rules to avoid exposing their executives to new legal woes. The SEC’s “shadow trading” trial win against former biopharma executive Matthew Panuwat focused on his company’s policy prohibiting him from buying another drug company’s stock based on knowledge of his company’s pending deal. It’s forcing companies to take a second look at their own insider trading policies, including rules to stop employees from using confidential information to trade a rival’s stock. Some expanded those policies to explicitly address shadow trading. Others are considering narrowing their prohibitions, hoping to limit employees’ exposure. (Bloomberg Law | May 30)

This record stock market is riding on questionable AI assumptions

Four giant technology stocks added more market value than the rest of the S&P 500 this month. More than half of the gain came from Nvidia. Behind the rises in the biggest stocks this month and this year are two trends that have already run a long way: Artificial intelligence and higher-for-longer interest rates. Any trend can always go further, but there are challenges to both. (The Wall Street Journal | May 30) see also Hedge funds' exposure to magnificent seven at record high as Nvidia soars (Bloomberg Technology)

'Ample evidence' that policy is restrictive: NY Fed's Williams

Federal Reserve Bank of New York President John Williams said he expects inflation to continue falling in the second half of the year. Williams said that while inflation is still too high, the imbalances between supply and demand are easing. “With the economy coming into better balance over time and the disinflation taking place in other economies reducing global inflationary pressures, I expect inflation to resume moderating in the second half of this year,” Williams said. (Bloomberg Markets | May 30)

Treasury yields have been inverted for the longest stretch on record

One of Wall Street’s favorite recession indicators looks broken. An anomaly known as an inverted yield curve, in which yields on short-term Treasurys exceed those of longer-term government debt, has long been taken as a nearly surefire call that an economic pullback looms. In each of the previous eight U.S. downturns, that has happened before the economy sputtered. There haven’t been any glaring false alarms. Now, though, that streak is threatened. Wall Street's favorite recession indicator is in a slump of its own. (The Wall Street Journal | May 28)

It’s time to formally stop ransom payments

That’s the argument that a top cybercrime researcher — one who until recently staunchly opposed such a ban — made to scores of threat intelligence experts who gathered last week in a darkened basement ballroom at a hotel not far from the US Capitol. “Banning ransom payments is an extreme step, but it also might be the least bad option available to us,” Allan Liska, a threat analyst at the cyber firm Recorded Future, told the crowd at SleuthCon, a gathering of analysts and law enforcement officials focused on the latest hacking threats.

— SleuthCon

Sensitive diplomatic summits are magnets for cyber-espionage

There’s an “increased risk” of cyberattacks from Russian hackers at the Ukraine peace meeting to be held in Switzerland in June, NZZ am Sonntag reported. Russia, which hasn’t been invited to the June 15-16 event in Burgenstock, is likely to seek ways to disrupt the gathering, the Swiss newspaper reported, citing IT experts and people within the Swiss Federal Office of Cybersecurity whom it didn’t identify.

— Bloomberg Technology | Cybersecurity

BIS report shows generative AI as the top cybersecurity choice for central banks

The Bank for International Settlements has highlighted a significant trend among central banks. This trend typically targets the adoption of generative artificial intelligence (AI) to strengthen cybersecurity measures. The entity considers this shift a pivotal development in the financial sector. It reflects the growing dependence of several industries on advanced technologies to safeguard critical financial infrastructure.

— TechReport

Illustration: Jasjyot Singh Hans | Bloomberg

For private credit's top dogs, $1 million a year is not enough

Antoine Gosselin-Mercury may not have expected to hit the corporate heights quite so quickly when he moved to Barings LLC in 2021. But over a single mad March weekend this year, the mid-level staffer found himself one of the most senior people left on his team at its ritzy London office. For any financier wanting to make a mark in the booming $1.7 trillion private credit market, Barings was a good place to be. But what many of the older hands at “GPF” wanted was the chance to make more money. Possibly lots more.

— Bloomberg Business

RIP Doge: The Shiba Inu that inspired Dogecoin crypto and countless memes has died

The dog that inspired the famous “Doge” meme and a cryptocurrency has died, according to her owner. She was 18 years old. The Shiba Inu, named Kabosu, “fell into a deep sleep” on Friday morning, Atsuko Sato, a teacher in Japan, said in a blog post. Kabosu became an internet celebrity after social media users spread a now-famous photo of the rescue dog that Sato posted to her blog in 2010.

— NPR

The great AI challenge: Testing which bot is best

The Wall Street Journal tested five of the leading bots: OpenAI’s ChatGPT against Microsoft’s Copilot, Google’s Gemini, Perplexity, and Anthropic’s Claude. They were put through a series of blind tests to determine their usefulness, excelling in some areas and failing in others. Plus, they’re all evolving rapidly. During the testing, OpenAI upgraded ChatGPT, improving its speed and knowledge of current events.

— The Wall Street Journal