Evening Briefing: Americas

Wall Street is poised to receive a big gift courtesy of the Federal Reserve. The central bank unveiled plans to roll back an important capital rule that big banks have complained limits their ability to hold more Treasuries and act as intermediaries in the $29 trillion market. (The Fed’s announcement confirmed proposed changes to the rule first reported by Bloomberg News last week.)

The Fed board voted 5-2 on Wednesday to propose changes to what’s known as the enhanced supplementary leverage ratio, which applies to the largest US banks—like Bank of America, JPMorgan and Goldman Sachs. The revisions would reduce holding companies’ capital requirement under the ratio to a range of 3.5% to 4.5% from the current 5%. Their banking subsidiaries would see that requirement lowered to the same range from 6%.

Michelle Bowman Photographer: Al Drago/Bloomberg

The proposal followed by a few weeks the ascent of Michelle Bowman, President Donald Trump’s pick to be the central bank’s new vice chair for supervision. Bowman’s predecessor, Governor Michael Barr, objected to the plan, which he said would reduce bank-level capital by $210 billion for US global systemically important banks (G-SIB). “Taken together, these changes would significantly increase the risk that a G-SIB bank would fail, orderly resolution would not be possible and the Deposit Insurance Fund would incur higher losses,” Barr said.

Some of the sharpest criticism of the Fed’s proposal has come from Senator Elizabeth Warren, a Massachusetts Democrat who recently wrote a letter to bank regulators. She called the leverage rule a “critical safeguard” that promotes financial stability and warned that the economy already faces risks from Trump’s trade war. —David E. Rovella

What You Need to Know Today

Following a surge in new listings by special purpose acquisition companies, one can’t help but worry how astonishingly short Wall Street’s memory is, Chris Bryant writes in Bloomberg Opinion. A refresher: These cash shells experienced a spectacular boom and bust in 2020-2022 as unrealistic valuations and retail investor enthusiasm for firms with little or no revenue ended in bankruptcies, shareholder litigation and financially painful liquidations. So guess what? This maligned asset class is off to the races again, having raised $11 billion so far this year in the US, compared with less than $2 billion in the same period a year earlier.

NATO Formalizes Increased Spending

NATO leaders agreed to increase defense spending to 5% of GDP and renewed their “ironclad commitment” to mutual security in a historic move to push back against an increasingly belligerent Russia.

Read the Story

Micron Technology, the largest US maker of computer memory chips, gave an upbeat forecast for the current quarter, helped by demand for artificial intelligence equipment. Fiscal fourth-quarter revenue will be roughly $10.7 billion, well ahead of the $9.89 billion average analyst estimate. Micron is seeing increasing demand for components like its high-bandwidth memory, used in machines that develop and run AI tools.

The company expects continued growth from that market as such software becomes more complex, requiring bigger amounts of memory. Growth prospects have turned Micron into the chip industry’s hottest stock this year, with shares gaining 51% through Thursday’s close. They jumped more than 4% in extended trading following the announcement.

The darling of the Big Tech bull market had a lovely Wednesday as well. Nvidia shares rose to an all-time high as the leader in AI chips cemented its position as one of the most valuable companies in the world. Recent Nvidia earnings were a notable catalyst as the report showed robust growth and pointed to more strength ahead, despite the impact of restrictions on the sales of advanced semiconductors in China.

Prints from Microsoft, Meta, Alphabet and Amazon—which together make up more than 40% of Nvidia’s revenue—further underlined how the company’s biggest customers continue to spend aggressively building out their AI infrastructure. Interestingly enough, Nvidia remains under-owned by market professionals relative to its Big Tech peers, a sign there’s potential for more buying in the weeks to come.

Does hearing the names Little Caesars, Dunkin’, Jersey Mike’s or Wingstop make you a little hungry? How about Bain Capital? Well soon that last one just might, as the Wall Street standby is said to have raised about $1 billion in term loans to buy Sizzling Platter, a restaurant franchisee that operates locations of the above brand names.

Photographer: Alexi Rosenfeld/Getty Images

California Governor Gavin Newsom and state lawmakers struck a budget agreement that provides $750 million in tax credits for Hollywood while cutting free health care for undocumented immigrants. The $321 billion spending plan for the fiscal year that begins July 1 marks Newsom’s third consecutive year facing a deficit, forcing trade-offs between the progressive policies he has championed and pro-business priorities, such as avoiding higher levies on corporations. Last year, California became the first state to offer comprehensive health-care coverage to all residents regardless of immigration status. But greater-than-expected demand and higher costs increased the expense.