🎙️ Cyberattacks

It might be time to update your passwords 📟

While 91% of people acknowledge the risk of using a single password for multiple accounts, a whopping 66% still do it. More on cybersecurity below.

Elsewhere, our Chart of the Day shows how the technology sector — including cybersecurity companies like Crowdstrike — has dominated market returns over the last few years. Since the end of 2018, all other sectors have lagged behind the S&P 500 👨🏻‍💻

It’s a tech-driven market, and then there’s everything else in distant second place.

— Weronika & Matthew 

Here’s the rundown:

Today, we'll discuss the three biggest stories in markets:

• U.S. Health Department falls victim to cyber attack

• PG&E seeks $7 billion federal loan to reduce California wildfire risk

• Fed: Banks would lose $541 billion in a worst-case scenario

All this, and more, in just 5 minutes to read.

CHART OF THE DAY

IN THE NEWS

🥷 U.S. Health Department Falls Victim to Cyber Attack (Bloomberg)

The U.S. Department of Health and Human Services (HHS) fell victim to a wide-ranging hacking campaign that targeted a vulnerability in file-transfer software known as MOVEit. Congress suggested 100,000-plus people were impacted.

The attackers accessed data by exploiting the MOVEit software utilized by third-party vendors without compromising HHS systems or networks.

• HHS leadership suspects the involvement of a Russian-speaking group called Clop, which has taken credit for the MOVEit attacks.

• One analyst said the MOVEit attacks affected 137 organizations altogether, compromising the records of over 15 million people. This includes 16 entities within the U.S. public sector, raising concerns about the costs of such events.

Numerous entities, including Ernst & Young, Honeywell, Nova Scotia, the New York City Department of Education, and all Louisiana residents with a state-issued license, were impacted.

Why it matters:

Earlier this month, a U.S. official disclosed that several federal agencies had encountered intrusions impacting their MOVEit applications. Since then, additional information has emerged regarding the repercussions within the U.S. government.

• A spokesperson from the U.S. Department of Agriculture said that fewer than 30 employees might have been affected due to a breach in a third-party vendor's data.

In response, the U.S. government has launched its most recent strategy to strengthen its cyber defenses:

• Stricter regulation of current cybersecurity practices
  

• Tightened collaboration between the government and private sector
  

• Enhanced industry accountability for the cybersecurity of critical American infrastructure, including hospitals and dams

In 2020, cyber attacks ranked as the fifth highest-risk factor. They’ve become a prevalent occurrence in the public and private sectors. The landscape is anticipated to expand further in 2023, with projections indicating a doubling of Internet of Things (IoT) cyber attacks by 2025.

Global data indicates that as cybercrime grows, the costs will escalate dramatically, too.

Hard to catch: The World Economic Forum's Global Risk Report highlights that the detection and prosecution rate for cybercrimes in the U.S. stood as low as 0.05% in 2020.

BROUGHT TO YOU BY

Are you still leaving alpha on the table?

Gaining access to the right financial intelligence platform can make or break your quarter.

Sign up for a trial today to beat FOMO and move faster than the market.

⚡ PG&E Seeks About $7 Billion Federal Loan to Reduce Wildfire Risk (WSJ)

PG&E has applied for $7 billion in federal funding to back its ambitious plans to reduce California wildfire risk by burying power lines and upgrading the electric grid, changes that could save California residents and businesses millions of dollars from power outages and other wildfire-related costs.

PG&E hopes to use the loan to fund the burial of 10,000 miles of power lines at high fire risk. Other uses include replacing overloaded transmission conductors that carry power and upgrading substations. Last year’s U.S. climate law increased the U.S. Energy Department’s loan lending capacity about 10-fold to $400 billion.

• The funding would bolster PG&E at a challenging juncture for the Oakland-based firm. It’s struggling to raise money from Wall Street after a complex bankruptcy restructuring, and it’s preparing for a surge in electricity demand driven by the state’s shift to EVs.
  

•  “The entire grid has to be electrification-ready, and EV-ready,” PG&E’s CEO said “would be backing our ability to pay for it and allowing us to make these infrastructure investments at the lowest cost to customers.”

Upgrading the overall energy infrastructure is critical as fire risk increases in the state. The company’s power lines sparked more than 20 major wildfires in recent years, including the 2018 Camp Fire that killed 84 people and destroyed the town of Paradise.

Why it matters:

California’s energy infrastructure is also critical because it’s the most populous state.

But skeptics argue that lending out such large sums to the private sector is a risk: If the project flops, the failures could leave taxpayers holding the bag.

• Wildfires have become more common and devastating due to a longer average season, hotter weather, earlier winter snowpack melting, and changing weather patterns due to climate change. The market impact is profound, as properties and businesses are destroyed, and tourism and recreation are decimated.
  

• A University College London study estimated the 2018 wildfires alone cost the U.S. economy about $150 billion, demonstrating how far the reach of wildfire damage is.

This is why PG&E is counting on billions in federal funding to do its part in mitigating the damage.

MORE HEADLINES

🛑 Nvidia says U.S. curbs on A.I. chip sales in China would cause ‘permanent loss of opportunities’

💸 Justice Department charges 78 people with $2.5 billion in healthcare fraud

🚢 A shipping emissions showdown stands in the way of a big climate deal

👨🏻‍🍳 Stress Tests Show Largest U.S. Banks Are Sturdy (FT)

The Federal Reserve put large U.S. banks through the wringer, testing their ability to endure a real estate crash, high unemployment, and trading turmoil. The conclusion: They’re sturdy.

• The Fed subjected them to a series of hypothetical disaster scenarios, a yearly stress-testing of the banks it started performing after the 2008 financial crisis rocked the financial system.
  

• The 2023 test, fresh off high-profile bank collapses and amid elevated inflation and interest rates, revealed that the large banks could withstand a 40% drop in commercial real estate prices, plus aggregated losses of more than a trillion dollars without failing.

Other scenarios that the 23 biggest banks faced in the study included a severe economic recession, 10% unemployment, and a large drop in home prices.

• In very simple terms, the goal of regulators was to determine whether the banks were holding enough cash or so-called “cash equivalents” to withstand unexpected shocks.

Why it matters:

Noted Michael S. Barr, the Fed’s vice chair for supervision: “Today’s results confirm that the banking system remains strong and resilient. At the same time, this stress test is only one way to measure that strength. We should remain humble about how risks can arise and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses.”

• The banks provided a new status report after the banking industry’s crisis this spring, when four lenders, including Silicon Valley Bank (SVB), amplified the Fed’s need to monitor them.
  

• That’s especially true after a lengthy period of low inflation and low-interest rates, which generally encourages risk-taking in the banking and financial industries.

The banks would lose a staggering $541 billion in a doomsday scenario, but they have more than enough capital to absorb the losses, per the Fed’s tests. Officials added this week that they’re still reviewing the rules governing stress tests and other bank oversight procedures to see if adjustments could be made to prevent another bank crisis.

See you next time!

That's it for today on We Study Markets!

Enjoy reading this newsletter? Forward it to a friend.

Was this newsletter forwarded to you? Sign up here.

Keep an eye on your inbox for our newsletters on weekdays around 6pm EST and on weekends. If you have any feedback for us, simply respond to this email.

You can also leave your comments/suggestions/feedback anonymously here.

How would you rate today's newsletter?

⭐️⭐️⭐️⭐️⭐️
⭐️⭐️⭐️
⭐️