The 10-Point: My Guide to the Day's Top News

View this email in a web browser. The 10-Point. Gerard Baker Editor in Chief The Wall Street Journal Good morning, No Stress All but two of 33 big U.S. banks passed the final round of the Federal Reserve’s annual “stress tests” on Wednesday, winning permission to boost dividends and buybacks. Large firms such as Bank of America and Citigroup, which struggled on the tests in recent years, passed this time. Both banks, along with J.P. Morgan Chase, followed the report by announcing they would boost capital returns to shareholders. Morgan Stanley also passed but received a rebuke of its internal risk-management processes, while the U.S. banking units of Deutsche Bank and Banco Santander were held back again. This year’s results could prove a tonic for bank stocks, reflecting the Fed’s view that the banking sector is much stronger than it was leading up to the 2008 bailouts. Analysts have said that postcrisis regulatory changes helped contain the damage from the Brexit market rout. Keep Calm and Carry On Two of the best days for stocks this year began to undo two of the worst, putting major U.S. indexes back into the black for 2016. The rebound comes as investors shake off their initial panic over the U.K.’s decision last week to leave the EU. But still-strong demand for the safety of government bonds and currencies like the yen shows that markets are far from sounding the all-clear. The rapid rebound prompted some traders and analysts to question whether the rally was sustainable given that fundamental questions remain about the health of the global economy and the direction of central-bank policy. Global stocks mostly stabilized Thursday following a two-day bounceback around the world, when the FTSE 100 rose above last Thursday’s close. However, don’t be fooled, writes our Streetwise columnist James Mackintosh—the index is a poor representation of the U.K. Meanwhile, the race for the leadership of the U.K. Conservative Party, and therefore the U.K.’s next prime minister, took a sharp and unexpected turn Thursday, as former London mayor Boris Johnson said he wouldn’t run. Isle of Woes Senate approval of debt-relief legislation for Puerto Rico on Wednesday paved the way for President Obama to sign the bipartisan bill into law, but the beleaguered island still faces a grinding turnaround. Puerto Rico has suffered a 9% population decline in the past decade, worsening the island’s debt crisis and challenging the survival of its hospitals and health-care system. The exodus of workers, retirees and entire families has been steeper and more financially disastrous than in any U.S. state since the end of World War II. A decadelong recession has left one in nine residents out of work and roughly half dependent on the cash-strapped government for health care. We report that the island’s hospitals show the potential for a vicious cycle if Puerto Rico’s government can’t spark enough economic growth to stem the outflow. Secret Support Victoria’s Secret has a problem and it isn’t much of a secret: athleisure is upending the bra business. At issue is a fundamental shift in what female consumers want from their undergarments and how much they are willing to pay. Growth is slowing in the retailer’s core bra business, which accounts for about 35% of sales at its parent company, as shoppers seek comfort instead of flash. In response, Victoria’s Secret is setting aside more space in stores for sports bras and in April released a collection of “bralettes”—bras without underwire and padding. The pivot is hard for a brand that was built on affectation, not authenticity, which many young consumers now prefer. Meanwhile, online lingerie startups are gaining traction by providing alternatives, both in style and marketing. TODAY'S VIDEO Performance Boost Adidas announced Wednesday that it is expanding its partnership with Kanye West to include performance gear and a new line of co-branded retail stores. TOP STORIES U.S. Muslim Recruit’s Death Sparks a Broad Marine Investigation Democrats Launch Push to Regain North Carolina WORLD In Rodrigo Duterte’s Philippines, Suspects Have the ‘Right to Remain Silent—Forever’ European Union Leaders Meet Without Britain for First Time After Brexit Vote BUSINESS U.K. Tax Code Could Entice Companies GM’s U.S. Share Shrinks Amid Truck Boom MARKETS GE Capital Sheds ‘Systemically Important’ Label Behind Credit Suisse’s Soured Mozambique Deals NUMBER OF THE DAY $30 billion The potential valuation of room-rental website Airbnb after a planned funding round and employee stock sale. The San Francisco company aims to raise between $500 million and $1 billion in the coming weeks, in part to help defer an initial public offering. QUOTE OF THE DAY They were comfortable there. Their leadership lived there and so did their families. They could not destroy the city in the process of defending it. A senior Iraqi counterterrorism officer on why Iraqi forces were able to defeat Islamic State in Fallujah much faster than expected. Islamic State militants had built up infrastructure in the birthplace of their movement and were loath to destroy it in defending the city. TODAY'S QUESTION Going back to our story above, what are your thoughts on the Senate’s approval of debt-relief legislation for Puerto Rico? Send your comments, which we may edit before publication, to 10point@wsj.com. Please include your name and location. —Compiled by Margaret Rawson READER RESPONSE Responding to yesterday’s question on Donald Trump’s trade proposals, Paul Taube of Texas wrote: “Mr. Trump’s comments about tariffs, trade and trade agreements defy logic and portray a complete lack of understanding of economics, economic history and U.S. history. His proposal would devastate states like Texas. It is amazing that the Republican Party still backs him.” Slade Howell of North Carolina commented: “The GOP has long advocated ‘free trade’ agreements to foster competition, and the Democrats have supported the same as long as they control the terms to protect labor. Neither have been successful, as measured by our trade deficits and stagnant wages. Maybe Mr. Trump is on to something.” And W.S. Thomas of Alabama weighed in: “He’s correct: free trade should be a two-way street, not a suicide pact.” This daily briefing is named "The 10-Point" after the nickname conferred by the editors of The Wall Street Journal on the lead column of the legendary "What's News" digest of top stories. Technically, "10-point" referred to the size of the typeface. The type is smaller now but the name lives on. Unsubscribe Email Settings Contact Us Privacy Policy Cookie Policy SIGN UP FOR THIS NEWSLETTER SUBSCRIBE FOR FULL ACCESS TO WSJ.COM You are currently subscribed as hectorpinillos@gmail.com. For further assistance, please contact Customer Service at support@wsj.com Copyright 2016 Dow Jones & Company, Inc. All Rights Reserved.