That consumer slowdown wasn’t much in evidence in May, as shoppers sent sales up at a much higher rate than had been expected. The Journal on B1 credits the federal government’s cash drop of stimulus checks and quotes an industry spokesman saying the gains may be illusory, lasting just a couple of months until the checks are spent.

Sales at stores open at least a year—a key measure of retail health—rose 2.8 percent or twice what analysts were conservatively predicting, the Times says on C1. That sent stocks up 1.7 percent on the day. Discount retailers like Wal-Mart led the way, though Target’s sales fell.

Bloomberg says its monthly survey of economists projects the country shed jobs for the fifth straight month in May, something that will put a damper on spending. Its survey says payrolls fell by 60,000 last month. The official numbers are out this morning.

“We’ve never seen a run of negative payroll numbers like this without the economy being in a recession,” said Avery Shenfeld, senior economist at CIBC World Markets in Toronto. “We are in a mild recession. We expect to see a few months of declines that are worse than this.”

A criminal investigation for AIG?

The WSJ reports on its Money & Investing cover that insurance giant American International Group may face a criminal investigation over whether it overvalued credit-default swaps—contracts that insure against a debt default and were used to hedge bets on subprime mortgages and other assets.

The Justice Department is asking for information from the Securities and Exchange Commission’s inquiry into AIG. The Journal says the firm has already written down $20 billion in bad swaps.

UBS about to roll over on rich Americans

The Times reports on C1 that Swiss banking giant UBS is running scared and may give up 20,000 names of the rich American clients of its private-banking arm that’s under investigation for aiding tax evasion. The paper calls it a “step that would have once been unthinkable to Swiss bankers, whose traditions of secrecy date to the Middle Ages.”

Federal investigators believe some of the clients may have used offshore accounts at UBS to hide as much as $20 billion in assets from the Internal Revenue Service. Doing so may have enabled these people to dodge at least $300 million in federal taxes on income from those assets, according to a government official connected with the investigation.

The Times says the ex-UBS banker Bradley Birkenfeld will spill his guts in court on Monday.

“He’s going to sing like a parakeet,” one of Mr. Birkenfeld’s former clients said.

Loopholes blow bubble in commodities markets

The Washington Post says on page one that loopholes provided by the Commodity Futures Trading Commission are allowing big investors to load up on “massive amounts of oil contracts,” fueling what critics, including lawmakers, say is a speculative rise in prices.

This is interesting:

Over the past five years, investors have become such a force on commodity markets that their appetite for oil contracts has been equal to China’s increase in demand over the same period, said Michael Masters, a hedge fund manager who testified before Congress on the subject last month. The commodity markets, he added, were never intended for such large financial players…

George Soros, one of the nation’s leading investors, testified in a Senate hearing this week that index funds were contributing to the rapid rise in commodity prices and were possibly creating a bubble. If it were to burst, sending prices tumbling, the fallout could wreak havoc on banks, retiree funds and colleges across the nation.

“I find commodity index buying eerily reminiscent of a similar craze for portfolio insurance, which led to the stock market crash of 1987,” Soros said.


Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.