Wall Street catches its breath after the crash. Banks are back in the game, risk appetite is growing
Friday's session on Wall Street ended with gains as investor concerns about the credit situation, which triggered a large sell-off at regional banks on Thursday, eased. Additionally, trade tensions between the US and China have decreased.
The Dow Jones Industrial was up 0.52% at the close. and amounted to 46,190.61 points.
The S&P 500 increased by 0.53% at the end of the day. and amounted to 6,664.01 points.
The Nasdaq Composite increased by 0.52%. up to 22,679.98 points
The Russell 2000 mid-cap index is down 0.56%. up to 2,453.25 points
The VIX index falls by 17.34%. up to 20.92 points
The S&P 500 index increased by 1.7% throughout the week. after a strong start to the season of publishing company results for the third quarter. The Dow rose about 1.7 percent. since the beginning of the week, while the Nasdaq is up 2.2%.
Treasury Secretary Scott Bessent said he would speak with his Chinese trade counterpart on Friday evening. Trump also said from the White House that a meeting with Chinese President Xi Jinping was still likely at the end of the month.
The comments helped alleviate concerns that the threat of imposing a 100 percent additional tariffs on China on November 1 may not materialize.
Stocks of companies that led Thursday's bank rout rebounded on Friday as investors assume any bad credit bets were one-offs rather than part of a larger crisis.
Western Alliance disclosed bad loans over the last 48 hours, triggering a major stock sell-off that ultimately dragged the entire market down on Thursday. Zion lost 13%, while Western Alliance fell 11% on Thursday.
Zions Bancorp rose 5% on Friday. after receiving an update from Baird, who said the decline in the regional bank's market value was disproportionate given the magnitude of loan losses it was potentially facing.
Investment bank Jefferies, which has come under fire for its exposure to bankrupt auto parts company First Brands, rose 6 percent. after Oppenheimer upgraded its rating to “outperform.”
Fifth Third Bancorp's better-than-expected results Friday also calmed concerns, pushing shares up about 1%. The bank's profit rose last quarter even as it reported an increase in loan losses related to its exposure to bankrupt subprime auto lender Tricolor.
Concern in the banking sector has increased after the recent bankruptcies of two companies related to the automotive industry: Tricolor and First Brands.
“We don't believe there are systemic credit issues for banks – most of what we're seeing so far is a function of a few specific situations (First Brands and TriColor), while credit quality overall, if anything, is better than expected,” Vital Knowledge's Adam Crisafulli wrote in a note.
“All of these incidents may be isolated, but there are growing concerns about deteriorating credit conditions and poor credit history. Add in concerns about trade wars and the ever-increasing risk of an AI bubble, and you have quite the cocktail of excuses to end the week in risk-off mode,” said Neil Wilson, strategist at Saxo Markets.
“This US banking shock is more about market sentiment and liquidity than a systemic credit crunch. It's a good example of global risk aversion – fundamentals are OK, but fear dominates among analysts,” added Dilin Wu, strategist at Pepperstone Group.
Although some analysts estimate that the situation is similar to the US regional banking crisis of 2023, which led to the collapse of Silicon Valley Bank and the takeover of Credit Suisse by UBS Group AG, they expect the market reaction to be short-lived.
“Ultimately, the crisis has been contained, but it was not immediately clear. The third quarter results of U.S. banks were good, so investors are surprised and wondering whether they made a mistake in judgment,” said Leonard Cohen, CEO of Ginjer Asset Management.
The yield on benchmark 10-year Treasury bonds rose back above 4%.
Oracle shares fell more than 7% on Friday, recording their worst session since January 27. Shares of the company, which has struck several deals with companies including OpenAI and AMD, have soared in recent weeks but fell on Thursday after the company announced its long-term financial outlook. Since the beginning of 2025, Oracle shares have gained 75%.
On the oil market, WTI contracts for November are up by 0.23%. to USD 57.59 per barrel, and December Brent futures increase by 0.44%. up to USD 61.33/b. (PAP)
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