Stocks fall on concerns over regional bank lending

new York
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U.S. stocks closed lower on Thursday as nervousness spread across Wall Street over credit market turmoil and regional banks’ exposure to bad loans.

The Dow Jones fell by 301 points, or 0.65%. The broader S&P 500 index fell 0.63% and the tech-heavy Nasdaq Composite fell 0.47%.

Volatility returned to Wall Street amid a rise Trade tensions between the United States and Chinaconcerns about historically expensive stocks and unrest is brewing in the banking sector.

Shares of regional banks fell Thursday after two lenders revealed problems with borrowers, stoking nerves about the health of the credit market – and the potential for negative spillovers to the stock market and the broader economy.

Zions Bancorp (ZION) sank 13% after the bank disclosed this would result in a $50 million loss in the third quarter due to a bad loan. Western Alliance Bank (WAL) fell 10.8% after disclosed he is suing a borrower for fraud allegations.

“Concerns about credit quality are plaguing Wall Street today as fears grow that several large lenders are heavily exposed to problem loans with limited collateral,” said José Torres, senior economist at Interactive Brokers.

The revelations follow auto lenders First Brands and Tricolor Holdings. filing for bankruptcy in September. Nervousness is mounting that big banks are stuck in loans that might not be repaid.

Jefferies (JEF) fell 10.6% on Thursday as the bank grapples with the fallout from its exposure to First Brands. Jefferies shares had their worst day since April and are down 25% so far this month.

“Everyone is wondering: Is this a canary in the coal mine? » Michael Block, market strategist at Third Seven Capital, told CNN’s Matt Egan. “They’re supposed to be the smartest guys in the room.”

“Everyone is waiting for a shoe to drop,” Block said. “There’s a little baby shoe falling in the shape of a Jefferies. It could be a false alarm or it could be that where there’s smoke, there’s fire.”

Wall Street’s fear index, the VIX, jumped 22.6% and is trading at its highest level since May.

CNN Fear and Greed Index plunged into “extreme fear” for the first time since April.

About 80% of S&P 500 companies closed lower on Thursday. The KBW Nasdaq Regional Banking Index fell 6.3%.

Gold futures surged 3.1% to exceed $4,300 per troy ounce for the first time as investors rushed to safe havens. Silver futures gained 3.8% and also hit a record high.

Investors flocked to bonds, pushing down yields. The 10-year yield fell below 4% and reached its lowest level since April. The two-year yield fell to 3.42% and is trading at its lowest level since 2022.

JPMorgan Chase CEO Jamie Dimon said during his company’s earnings conference call Tuesday that he is concerned about the credit environment. JPMorgan revealed it had a $170 million exposure to Tricolor.

“These are early signs that there might be some excess,” Dimon said on the earnings conference call. “If we ever have a downturn, you’re going to see a little more credit issues.”

“I view asset prices as very high, credit spreads as very low…I would feel more comfortable if that wasn’t true because it’s a long way to go,” Dimon said Thursday at the annual meeting of the Institute of International Finance.

“And it seems to me that the market thinks it’s going to be OK, and you know, I’m not so sure,” Dimon said.