U.S. stocks declined on Thursday, driven by concerns about the stability of midsized banks and the quality of their loan portfolios. The S&P 500 dropped 0.6%, while the Dow Jones Industrial Average fell by 301 points, or 0.7%. The Nasdaq composite lost 0.5%.
Zions Bancorp. experienced a sharp decline of 13.1% after disclosing that its third-quarter profit would be negatively affected by a $50 million charge-off. The bank attributed this to “apparent misrepresentations and contractual defaults” by two borrowers and several guarantors, as well as “other irregularities.”
Western Alliance Bancorp also saw its shares fall by 10.8%. The bank reported that it has filed a lawsuit against a borrower for alleged fraud and stated that it is maintaining its financial forecasts for 2025.
The financial sector is facing increased scrutiny following the recent Chapter 11 bankruptcy filing of First Brands Group, an aftermarket auto parts supplier. This has raised questions about whether these issues are isolated or indicative of broader problems in the industry.
Market volatility continued throughout the day, with the Dow swinging from an early gain of 169 points to an afternoon loss of 472 points. This pattern follows a recent period of instability, which began when President Donald Trump announced the possibility of higher tariffs on China.
Earlier in the day, positive news from the technology sector had lifted the market. Taiwan Semiconductor Manufacturing Co. reported quarterly profits that exceeded analysts’ expectations. Chief Financial Officer Wendell Huang said, “TSMC expects ‘continued strong demand for our leading-edge process technologies’ going into the end of the year.” TSMC’s role in producing chips for companies like Nvidia is significant, as AI-related stocks have been central to the market’s gains this year.
Despite the strong performance of AI stocks, some analysts have expressed concerns about a potential bubble similar to the dot-com era.
U.S. companies are under pressure to deliver higher profits after the S&P 500 rose 35% from its April low. Critics argue that current stock prices may be too high unless companies can demonstrate sustained profit growth.
Among individual stocks, Travelers fell 2.9% despite reporting higher-than-expected profits, as its revenue missed forecasts. Hewlett Packard Enterprise dropped 10.1% after presenting long-term financial targets that disappointed some analysts. Salesforce rose 4% after announcing a plan for more than 10% compounded annual revenue growth. J.B. Hunt Transport Services surged 22.1% after surpassing third-quarter profit expectations.
By the close, the S&P 500 had fallen 41.99 points to 6,629.07. The Dow Jones Industrial Average ended at 45,952.24, down 301.07 points, and the Nasdaq composite finished at 22,562.54, down 107.54 points.
Oil prices declined after President Trump agreed to meet with Russian President Vladimir Putin in Hungary to discuss the war in Ukraine. The conflict has led the U.S. to try to limit purchases of Russian oil. U.S. crude fell 1.4% to $57.46 per barrel, while Brent crude dropped 1.4% to $61.06 per barrel.
Internationally, stock indexes rose in Asia and Europe. South Korea’s Kospi jumped 2.5% on optimism about a potential trade agreement between Seoul and Washington, with Samsung Electronics, Hyundai Motor, and Kia Corp. among the leading gainers.
In the bond market, Treasury yields decreased as investors sought safer assets. The yield on the 10-year Treasury note fell to 3.97% from 4.05%. Gold prices also increased, rising 2.5% to $4,304.60 per ounce, marking a 63% gain for the year so far.
Economic data released Thursday showed that manufacturing activity in the mid-Atlantic region is contracting, providing one of the few recent economic indicators available to the Federal Reserve. The ongoing U.S. government shutdown has delayed key economic reports, including updates on unemployment claims and inflation.
