Dow futures plummeted by over 350 points on Friday, as investor sentiment remained fragile following renewed concerns over US regional banks and deteriorating credit quality.
The futures on the Dow Jones Industrial Average slipped about 0.8%, while S&P 500 and Nasdaq 100 futures declined 1.1% and 1.3% in premarket trade.
The sharp sell-off was witnessed as the market sentiment became nervous about potential loan fraud tied to smaller banks, echoing stress reminiscent of the 2023 banking turmoil.
5 things to know before Wall Street opens
1. Zions Bancorporation and Western Alliance Bancorp are the two regional banks at the center of the chaos as they have become embroiled in an alleged loan fraud scandal that has shaken investor confidence in the sector.
Zions discovered a falsified collateral linked to two commercial loans at its California Bank & Trust unit, and disclosed a $50 million charge-off related to this.
The Western Alliance reported up to $100 million in disputed loans tied to fraudulent borrowers.
The revelations sent regional bank stocks tumbling, reviving fears of deeper credit quality issues.
2. The US government shutdown has stretched into its 17th day today, with no end in sight.
Lawmakers are still locked in a bitter standoff over healthcare subsidies tied to government funding.
Republicans are pushing a short-term spending bill to keep the government running until November 21, but Senate Democrats keep blocking it, insisting that Affordable Care Act tax credits need to be made permanent first.
3. In Q3 earnings on Friday, Comerica and Fifth Third Bancorp are all set to release their third-quarter results.
Comerica’s call, scheduled before market open, follows a volatile week in which its shares dropped nearly 6% ahead of earnings.
Analysts expect Fifth Third to post earnings of $0.87 per share on $2.29 billion in revenue, driven by solid loan and fee income growth.
4. Technical analysis of Wall Street indices signals heightened volatility, as the Cboe Volatility Index (VIX) surged 22.6% on Thursday to 25.31, marking its highest level in nearly four months as market anxiety intensified.
The spike represents increased investor caution surrounding the US regional bank fraud revelations and prolonged government shutdown.
The VIX jump coincided with a drop in Treasury yields, as investors sought bonds for safety, and a weaker US dollar, signaling risk aversion across asset classes.
5. Global markets took a hit on October 17 as fears about bad loans in US banks sent a wave of selling across the world.
Big names like JPMorgan, Citi, and Bank of America saw their shares slide in premarket trading, while European lenders weren’t spared either as Spain’s Sabadell plunged nearly 9%, and Deutsche Bank dropped around 7%.
The ripple effect reached Asia too, with Japanese financial stocks and Hong Kong’s HSBC under pressure.
Interestingly, India stood out with the Nifty 50 managing a modest 0.4% gain, thanks to upbeat corporate earnings.
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