Bad loans have become a new cause for market concern, with the S&P 500 closing in negative territory

On Thursday, October 16, the four major U.S. stock indices ended trading in the red zone, losing what they gained at the beginning of the day. The pressure on the market was exerted by bank shares due to investors' concerns about bad loans. Trading participants also continued to monitor the ongoing trade tensions and the ongoing shutdown in the United States.

- Thursday's trading in the broad market index S&P 500 ended in the negative by 0.63%. Before the publication of news from the banking sector, the index was growing by 0.6%.

- The Nasdaq Composite Technology Sector Index lost 0.47% for the day.

- The blue-chip index Dow Jones Industrial Average was down 0.65% on Thursday.

- The Russel 2000 index of small-capitalization companies fell 2.1%.

Shares of regional banks Zions and Western Alliance collapsed 13.1 percent and 10.8 percent, respectively, in trading Thursday. Zions will write off $50 million of troubled borrowers' debts among businesses in the third quarter. And Western Alliance accused one of its borrowers of fraud. The banking industry remains under pressure amid the recent bankruptcies of auto lender Tricolor Holdings and auto parts maker First Brands, Barron's explains. Shares of Jefferies, which is tied to First Brands, fell 10.6% Thursday and have lost 25% since the beginning of October.

"If you see one cockroach, there are probably more," commented Jamie Dimon, CEO of JPMorgan, the largest U.S. bank, this week on the topic of bankruptcies and risks in the credit market .

Deteriorating stock market sentiment is reflected in a sharp rise in the Cboe Wall Street Fear Index (VIX, up 25.3 points on Thursday), as well as declining bond yields and the dollar. The VIX jumped to its highest since Ma, while the yield on 10-year Treasury securities fell below the 4% mark. The dollar index fell 0.4%, hitting an intraday low mid-session. Gold hit a new record, with spot prices adding about 2.7% to reach $4322.77.

The market is still in a state of uncertainty after Donald Trump threatened China with new duties last week and a ban on vegetable oil on Tuesday. In addition, investors are closely monitoring the situation with the US federal government shutdown, which is now in its third week. Because of the shutdown, the publication of the most important economic data from federal agencies has been postponed indefinitely, CNBC writes.

- "The market is extremely nervous right now about any credit-related losses," Argent Capital Management portfolio manager Jed Ellerbrook told CNBC. - Given the announcements [from regional banks], investors are not happy, and as a result, almost all small bank and financial company stocks are down today."

- "From a credit risk perspective, is it good or bad if loans became problematic because of fraud rather than as part of normal business operations? - asks Truist analyst David Smith, commenting on the Zions situation. - Either way, there have been enough of these 'one-offs' in banks' commercial loan portfolios lately that investors have started selling first and figuring things out later."

- KBW analyst Christopher McGratty added that even though Western Alliance's losses have narrowed, "the emergence of more 'one-off' credit problems in the industry is weighing on investor sentiment - especially for securities that are considered more sensitive to credit risk."

This article was AI-translated and verified by a human editor