U.S. regional bank credit woes calm down, attempt to rebound

🔔 Morning Briefing

1. U.S. regional bank credit woes calm down, attempt to rebound

Dow futures also rose +70pt as regional bank stocks, which led the previous day’s plunge, rallied in the premarket. Shares of Zion Bancorp and Western Alliance plunged more than 10% in the aftermath of their recently announced bad loans, but rebounded due to Baird’s upward investment opinion and easing concerns over Jefferies’ performance. Fifth Third Bank rose +2% on better-than-expected earnings reports.

2. Credit risk spreads to Europe, squeezes global financial stocks

U.S. regional banks’ bad loans have spread to Europe. Major European banks such as Spain’s Sabadell, Germany’s Deutsche Bank and the U.K.’s Barclays plunged to the Stoxx Bank index of -3 percent. U.S.-originated financial sector instability is a structural risk to the global credit market.

3. Quiets After Volatility Surges, Signs Of Easing Market Unrest

The previous day, the Wall Street Fear Index VIX surpassed 27 and reached its highest level since April, but fell to 23 this morning, expecting market stability. Bond yields and the dollar also turned flat after falling.

4. Individual stocks such as CSX and Oracle are strong… Performance Screening Market Continues

Railroad company CSX up +2% on Q3 earnings that slightly beat market expectations; Oracle remains market-responsive to long-term growth despite announcement of cloud collaboration with Meta; -2.4% in after-hours trading; Interactive Brokers down -3% despite earnings beat.

5. Speculative Overheating Warning: High-Risk Lead Shares In Russell 2000 Attention

Charles Schwab chief strategist Liz Ann Sonders mentions “polarized speculative markets.” Pointing out the possibility of a “bubble” centered on small and medium-sized stocks, which are more volatile in both directions than megacap stocks. In fact, the Russell 2000 index hit a new high this week, raising controversy over its overvaluation.

✅ Today’s conclusion

Yesterday, the market raised concerns about the credit market, with local banks Zions and Western Alliance disclosing tens of millions of dollars in loan losses following the recent collapse of First Brands and Tricolor, which Jamie Dimon warned were “wheelers.”

In fact, it came as a real shock to the market because the bank’s performance was all good. This morning, it seems to be stabilizing again, but I don’t know… there’s already a question on Wall Street about whether you can’t just look at the trees and see the forest.