The week’s big fear was that the AI borrowing binge would turn into a wider credit problem. A batch of America’s regional banks has just reported, and on the evidence so far, the bad loans are not showing up. Loan losses are falling, not rising. The shares are slipping anyway, because investors wanted stronger revenue to go with the clean bill of health.
That leaves Wall Street heading into a quiet-looking Friday with one worry crossed off and another one, growth, moving up the list.
The Situation Right Now
US futures are calm. S&P 500 futures are up about 0.2% near 7,804 and Dow futures about 0.4%, while Nasdaq 100 futures are flat, according to CNBC data shortly before midday UK time. The VIX, Wall Street’s main gauge of expected volatility, has eased to about 16.1.
That follows a steadier Thursday. The S&P 500 rose 0.33% to 7,744.06 and the Dow jumped 1.08%, while the Nasdaq Composite barely moved. Money has been rotating from technology into banks, consumer names and smaller companies, and the Nasdaq 100 is still down about 3% for the week.
Europe is in a better mood. Germany’s DAX is up about 1.2%, the Stoxx 600 about 0.7% and France’s CAC 40 about 0.5%, while the FTSE 100 is little changed near 10,855.
What Changed Since This Morning?
This morning’s brief focused on Fed Chair Kevin Warsh refusing to give any hint about the October meeting, and flagged the regional bank results as the next thing worth watching. Those results are now out.
Truist, Regions, Citizens Financial and M&T Bank all reported before the US open. Each beat profit forecasts, and the two that broke out loan quality in detail showed it improving. Yet Truist, Regions and Citizens are all lower in pre-market trade, and insurer Travelers is down more after its own results.
The Biggest US Market Story
This week, the AI trade ran into a credit scare. CoreWeave, a heavily borrowed company that rents out AI computing power, saw the cost of insuring its debt rise to distressed levels, and investors started asking where else the strain might show. Regional banks, which lend to ordinary businesses and property owners, tend to feel trouble early.
So far, the answer is reassuring. Regions said its annualised net charge-offs, the loans it has written off as lost, fell to 0.29% of average loans from 0.42% in the second quarter. Non-performing loans dropped to 0.59% from 0.67%, and the bank said business sentiment among its customers remains constructive. Profit available to shareholders rose 11% from a year earlier to $611 million.
Truist told a similar story on credit. Non-performing loans fell to 0.40% of total loans from 0.51% after it sold a portfolio of car loans, and it has agreed to sell $7.7 billion of unsecured consumer loans to Carlyle. But its reported revenue of $3.75 billion was dragged down by a $1.45 billion loss on selling securities, part of a deliberate clean-up of its balance sheet. Stripping out those items, revenue of about $5.30 billion was flat on the quarter and a little short of what analysts expected, according to Investing.com.
Citizens Financial reported net income of $636 million, up 29% on a year ago, raised its dividend by 13% and lifted its share buyback capacity to $1.95 billion. M&T Bank posted earnings of $5.04 a share, or $5.08 on an adjusted basis, ahead of forecasts, though its provision for bad loans rose to $135 million from $125 million a year earlier.
The pattern is clear enough. The banks are not finding the credit cracks the market feared, but revenue growth is modest, and Regions, Truist and Citizens all fell short of revenue forecasts according to Investing.com. After a strong Thursday for bank shares, a clean but unexciting quarter is not enough.
Stocks Moving Before The Open
Regions is down about 2% before the open, Truist about 1% and Citizens a little under 1%, according to CNBC’s pre-market data, in thin early trade. The biggest faller in the group is insurer Travelers, down about 4%. Its core earnings jumped to $9.18 a share from $8.14 a year ago, but net written premiums were flat at $11.48 billion and catastrophe losses rose to $538 million. It is the same story in a different coat: strong profits, not much growth. The big banks are steadier, with JPMorgan up about 0.4% and Bank of America about 0.5%.
In tech, the picture is mixed rather than panicky. Tesla is up about 3.4% after unveiling its long-awaited new Roadster, which Elon Musk said will go into production in 2028. CoreWeave is down about 4.4% after bouncing nearly 6% on Thursday, so the debt worries have not gone away. Micron is down about 2.4% and AMD about 1.6%, while Nvidia is flat. Netflix is down about 2.8% after CNBC reported that its chief content officer is leaving.
FX and the Dollar
The dollar is on the back foot again. The dollar index is down about 0.4% near 101.66. The pound is up about 0.5% near $1.3336, close to a three-week high, and the euro is up about 0.4% near $1.1258. Dollar-yen is little changed near 157.9. A weaker dollar on a calm day suggests investors are still unwinding bets on an October Fed rate rise.
Bonds
Treasuries are giving back a sliver of Thursday’s rally, which was the 10-year’s biggest one-day fall in yield in more than a year. The 10-year yield is about 5.10%, up roughly 1.5 basis points, while the two-year is flat near 4.75% and the 30-year is near 5.45%. Even so, Treasuries are on course for their best week since February, according to the Financial Times.
Markets now broadly expect the Fed to hold rates at its 27 to 28 October meeting, with another rise more likely in December. With the Fed now in its quiet period, bonds will be steered by data rather than speeches. In the UK, the 10-year gilt yield is near 5.38%.
Commodities
Oil is flat. Brent crude is near $106.10 a barrel and US crude is down about 0.3% near $97.71. President Trump said the US will not use nuclear weapons or send ground troops to Iran, and Treasury Secretary Scott Bessent has stepped up economic pressure on Tehran, but neither has moved prices much. The Strait of Hormuz remains the main risk, still treated as background rather than a fresh shock.
Gold is up about 0.7% near $4,199 an ounce in futures, helped by the weaker dollar, and silver is up about 1.4% near $57.95. Copper is up about 1.2%.
Today’s Remaining Catalysts
The data diary is light. US import prices for September are due at 13:30 UK time, with forecasts pointing to a 0.9% monthly rise, and after this week’s hot consumer and producer price figures, another strong reading would not be welcome. Industrial production follows at 14:15, expected to rise 0.4%.
The bank calls matter too. Truist’s call is at 13:00 UK time, Citizens and Travelers both speak at 14:00 and Regions at 15:00. Listen for anything on how borrowers are coping with 5% Treasury yields. The US cash market opens at 14:30 UK time, and today is also a monthly options expiry, which can exaggerate moves around round numbers such as 7,800 on the S&P 500.
Levels Traders Are Watching
These are reference points, not targets. S&P 500 futures are sitting just above 7,800, with Thursday’s cash close near 7,744 below. For the US 10-year yield, 5.00% is the big figure below and 5.19%, Wednesday’s close, is the level that would undo this week’s bond rally. The SPDR S&P Regional Banking ETF closed near $69.75 on Thursday, a useful marker for whether bank selling spreads. CoreWeave’s Thursday close near $69.69 shows whether the AI debt worry is easing. Gold is right on $4,200, Brent is sitting just above $106, the dollar index has 101.5 below and the pound has $1.33 underneath.
How We Read It Into The Open
The fair reading into the open is cautiously constructive, with a short leash. The evidence for that is decent: falling loan losses at Regions, fewer problem loans at Truist, higher payouts at Citizens and a market that has stopped selling everything linked to AI. The credit scare that started with CoreWeave has not, on this evidence, spread to Main Street lenders. On the other side, revenue growth is thin, bank shares have had a good run, and Treasury yields above 5% are still a burden for borrowers.
The opportunities today are more likely to come from how individual stocks react to their results than from a big move in the index, especially on an options expiry day. The main risk is a hot import price figure or a sharp rise in Treasury yields that brings October rate rise talk back. The view would weaken if regional bank shares keep falling after the open, CoreWeave slides back below Wednesday’s close near $65.78 or the 10-year yield climbs back above 5.19%. It would strengthen if banks recover through the session and Nasdaq futures hold steady. The markets to watch are the regional banks, the 10-year yield, Nasdaq futures, the dollar and gold.
For beginners, the lesson is that a share price reacts to what was expected, not just to what was reported. A bank can show healthier loans and higher profits and still fall if investors had hoped for more. This is an educational view of the market, not advice to buy or sell anything.
If you want to see how you would handle a day like this, with good news priced in and the next move up for grabs, the free Samuel & Co Trading trader assessment is a good place to test your approach.
