After the shock of Friday, Oct. 10, when Donald Trump announced 100% tariffs on Chinese products, the president quickly softened his tone, assuring that trade relations "will be fine."
That sweetener was well received by markets, helping Wall Street rebound early in the week.
Powell's Dovish Tone Added Fuel To The Recovery
The recovery was also fueled by stronger-than-expected bank earnings and by dovish remarks from Federal Reserve Chair Jerome Powell.
Powell warned of mounting risks to employment, another indication that the central bank is likely to continue easing borrowing costs, bolstering bets on a rate cut later this month.
Big Banks Shine, But Cracks Emerge in Smaller Lenders
Major U.S. banks including JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group Inc. (NYSE:GS), Bank of America Corp. (NYSE:BAC), Citigroup Inc. (NYSE:C), Wells Fargo & Co. (NYSE:WFC) and Morgan Stanley (NYSE:MS) all beat analyst estimates, highlighting the resilience of the country's financial giants.
Yet cracks are beginning to show further down the ladder among smaller regional lenders.
Credit Concerns Resurface With Zions And Western Alliance
Markets were reminded of that fragility on Thursday, when a new wave of volatility hit the sector as several regional banks flagged credit problems. Zions Bancorporation (NASDAQ:ZION) disclosed it would record a $50 million charge-off in the third quarter, tied to two troubled commercial and industrial loans held by its California Bank & Trust unit.
Meanwhile, Western Alliance Bancorp (NYSE:WAL) revealed it had filed a lawsuit against a borrower alleging fraud. Shares of both banks plunged by double digits on Thursday, while the broader regional banking industry suffered its worst single-day loss since April.
Adding to the unease, JPMorgan CEO Jamie Dimon warned of rising credit risk during the earnings call, citing the recent bankruptcies of Tricolor Holdings, a subprime auto lender, and First Brands, an auto parts manufacturer. "When you see one cockroach, there's probably more," Dimon said.
Gold Surges To All-Time Highs
Gold continued its unstoppable rally, reaching new record highs of $4,350 per ounce — up more than 60% since the start of the year, marking its strongest performance since 1979.
Gold-mining stocks have soared by triple digits, and analysts suggest the rally may still be in its early stages.
Detroit Auto Stocks Find Relief Ahead of Earnings
For Michigan-based stocks, the week ended on a brighter note. Shares of General Motors Co. (NYSE:GM), Ford Motor Co. (NYSE:F) and Stellantis N.V. (NYSE:STLA) rebounded from last week's losses, up around 6%, 4.3%, and 6.2%, respectively, as improved trade and interest-rate sentiment lifted the auto sector.
Next week, GM and Ford will report quarterly earnings on Oct. 21 and 23, respectively.
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Image created using artificial intelligence via Midjourney.
