Bank Sector Turmoil Hits Wall Street
US stock indexes ended lower on Thursday: the S&P 500 fell by 0.63%, the Dow Jones dropped 0.65%, and the Nasdaq 100 declined 0.36%. The market erased early gains after panic spread in the banking sector. Zions Bancorp and Western Alliance Bancorp plunged over 10% following disclosures of potential fraud in commercial loans, triggering a sharp sell-off across regional banks.
Tech Optimism Fails to Offset Losses
Earlier in the day, investors reacted positively to strong technology earnings. Taiwan Semiconductor Manufacturing Co. (TSMC) lifted its 2025 revenue forecast for the second time this year, citing surging AI chip demand. The news pushed shares of Nvidia, Micron, and ON Semiconductor higher. However, the tech rally was short-lived as bank stocks dragged the indexes back down.
Fed Signals Support Rate Cuts, Yields Fall
Dovish remarks from Federal Reserve officials helped limit losses. Fed Governor Christopher Waller said the central bank can continue cutting rates by 25 basis points to support a weakening labor market. The 10-year Treasury yield dropped to 3.97%, a six-month low. Richmond Fed President Tom Barkin added that rising US productivity could offset inflationary pressures from trade tariffs.
Mixed Economic Data
Thursday’s economic reports sent mixed signals. The Philadelphia Fed manufacturing index plunged to -12.8, the weakest in six months, pointing to an industrial slowdown. However, the housing market index rose to 37, beating forecasts and marking its strongest level since spring.
Gold Surges to Record Highs
Rising US-China trade tensions and the ongoing government shutdown drove investors into safe havens. Gold and silver hit fresh all-time highs, while gold miners such as Kinross, Newmont, Barrick Gold, and AngloGold Ashanti gained more than 2%.
Political Gridlock and Government Shutdown
The government shutdown continues to weigh on sentiment, delaying key economic reports, including jobless claims and inflation data. Bloomberg estimates that 640,000 federal employees are temporarily furloughed, potentially lifting the unemployment rate to 4.7%. The White House has warned that a prolonged shutdown could lead to massive layoffs and lower consumer spending.
Corporate Earnings Season Begins
Attention is shifting toward Q3 earnings. About 78% of S&P 500 companies reporting so far have exceeded expectations, though overall profit growth is expected to slow to 7.2% year-over-year — the weakest in two years. Revenue growth is projected to decelerate to 5.9%. Still, stronger-than-expected earnings could help stabilize investor sentiment.
Global Markets and Bonds
European markets closed higher, while bond yields in the UK and Germany fell. Investors see only a 2% chance of an ECB rate cut on October 30. Meanwhile, dovish Fed comments and banking fears supported strong demand for US Treasuries.
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