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Financial Markets 10/17 15:34
NEW YORK (AP) -- Wall Street cruised to the finish of a winning week on
Friday after banks recovered some of their sharp losses from the day before.
The S&P 500 rose 0.5%. The Dow Jones Industrial Average added 238 points, or
0.5%, and the Nasdaq composite climbed 0.5%.
The gains capped the best week for the S&P 500 since early August, but it
was a roller-coaster ride. Indexes careened through several jarring swings as
worries built about the financial health of small and midsized banks, as well
as the souring trade relationship between the United States and China.
Some of the nervousness around U.S.-China trade tensions eased on Friday
after President Donald Trump said that very high tariffs he threatened to put
on Chinese imports are not sustainable.
Trump also told Fox News Channel's "Sunday Morning Futures" that he would
meet with China's leader, Xi Jinping, at an upcoming conference in South Korea.
That's counter to an earlier, angry posting he made on social media, where he
said there seemed to be "no reason" for such a meeting.
Bank stocks, meanwhile, stabilized on Friday after several reported stronger
profit for the latest quarter than analysts expected, including Truist
Financial, Fifth Third Bancorp and Huntington Bancshares. That helped steady
the group, a day after tumbling on worries about potentially bad loans.
The two banks at the center of Thursday's action also rose to trim some of
their sharp losses.
Zions Bancorp., which is charging off $50 million of loans where it found
"apparent misrepresentations and contractual defaults" by the borrowers,
climbed 5.8% following its 13.1% loss.
Western Alliance Bancorp, which is suing a borrower due to allegations of
fraud, rose 3.1% after its 10.8% fall on Thursday.
Scrutiny is rising on the quality of loans that banks and other lenders have
broadly made following last month's Chapter 11 bankruptcy protection filing of
First Brands Group, a supplier of aftermarket auto parts.
One of the financial firms that could feel pain because of First Brands'
bankruptcy, Jefferies Financial Group, rose 5.9% Friday. It had come into the
day with a loss of roughly 30% since mid-September.
The question is whether the lenders' problems are just a collection of
one-offs or a signal of something larger threatening the industry. Uncertainty
is high following a long stretch where many borrowers were able to stay in
business, even with the weight of higher interest rates. And with prices
soaring to records for all kinds of investments, the appetite for risk may have
gotten too high.
JPMorgan CEO Jamie Dimon addressed the issue on an earnings conference call
with analysts earlier this week.
"When you see one cockroach, there are probably more," Dimon said. "Everyone
should be forewarned on this one."
"But banks make loan loss provisions and typically have plenty of capital to
keep the cockroaches from causing structural damage," said Brian Jacobsen,
chief economist at Annex Wealth Management. "Based on earnings and data so far,
it looks like this isn't an infestation" and that the potential canary in the
coal mine "is probably passed out and not dead."
All told, the S&P 500 rose 34.94 points to 6,664.01. The Dow Jones
Industrial Average climbed 238.37 to 46,190.61, and the Nasdaq composite gained
117.44 to 22,679.97.
In the bond market, Treasury yields steadied following their sharp slides
from Thursday, which came as investors rushed into investments seen as safer.
The yield on the 10-year Treasury edged up to 4.00% from 3.99% late Thursday.
Gold also pulled back from its latest record as more calm seeped through the
market.
The price for an ounce fell 2.1% to $4,213.30, but it's still up roughly 60%
for the year so far. Besides worries about tariffs, gold's price has also
surged on expectations for coming cuts to interest rates by the Federal Reserve
and concerns about the massive amounts of debt that the U.S. and other
governments worldwide are building.
In stock markets abroad, indexes dropped across much of Europe and Asia
after Wall Street's weakness from Thursday moved westward.
Germany's DAX lost 1.8%, and Hong Kong's Hang Seng sank 2.5% for two of the
world's bigger moves.
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AP Writers Teresa Cerojano and Matt Ott contributed.
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