Through the summer, stocks were riding a resilient economy and corporate earnings that, in large part, exceeded analysts expectations. But as summer has turned to fall, investors are being rattled by a renewed trade dispute with China and reports from banks of souring debts on their balance sheets.
The S&P 500 index was flat in early trading on Friday, after recording a loss the day before when troubles at smaller banks spooked investors.
The regional bank Zions Bancorp on Thursday disclosed a $50 million charge-off related to loans made to a pair of real estate investors looking to buy distressed commercial mortgages. Western Alliance Bank also disclosed on Thursday that it believed it was the victim of fraud involving commercial real estate loans and that it had sued the borrowers.
The disclosures come on the heels of the downfall of the subprime auto lender Tricolor and the auto parts supplier First Brands Group, with banks including JPMorgan, Fifth Third Bancorp and Jefferies disclosing losses from loans to the companies.
“My antenna goes up when things like that happen,” Jamie Dimon, the chief executive of JPMorgan, said on the bank’s quarterly earnings call on Tuesday. “And I probably shouldn’t say this, but when you see one cockroach, there are probably more.”
Those bankruptcies also flared concerns that the strength of the consumer, which has propped up the economy since the onset of the Covid-19 pandemic, might be waning. With the government shutdown, economic data tracking the current health of the economy is sparse, adding to the nervousness.
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