NEW YORK (AP) — U.S. stocks fell Thursday, hurt by declines at midsize banks as concerns grow about the loans they have made.
The S&P 500 fell 0.6% in its latest day of ups and downs after erasing a morning gain. The Dow Jones Industrial Average fell 301 points, or 0.7%, and the Nasdaq composite lost 0.5%.
Zions Bancorp. fell 13.1% after the bank said its third-quarter earnings will be hit due to a $50 million write-off related to loans made to a pair of borrowers. Zions said it found “apparent misrepresentations and contractual breaches” by the borrowers and several people who guaranteed the loans, along with “other irregularities.”
Another bank, Western Alliance Bancorp, fell 10.8% after saying it had sued a borrower, alleging fraud. He also said that he maintains his financial forecasts for 2025.
Scrutiny is increasing over the quality of loans that banks and other lenders have generally made following last month’s filing for Chapter 11 bankruptcy protection by First Brands Group, an auto parts supplier. The question is whether the setbacks are just a series of one-off events or a sign that something bigger is threatening the industry.
Thursday’s swings on Wall Street, where the Dow bounced from an early gain of 169 points to a loss of 472 in the afternoon, fit the pattern of the week for stocks. They have been shaky since late last week, when President Donald Trump broke a months-long calm in the US stock market by threatening much higher tariffs on China.
Thursday’s slide erased a morning gain driven by an encouraging sign about the rise of artificial intelligence.
Taiwan Semiconductor Manufacturing Co. reported a bigger rise in profit for the latest quarter than analysts expected. Chief Financial Officer Wendell Huang also said TSMC expects “continued strong demand for our cutting-edge process technologies” through the end of the year.
This is important for the US stock market because TSMC is a key player in the AI frenzy and makes chips for companies like Nvidia. And Nvidia and other AI stocks have been instrumental in Wall Street’s rise to records this year, even though inflation remains high and the job market is slowing.
AI-related stocks have soared so high that critics fear a possible bubble, like the one that imploded for dot-com stocks in 2000.
Overall, U.S. companies are under pressure to generate higher profits after the S&P 500 rose 35% from its April low. To justify those gains, which critics say have made their stock prices too expensive, companies will have to show that they are making much more profit and will continue to do so.