US stocks are facing significant declines ahead of the market opening on Friday, fueled by growing concerns surrounding regional banks’ vulnerability to bad loans and the overall credit quality in the United States. As investors react to these uncertainties, they are increasingly seeking the security of safer assets.
Futures for the Dow Jones Industrial Average indicate a drop of approximately 0.8%, while the S&P 500 futures are down 1.1%. The tech-heavy Nasdaq 100 saw the largest decrease, falling by 1.3%. This marks a continuation of losses from the previous day, following disclosures from two regional banks about loan issues allegedly tied to fraudulent activities. These revelations have heightened anxiety on Wall Street, echoing concerns raised by JPMorgan CEO Jamie Dimon, who warned of “cockroach” signals pointing to cracks in US borrowers’ creditworthiness.
The movement towards safety is intensifying, with investors increasingly turning to bonds and gold as safer havens. The yield on the 10-year Treasury has fallen below the critical 4% threshold, while gold prices have surged to a new record, exceeding $4,300 an ounce.
The stock market turmoil caps a tumultuous week characterized by rising tensions between the US and China, alongside the looming possibility of a prolonged federal government shutdown. China has imposed new export controls and sanctions amid threats from President Trump regarding new tariffs. However, a glimmer of hope emerged Thursday night as Bloomberg reported that the White House is preparing to ease tariffs on the auto sector, with an announcement possibly coming as soon as Friday.
Simultaneously, traders are increasingly betting on the Federal Reserve implementing a substantial 50 basis point rate cut by the year’s end. This speculation follows comments from officials, including Trump-backed Governor Stephen Miran. Chair Jerome Powell suggested earlier this week that the groundwork is being laid for a quarter-point rate cut during the Fed’s October meeting.
Despite these challenges, earnings season continues, buoyed by strong quarterly results from major banks. On Friday, American Express is scheduled to report its earnings before the market opens.
Compounding market stresses, the government shutdown persists with no resolution in sight. On Thursday, the Senate faced yet another setback, failing for the tenth time to advance a proposal aimed at funding the government. Concerns are mounting that this impasse could last into November and potentially extend past Thanksgiving.
Meanwhile, the release of critical economic data has been put on hold due to the shutdown, with the Consumer Price Index (CPI) report initially scheduled for this week set to be published the following week. Additionally, federal employees remain without paychecks as President Trump threatens to block back pay and the courts deliberate on his attempt to terminate thousands of government workers.
In a related development, shares of pharmaceutical companies Novo Nordisk and Eli Lilly have experienced declines following remarks by President Trump about the potential decrease in the price of Ozempic, a popular weight-loss drug. Novo Nordisk’s stock plummeted over 4% in premarket trading in the US and more than 6% in Copenhagen, reflecting a nearly 60% loss over the past year amid concerns about the company’s future in the competitive weight-loss market. Likewise, shares of Eli Lilly fell by over 4% ahead of the market opening.
