U.S. stock futures were pointing to losses early Friday as the market frets about the potential for bad loans to hit the banking industry.
Dow Jones Industrial Average futures were down 464 points, or 1.0%. S&P 500 futures were dropping 1.3% and Nasdaq 100 futures were falling 1.5%.
Zions Bancorp said late Wednesday that it had taken a $50 million charge-off to cover two loans taken out by borrowers facing legal actions. Meanwhile, Western Alliance said Thursday that it filed a lawsuit in August against one of its borrowers, alleging the company committed fraud.
“While this was an ostensibly isolated story at two banks each less than $10bn market cap, the event drew inevitable comparisons to the regional bank stress that followed the collapse of SVB [Silicon Valley Bank] in March 2023 and raised broader questions over potential credit quality issues,” wrote Deutsche Bank analyst Peter Sidorov in a research note.
The yield on the benchmark 10-year Treasury stood at 3.950% early on Friday, ticking down from the previous day, when it settled below 4% for the first time since April.
Federal Reserve Gov. Christopher Waller said Thursday the central bank should lower interest rates by a quarter percentage point at its October meeting, pointing to weakness in the labor market, amid a lack of new data. The government shutdown that began Oct. 1 has suspended the September employment report and will delay inflation releases originally slated for publication this week.
Concerns about inflation might be relatively muted due to cheap energy prices. Brent crude futures, the international price gauge for oil, were down 0.3% early on Friday at $60.89, their lowest level since May.