Washington, D.C. – Wall Street braced for another tense session on Friday as investors’ attention shifted to a growing number of troubled bank loans, sparking concerns about potential underlying risks in the U.S. banking system.
Jefferies Financial Group, an investment bank, has been under the microscope for weeks due to at least $45 million in exposure to First Brands, an auto-parts supplier that filed for bankruptcy last month. On Thursday, investor focus expanded to include regional lenders Western Alliance Bancorp and Zions Bancorp, amid reports of additional problematic loans.
The market reacted sharply. Stocks of all three banks suffered their steepest single-day losses in more than six months. Jefferies’ shares plunged 10% Thursday, reflecting a 27% drop over the past three weeks following its disclosure of massive exposure to First Brands. Meanwhile, Zions Bancorp reported a $50 million loan loss, contributing to a 300-point drop in the Dow, and Western Alliance filed a lawsuit against a borrower accused of fraud.
Analysts note that each of these bad loans may be unique in its circumstances and it remains unclear whether they pose broader systemic risks. However, investors are growing increasingly nervous about the steady trickle of negative news, prompting some to shed riskier holdings.
Despite the turbulence, major indexes have yet to signal a full-scale market collapse. The S&P 500 remains less than 2% below its all-time high, though CNN’s Fear & Greed Index is trading in extreme fear for the first time since April.
Market futures indicated continued volatility into Friday, with Dow futures down 100 points, S&P 500 futures 0.4% lower, and the Nasdaq set to open 0.6% lower. The VIX volatility index, which spiked 23% Thursday, climbed another 5% Friday to reach its highest level since the announcement of President Trump’s massive tariff plan in April.
For now, Wall Street remains on edge, with investors watching closely to see if these isolated loan losses are the start of a broader trend – or merely one-off events unlikely to derail the market.