US stocks closed lower on Thursday, reversing earlier gains, as banking worries weighed on sentiment alongside trade tensions and the ongoing U.S. government shutdown.
The Dow Jones Industrial Average lost 301 points, or 0.7%, to finish at 45,952. The S&P 500 fell 0.6% to 6,629, and the Nasdaq Composite ended 0.5% lower at 22,562. Earlier in the day, the Dow had been up by 170 points, but selling intensified in afternoon trade.
Regional banks under pressure
Regional lenders led the downturn after two institutions disclosed significant loan problems. Zions Bancorp plunged 13% after recording a $50m charge tied to troubled borrowers. Western Alliance dropped 11% after alleging a borrower committed fraud.
Jefferies also fell 10% on Thursday, extending its monthly loss to 25%, on exposure to bankrupt auto-related companies First Brands and Tricolor Holdings. The failures have raised concerns about loose lending standards and risks lurking in the opaque private credit market.
Volatility and safe-haven moves
The sell-off coincided with a spike in volatility. The Cboe Volatility Index jumped to its highest level since May, rising above 25. Safe-haven flows drove the 10-year Treasury yield below 4%, while the U.S. dollar index fell nearly half a percent.
Trade tensions escalate
Trade uncertainty also added to the pressure. President Donald Trump last week threatened tariffs of up to 100% on Chinese imports in response to Beijing’s rare earth export controls. While rhetoric briefly cooled, tensions flared again Tuesday when Trump raised the prospect of banning cooking oil trade with China.
Government shutdown continues
Meanwhile, the U.S. government shutdown entered its third week, halting the release of key federal economic data. The absence of reports is leaving traders with fewer signals at a time of heightened market stress.
Australia outlook
Australian shares are set to follow Wall Street lower. ASX 200 futures are pointing down 31 points, or 0.3%, to 9068. That comes after the index set a record high on Thursday, fuelled by renewed bets of a Reserve Bank rate cut following weak jobs data.
On the corporate front, Clinuvel Pharmaceuticals, PWR Holdings and Silex Systems are among those holding annual meetings today.
