The Dow Jones Industrial Average rose Friday as traders digested the U.S.' softening tone on its trade talks with China and tried to move past credit concerns that sparked a big sell-off in regional banks Thursday.
The Dow finished 238.37 points, or 0.52%, higher at 46,190.61. The S&P 500 settled up 0.53% at 6,664.01, while the Nasdaq Composite added 0.52% to finish at 22,679.98.
Stocks extended their gains in afternoon trading after Treasury Secretary Scott Bessent said he would be speaking with his Chinese trade counterpart Friday evening. Trump also said from the White House that a meeting with China President Xi Jinping was still likely at the end of the month. The comments suggested the threat of 100% additional tariffs against China on Nov. 1 might not come to pass.
"The positive sentiment this afternoon has a lot to do with President Trump's comments about China ... that he understands the tariff threat posed was not sustainable," Ross Mayfield, an investment strategist at Baird, told CNBC. "I'm sure there will be ups and downs in these negotiations, but I think [Trump's announcement] sets a baseline that the administration doesn't want to see a repeat of a Liberation Day-type sell-off."
Shares of companies that led Thursday's bank rout rebounded Friday, as traders bet any bad credit bets were one-offs and not part of a bigger crisis. Zions and Western Alliance disclosed bad loans over the last 48 hours, which sparked a big sell-off in the stocks that eventually dragged down the whole market Thursday. Zion lost 13%, while Western Alliance tanked by 11% Thursday.
But Zions Bancorp climbed nearly 6% on Friday after receiving an upgrade from Baird, which said the drop in market value for the regional bank was out of proportion to the size of loan losses it was potentially facing. Investment bank Jefferies, caught in the storm for its exposure to bankrupt auto parts retailer First Brands, closed up 6% after Oppenheimer raised its rating to outperform. Jefferies was down 11% Thursday.
Better-than-expected earnings Friday from Fifth Third Bancorp also assuaged worries, sending the stock higher by 1.3%. The bank's profit jumped last quarter even after posting an increase in credit losses tied to exposure to bankrupt subprime auto lender Tricolor.
The Dow lost 300 points and the S&P 500 shed 0.6% on Thursday, fueled by the significant decline in bank stocks late in the afternoon. The SPDR S&P Regional Banking ETF (KRE), which was down for four straight weeks, lost more than 6% during the session. Uneasiness in the banking sector has grown after the recent bankruptcies of those two auto industry-related companies: Tricolor and First Brands.
The regional bank ETF closed 1.6% higher on Friday, although it ended the week 1.9% lower.
"We don't think there are systemic credit problems for banks – most of what we're seeing so far is a function of a few specific situations (First Brands and TriColor) while credit quality broadly if anything is tracking better than anticipated," wrote Adam Crisafulli of Vital Knowledge in a note.
Thursday saw a jump in the Cboe Volatility Index, commonly referred to as Wall Street's fear gauge, alongside moves lower in Treasury yields and the U.S. dollar as investors went into safe havens and looked for hedges in the options market. The VIX moved steadily lower Friday as stocks bounced, signaling easing fears. The yield on the benchmark 10-year Treasury rose back above 4%.
Despite the recent volatility, all three major indexes finished the week higher. The S&P 500 rose 1.7% fueled by a strong start to the third-quarter earnings. The Dow added 1.6% week to date, while the Nasdaq gained 2.1% over the same period.
