Dow ticks up as traders try to shake off bank credit concerns: Live updates

The Dow Jones Industrial Average was slightly up on Friday as traders tried to move past credit concerns that sparked a big sell-off in regional banks Thursday.

The Dow traded 15 points, or less than 0.1%, higher. The S&P 500 and Nasdaq Composite edged down 0.2% and 0.4%, respectively.

Stocks that led Thursday’s bank sell off were rebounding, as Wall Street defended the shares and 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 selloff 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 4% Friday after receiving an upgrade from Baird, which said the drop in market value for the regional bank was out of proportion considering 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, was last 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 2%. The bank’s profit jumped last quarter even after posting a jump 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 session. 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 is trading 1.2% higher early Friday, although it’s still down roughly 2% for the week to date.

“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’ was moving steadily lower in early trading Friday as stocks bounced, signaling easing fears.

Liz Ann Sonders, chief investment strategist at Charles Schwab, said on CNBC’s “Closing Bell” Thursday that the banking concerns come as there’s is a lot of “speculative froth” that has developed in the public market, with investors chasing stocks with riskier profiles like quantum computing, drones and unprofitable tech stocks.

“When you have that speculative froth and then you have sort of a bigger picture potential issue, those two can sometimes collide and cause an increase in volatility,” she said, noting that most of the so-called froth is not in the megacap names anymore, but rather in smaller pockets of the market such as the Russell 2000 index, which hit a fresh high this week.

Stocks remain on track for weekly gains despite Thursday’s decline. The S&P 500 is up 1% after a strong start to the third-quarter earnings. The Dow has added about 1.3% week to date, while the Nasdaq has gained 1.6%.