Several financial groups are wrestling with bad loans, raising worries on Wall Street of more to come.
For weeks, investors have focused on Jefferies Financial Group, an investment bank that has at least $45 million worth of exposure to First Brands, an auto-parts supplier that filed for bankruptcy last month. But on Thursday, they turned some of their attention to two regional banks, Western Alliance Bancorp and Zions Bancorp, after concerns about some of their loans as well.
All three banks’ stocks suffered their steepest single-day losses in over six months on Thursday.
Each of the bad loans very well may prove to be unique – their circumstances vary widely, and it’s not yet clear that they pose a greater risk to the broader market, banking industry or economy. However, investors have grown increasingly anxious about the drip-drip-drip of bad news, and they fear that enough similarities exist between the various pieces of bad news to at least start selling off some of their riskier holdings.
Still, markets haven’t exactly been crumbling. The S&P 500 is down less than 2% from its all-time high. CNN’s Fear and Greed Index may be trading in extreme fear for the first time since April, but it’s not yet apparent that dominoes will continue to fall – or if they’re even big enough to bring down any big and consequential pieces.
For now, though, Wall Street remains a bundle of nerves.
