S&P500: Stock Market Rebounds Today as Bank Fears Ease, Forecast Improves

Dow Edges Higher as Traders Digest Bank Selloff and Credit Risks

The Dow Jones Industrial Average ticked up Friday morning, recovering some ground after a sharp selloff in regional banks rattled markets the previous session. The index gained 76 points, or 0.2%, while the S&P 500 added 0.1%. The Nasdaq remained flat. Investors were recalibrating risk following fresh credit concerns and a rebound in sentiment around bank stability.

Are Banking Fears Overdone After Thursday’s Drop?

Regional banks, which dragged major indexes lower Thursday, saw modest rebounds. Zions Bancorp, down 13% a day prior on credit concerns, climbed over 2% after an upgrade from Baird, which said losses were exaggerated by the selloff.

Jefferies rose 3% after Oppenheimer issued an “outperform” rating, offsetting some of Thursday’s 11% loss tied to exposure to bankrupt auto parts retailer First Brands.

Fifth Third Bancorp also helped sentiment, jumping 2% on better-than-expected earnings despite rising credit losses from exposure to bankrupt subprime lender Tricolor.

Which Sectors Are Seeing Rotation?

Financials outperformed early Friday, gaining 0.8%, followed by consumer discretionary and energy sectors. Technology rose 0.18%, while health care and materials lagged.

The SPDR S&P Regional Banking ETF (KRE), down over 6% Thursday, rebounded 0.3%. Meanwhile, Dow components like American Express and Visa posted strong gains of 4.34% and 1.47%, respectively, leading blue-chip strength.

What’s Fueling the Broader Market Outlook?

Improved sentiment came alongside easing volatility. The Cboe Volatility Index (VIX), which spiked Thursday, edged lower early Friday as Treasury yields and the dollar steadied. Investors appeared less concerned about systemic banking risks, viewing recent loan losses at Tricolor and First Brands as isolated.

Charles Schwab’s Liz Ann Sonders pointed to increased risk-taking in smaller caps, noting that speculative interest has shifted away from megacap stocks and into riskier corners like the Russell 2000, which hit a new high this week.

Is Investor Confidence Returning with Fund Flows?

Data from LSEG showed U.S. equity funds saw net inflows of $1.04 billion for the week ending October 15, reversing part of the prior week’s outflows. Inflows were driven by earnings optimism and growing rate-cut expectations from the Federal Reserve.

Tech and financial sector funds led with $1.18 billion and $920 million in inflows, respectively.

However, large-cap funds saw $2.42 billion in outflows, suggesting a selective risk appetite. Bond funds also attracted $6.49 billion in fresh capital, particularly short-to-intermediate investment-grade and government debt funds.

Market Outlook: Can the Rally Hold Into Next Week?

Despite Thursday’s selloff, all major indexes are on pace for weekly gains, supported by strong corporate earnings and easing credit fears.

The S&P 500 is up 1% for the week, the Dow has gained 1.3%, and the Nasdaq has climbed 1.4%.

Traders will continue to watch for earnings releases and Fed commentary, especially around inflation and credit conditions, to assess whether Friday’s recovery can sustain into next week.

More Information in our Economic Calendar.