{"id":214234,"date":"2025-10-20T23:35:08","date_gmt":"2025-10-20T23:35:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/214234\/"},"modified":"2025-10-20T23:35:08","modified_gmt":"2025-10-20T23:35:08","slug":"spooky-season-was-short-lived-on-wall-street","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/214234\/","title":{"rendered":"Spooky season was short-lived on Wall Street"},"content":{"rendered":"

\n A version of this story will appear in CNN Business\u2019 Nightcap newsletter. To get it in your inbox, sign up for free here<\/a>.\n<\/p>\n

New York
\n \u00a0\u2014\u00a0<\/p>\n

\n Is the nightmare on Wall Street over, or have traders just covered their eyes?\n <\/p>\n

\n ICYMI: Last week, relentlessly rosy stock traders \u2014 who so far have been unfazed by threats of US troops patrolling American cities or the federal government shutdown or any number of other real-life horrors \u2014 finally got a scare from the shadowy realm of finance known as private credit.\n <\/p>\n

\n The jump scares arrived, appropriately enough, like creepy twins with a warning from beyond the grave.\n <\/p>\n

\n First came the dual bankruptcies. The blowup of First Brands, an auto parts supplier accused of fraud<\/a>, and Tricolor, a subprime auto lender, had been haunting investors for weeks.\n <\/p>\n

\n The concern is less about those businesses failing than it is about major banks\u2019 exposure to them \u2014 and whether banks have been overlooking risks in private credit, where less-regulated non-bank entities lend money.\n <\/p>\n

\n Those fears crystallized when Jamie Dimon<\/a>, the head of JPMorgan Chase, revealed that his bank would take a $170 million loss on its loans to Tricolor. Dimon hinted more trouble could be coming, warning analysts that \u201cwhen you see one cockroach, there are probably more.\u201d (Ew!)\n <\/p>\n

\n With everyone\u2019s skin effectively crawling from that imagery, then came the pair of regional banks with their spooky update. Zions Bancorp and Western Alliance<\/a> disclosed that they were victims of a fraud on loans linked to distressed commercial mortgages \u2014 three words that should make anyone who lived through 2008 immediately start sweating. The news set off a panic, and regional bank shares tumbled<\/a> on Thursday.\n <\/p>\n

\n For a moment, it looked like a potential credit crisis was about to become the bogeyman that would end Wall Street\u2019s three-year bull run in stocks.\n <\/p>\n

\n But only for a moment.\n <\/p>\n

\n By Friday, the tension vanished like a ghost and investors got back to gobbling up equities. And by Monday<\/a> \u2014 after the White House signaled the shutdown could end this week and corporate earnings season switched into high gear \u2014 it was as if Thursday\u2019s panic was all just a bad dream. Subprime what? Tricolor who?\n <\/p>\n

\n If there was any fear lingering in the market, the allure of Big Tech returns and excitement for a likely Federal Reserve rate cut next week drowned them out, prompting investors to buy the dip.\n <\/p>\n

\n To be sure, the risks in the private credit market haven\u2019t gone away. Investors are just choosing to put their focus elsewhere for the moment, while keeping their heads on a swivel for any further signs of turmoil.\n <\/p>\n

\n The consensus among analysts seems to be that the troubles at Tricolor, First Brands and the two banks, look more like isolated cases of potential fraud and poor risk management than harbingers of the next financial crisis.\n <\/p>\n

\n \u201cIt\u2019s fair to get one\u2019s spidey sense tingling a little bit, but it\u2019s not necessarily fair to assume the worst right now,\u201d Steve Sosnick, chief strategist at Interactive Brokers, told me.\n <\/p>\n

\n Buying the dip has proven to be a profitable strategy, after all. And investors who weathered the banking crisis of 2023 may be feeling confident that the Federal Reserve would, once again, step in to prevent systemic collapse.\n <\/p>\n

\n Of course, the market\u2019s eagerness to assume the best could be pushing traders into Pollyanna-ish territory.\n <\/p>\n

\n \u201cIf this is more of an infestation, to extend Jamie Dimon\u2019s analogy, the market\u2019s not ready for it,\u201d Sosnick said, \u201cbecause it was so quick to shrug off the problems \u2026 If there are more cockroaches, that\u2019s systemic and that is problematic.\u201d\n <\/p>\n","protected":false},"excerpt":{"rendered":"A version of this story will appear in CNN Business\u2019 Nightcap newsletter. To get it in your inbox,…\n","protected":false},"author":2,"featured_media":214235,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[84,467,56,54,55],"class_list":["post-214234","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-markets","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/214234","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=214234"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/214234\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/214235"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=214234"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=214234"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=214234"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}