U.S. stocks fall as midsized bank earnings worry traders about underlying state of the economy

The S&P 500 fell 0.6% in the latest up-and-down day after erasing its morning gains. The Dow Jones Industrial Average fell 301 points, or 0.7%, and the Nasdaq Composite lost 0.5%.

Zions Bancorp fell 13.1% after the bank said its third-quarter earnings would be hurt by a $50 million charge related to loans made to a pair of borrowers. Zions said it found “clear misrepresentations and contractual defaults” by borrowers and several people who guaranteed the loans, along with “other irregularities.”

Another bank, Western Alliance Bancorp, fell 10.8% after it said it had filed a lawsuit against a borrower, alleging fraud. It also said it is committed to its 2025 financial outlook.

Scrutiny of the quality of loans made by banks and other lenders is growing widespread following the filing of Chapter 11 bankruptcy protection last month for First Brands Group, a supplier of aftermarket auto parts. The question is whether the hiccups are just a set of emergencies or a sign of something larger that threatens the industry.

Thursday’s volatility on Wall Street, where the Dow rebounded from an early gain of 169 points to an afternoon loss of 472, fit the pattern of the week for stocks. It has been fragile since last weekend, when President Donald Trump broke a months-long lull in the US stock market by threatening much higher tariffs on China.

Thursday’s swoon erased early morning gains driven by an encouraging sign about the artificial intelligence boom.

Taiwan Semiconductor Manufacturing Co. reported a bigger jump in fourth-quarter profit than analysts expected. CFO Wendell Huang also said that TSMC expects “continued strong demand for our leading process technologies” through the end of the year.

This is important for the US stock market because TSMC plays a crucial role in the AI ​​craze, making chips for companies like Nvidia. Nvidia and other artificial intelligence stocks have been a key component of Wall Street’s rise to record numbers this year, even though inflation remains high and the labor market slows.

AI-related stocks have soared to the point that critics worry about the possibility of a bubble, like the one that burst in dot-com stocks in 2000.

US companies are broadly under pressure to deliver stronger profits after the Standard & Poor’s 500 index rose 35% from its lowest levels in April. To justify these gains, which critics say have made their stock prices too expensive, companies will need to show they are generating much greater profits and will continue to do so.

Travelers fell 2.9% Thursday even though the insurer reported stronger fourth-quarter earnings than analysts expected. Its revenues were below expectations.

Hewlett Packard Enterprise shares fell 10.1% after details of long-term financial goals that some analysts found disappointing.

They helped cloud a 4% gain for Salesforce, which unveiled a plan for more than 10% compound annual revenue growth in the coming years.

J.B. Hunt Transport Services stock rose 22.1% after the shipping company beat Wall Street profit targets in the third quarter.

In total, the S&P 500 index fell 41.99 points to 6,629.07. The Dow Jones Industrial Average fell 301.07 to 45,952.24, and the Nasdaq Composite fell 107.54 to 22,562.54.

In the oil market, crude oil prices fell after Trump agreed to meet with Russian President Vladimir Putin in Hungary in the hope of resolving the war in Ukraine. The war prompted the United States to try to stop its purchases of Russian oil.

A barrel of US crude gave up its early gains, falling 1.4% to $57.46. Brent crude, the international standard, fell 1.4% to $61.06 a barrel.

In overseas stock markets, indices rose in most parts of Asia and Europe.

The KOSPI index in South Korea rose by 2.5% on hopes of reaching a trade agreement between Seoul and Washington. Samsung Electronics and automakers [hotlink]Hyundai Motor[/hotlink] Kia was among the biggest winners.

In the bond market, Treasury bond yields declined as investors moved toward investments considered safer. The yield on the 10-year Treasury note fell to 3.97% from 4.05% late Wednesday.

Gold also rose in search of safer investments. It rose 2.5% to $4,304.60 an ounce, bringing its impressive gains for the year so far to about 63%.

A report in the morning said that manufacturing activity in the Mid-Atlantic region was contracting unexpectedly. It’s one of the few windows into the economy the Fed has had recently as it tries to figure out whether high inflation or a weak labor market should be the economy’s biggest concern.

The US government shutdown is delaying important updates on the economy, such as the weekly update on unemployment claims that typically helps guide Wall Street trading each Thursday. The previous day, an important report on inflation was also postponed.

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AP writers Teresa Cirugano and Matt Ott contributed.