U.S. stocks closed higher on Friday as investors welcomed signs of easing trade tensions with China and brushed off renewed fears about credit risks in the banking sector that triggered a sharp sell-off the previous day.
The Dow Jones Industrial Average gained 238.37 points, or 0.52%, to finish at 46,190.61. The S&P 500 rose 0.53% to 6,664.01, while the Nasdaq Composite added 0.52%, closing at 22,679.98.
Markets extended their gains in afternoon trading after Treasury Secretary Scott Bessent said he would speak with his Chinese counterpart later Friday. President Donald Trump also confirmed that his planned meeting with Chinese President Xi Jinping at the end of the month was still likely to happen, suggesting that the proposed 100% tariff hike on Chinese goods slated for November 1 might not materialize.
“The positive mood this afternoon largely stems from President Trump’s comments on China — acknowledging that such high tariffs were unsustainable,” said Ross Mayfield, investment strategist at Baird, in an interview with CNBC. “There will be ups and downs in negotiations, but his statement shows the administration wants to avoid another major market sell-off like we saw on Liberation Day.”
Bank stocks — which suffered heavy losses on Thursday — rebounded sharply. Investors appeared confident that the recent credit issues disclosed by Zions Bancorp and Western Alliance were isolated incidents rather than signs of a broader crisis. On Thursday, Zions fell 13%, and Western Alliance plunged 11% after revealing bad loans.
On Friday, however, Zions Bancorp surged nearly 6% following an upgrade from Baird, which said the stock’s decline had been “disproportionate” to its actual credit exposure. Jefferies Financial Group, which had tumbled 11% the day before amid concerns over its ties to bankrupt auto parts retailer First Brands, climbed 6% after Oppenheimer upgraded its rating to “outperform.”
Meanwhile, Fifth Third Bancorp reported stronger-than-expected quarterly earnings, helping to calm nerves. The stock rose 1.3% after the bank said profits had grown despite higher credit losses tied to bankrupt subprime auto lender Tricolor.
Thursday’s sell-off saw the Dow drop 300 points and the S&P 500 decline 0.6%, driven by steep losses in financial stocks. The SPDR S&P Regional Banking ETF (KRE) fell more than 6% that day — marking its fourth consecutive weekly decline — as investors reacted to the bankruptcies of Tricolor and First Brands.
The ETF rebounded 1.6% on Friday but still ended the week down 1.9%.
“We don’t see evidence of systemic credit issues among banks,” wrote Adam Crisafulli of Vital Knowledge. “The problems so far appear isolated to a few cases like First Brands and Tricolor, while overall credit quality remains stronger than expected.”
Volatility, as measured by the Cboe Volatility Index (VIX) — Wall Street’s so-called “fear gauge” — spiked on Thursday as investors sought safety in Treasuries and options hedges. The VIX retreated on Friday as stocks rebounded, signaling a reduction in market anxiety. The 10-year Treasury yield climbed back above 4%.
Despite recent market turbulence, all three major indexes finished the week higher. The S&P 500 rose 1.7%, boosted by strong early third-quarter earnings reports. The Dow gained 1.6%, and the Nasdaq Composite advanced 2.1% for the week.
