Markets ended a busy week higher, despite the continued government shutdown, resulting lack of official government data, and heightened trade tensions between the US and China. Throw in concerns about credit markets, and the unofficial start to earnings season, and investors had plenty to consider.
Trade tensions between the US and China continued to simmer during the week with President Trump saying the US might stop buying cooking oil from China in response to China’s refusal to buy US soybeans. On Friday, Trump assuaged some trade-related concerns by acknowledging that his recently threatened tariff levels of 130%, set to take effect November 1, if nothing changes, are “not sustainable.” Trump and Chinese President Xi are scheduled to meet later this month. Separately, on Friday, Trump provided automakers with further relief from his tariffs by extending a 3.75% rebate, relative to the sales price of a domestically assembled vehicle, from 2027 to 2030.
On Tuesday, during its third quarter earnings call, JP Morgan disclosed a $170M loss related to the recent bankruptcy of subprime auto lender Tricolor Holdings. In discussing the incident, CEO Jamie Dimon said, “When you see one cockroach, there are probably more.” The recent collapse of Tricolor and another company, auto parts maker First Brands, has raised concerns about potential weakness within US credit markets.
Separately, regional bank Zions reported a $50M loss after being defrauded by an investment firm that borrowed money to invest in distressed real estate debt. Western Alliance Bank also disclosed it was suing the same firm, though it did not immediately report any associated losses. The news raised broader concerns about regional banks and other problem credits that might be lurking.
