Wall Street Breathes Out: Stocks Rebound as Bank Jitters Ease and China Tariff Heat Cools

CNBC, the New York Times, and Investor’s Business Daily contributed to this report.

After a white-knuckle Thursday, markets exhaled on Friday. A softer tone from Washington on China and fresh signs that regional-bank credit woes might be idiosyncratic — not systemic — helped stocks climb into the green.

The Dow Jones Industrial Average added 238.37 points, or 0.52%, to 46,190.61. The S&P 500 rose 0.53% to 6,664.01. The Nasdaq Composite matched the move, up 0.52% to 22,679.98. All three finished the week higher: S&P 500 +1.7%, Dow +1.6%, Nasdaq +2.1%.

The afternoon leg-up started after Treasury Secretary Scott Bessent said he’d speak with his Chinese counterpart Friday evening, and President Trump signaled a late-month meeting with President Xi remained likely — comments that implied the threatened Nov. 1 100% tariff escalation might be shelved. As Baird strategist Ross Mayfield put it on CNBC, the president “understands the tariff threat posed was not sustainable,” reducing the odds of another “Liberation Day-type” selloff.

The VIX — Wall Street’s fear gauge — which spiked on Thursday, bled lower through the session, while the 10-year Treasury yield popped back above 4%, a classic “risk-on” tell.

Thursday’s downdraft started in the regionals after Zions and Western Alliance disclosed problem loans — news that ricocheted across the sector amid fresh bankruptcies tied to Tricolor (subprime auto lender) and First Brands (auto parts). Zions plunged 13% and Western Alliance 11% on the day, dragging the broader market with them. The SPDR S&P Regional Banking ETF (KRE) sank more than 6% Thursday and, despite a bounce, finished the week down 1.9%.

Friday brought a tentative repair. Zions Bancorp rallied nearly 6% after an upgrade from Baird, which argued Thursday’s wipeout overshot the likely losses. Jefferies, caught in the crossfire for exposure to First Brands, reversed hard — closing up 6% after an Oppenheimer upgrade, clawing back a slice of Thursday’s 11% slide. Fifth Third Bancorp added 1.3% as better-than-expected earnings and resilient profit soothed nerves, even with higher credit losses tied to Tricolor.

The message from pros: cautious, not panicked. Moody’s Marc Pinto told CNBC there’s “little sign” of broader credit contagion. Adam Crisafulli at Vital Knowledge echoed it in a note: issues look “specific,” not systemic. Dan Niles said the same on “Squawk on the Street”: there may be more “cockroaches,” but this doesn’t look like 2008—or even March 2023.

Hopes for a cooler US–China dynamic were the quiet hero. Stocks pushed higher as the tariff rhetoric dialed down and Bessent flagged direct talks. That eased two big overhangs at once: global-growth anxiety and earnings-multiple risk if supply chains take another tariff hit.

Leaders, laggards, and the single-stock stories

• American Express carried the Dow, contributing nearly half the index’s afternoon point gain. Shares jumped more than 7% after the company beat on Q3 — $4.14 EPS on $18.43B revenue versus $4.00 and $18.05B expected.
• Oracle slumped more than 7% after laying out a long-term outlook that spooked a stock already up 74.5% in 2025 — its worst day since Jan. 27. (Even rockets pause to refuel.)
• AppFolio climbed ~7% on a KeyBanc upgrade to Overweight and a $285 target.
• AST SpaceMobile fell about 6% after a Barclays double-downgrade to Underweight, citing a valuation that “ran ahead of fundamentals” — notable after the stock more than doubled in a month and announced a Verizon deal.
• Revolution Medicines popped 10% after the FDA granted a priority voucher for its KRAS program candidate daraxonrasib (RMC-6236).
• Deere got a UBS upgrade to Buy with a bumped $545 target, as the analyst called for a 2027 earnings inflection even if 2026 stays choppy.

On the flow side, Schwab portfolio manager Joe Mazzola said retail clients keep leaning into energy, communication services, consumer discretionary, and health care, with “buy the dip” behavior in Tesla and Amazon — while institutions quietly hedge. That split lines up with Friday’s action in the VIX, which briefly topped 28 early before fading.

Macro and money markets: less fear, more facts

• Jobless claims likely eased: Goldman Sachs estimates initial claims fell to ~217,000 for the week ended Oct. 11 from 234,000, even as the government shutdown clouds the official read. Continuing claims were roughly steady around 1.92 million.
• Rates and the dollar: Thursday’s flight-to-quality pulled 10-year yields sub-4% intraday; Friday’s reversal above 4% mirrored the equity bounce.
• Funding stress chatter cooled as equities stabilized, though Thursday’s blip in short-term rates (SOFR poking above the Fed’s range) remains a reminder that year-end balance-sheet pruning plus headline shocks can gum up the plumbing fast. The Fed has tools if it worsens, but for now, as TD’s Gennadiy Goldberg put it, volatility should “abate, for now.”

The US bank scare briefly spilled into Europe Friday morning. The STOXX Banks index opened sharply lower, with Sabadell, Deutsche Bank, and Barclays among the hardest hit. As US shares recovered and tariff risks faded, the tone improved into the close.

The setup into late October looks like this:

• Earnings are doing the heavy lifting (AmEx a case in point), tamping down worst-case credit fears.
• Trade policy headlines matter — less tariff threat equals higher risk appetite.
• Banks aren’t out of the woods, but the tape is treating the latest blowups as idiosyncratic.
• Positioning feels two-track: retail nibbling on weakness while institutions pay up for protection.

Friday’s finish doesn’t erase Thursday’s scare, but it does re-establish the baseline: so long as negotiations with China stay constructive and earnings don’t crack, pullbacks will find buyers. The market is still a hostage to headlines — but for one session at least, the hostage took the wheel.