A brief and modest early rally around AI enthusiasm quickly faded into a broad market retreat just before midday, with the S&P 500 (-0.6%), Nasdaq Composite (-0.5%), and DJIA (-0.7%) trading progressively lower throughout the session. The small-cap Russell 2000 (-2.1%) and S&P Mid Cap 400 (-1.2%) lagged as the market displayed a risk-off disposition, resulting in some safe-haven demand in U.S. Treasuries.

For much of the morning, only the financials sector (-2.8%) traded in negative territory, with the initial weakness concentrated in insurer names after Marsh McLennan (MMC 186.48, -17.37, -8.52%) and Travelers (TRV 261.57, -7.88, -2.92%) traded lower despite beating earnings expectations. 

The sector would weigh heavier on the market after Zions Bancorp (ZION 46.93, -7.10, -13.14%) and Western Alliance Bancorp (WAL 70.32, -8.52, -10.81%) disclosed that they were victims of fraud involving loans tied to funds that invest in distressed commercial real estate, according to Bloomberg. Zions Bancorp disclosed a $50 million charge-off for one of the loans, which will be reflected on the company's Q3 earnings statement.

The KBW Regional Bank ETF slid 6.3% in response.

The scandal adds to a growing list of recent missteps that have prompted credit quality concerns across the industry, including Jefferies' (JEF 48.80, -5.80, -10.62%) exposure to the recently bankrupt First Brands and JPMorgan Chase (JPM 298.54, -7.15, -2.34%) and Fifth Third's (FITB 40.36, -2.56, -5.96%) exposure to the bankrupt Tricolor Auto.

Eroded confidence in the broader market ultimately saw ten S&P 500 sectors close with losses. 

Only the information technology sector (+0.1%) closed with a slight gain, led by strength in chipmakers after Taiwan Semiconductor Manufacturing (TSM 300.00, -4.71, -1.55%) reported strong AI demand in its Q3 earnings report. The PHLX Semiconductor Index (+0.5%) closed with a modest gain after retreating beneath its flatline. 

Despite the slight advance, the sector also held one of the worst-performing names in the S&P 500 amid a day ripe with laggards. F5 Networks (FFIV 295.35, -35.40, -10.70%) traded sharply lower after Bloomberg reported that the company's flagship BIG-IP product was breached by state-backed Chinese hackers.

Other notable laggards today included United Airlines (UAL 98.19, -5.86, -5.63%), which traded lower despite an earnings beat. CEO Scott Kirby said the federal government shutdown could hurt bookings if it continues, according to CNBC.

Kenvue (KVUE 14.11, -2.15, -13.22%) crashed to all-time lows on reports that the company is facing new litigation in the United Kingdom related to talc-based products, which the suit alleges are related to ovarian cancer claims.

The energy sector (-1.1%) also lagged as crude oil futures settled today's session $1.25 lower (-2.1%) at $57.03 per barrel. Reuters reported that the U.S and India had productive talks and Indian refiners are already lowering Russian imports by 50%. 

President Trump and Russian President Putin spoke on the phone today, with President Trump describing the conversation as "very productive" and announcing that he will meet with the Russian president in Hungary to discuss the war in Ukraine soon. 

There were relatively few developments regarding the recent trade tensions with China throughout the session, though President Trump described the situation as a trade war yesterday evening. 

Mounting geopolitical uncertainty, credit quality concerns across the banking industry, and a handful of negative corporate headlines culminated in a volatile environment for equities today that saw the CBOE Volatility Index surge over 20%. 

While stocks largely retreated throughout the session, U.S. Treasuries saw some safe-haven interest, with relative strength up front sending the 2-year yield to its lowest level since August 2022. The 2-year note yield settled down seven basis points to 3.43%, and the 10-year note yield settled down seven basis points to 3.98%. 

• Nasdaq Composite: +16.8% YTD
• S&P 500: + 12.7% YTD
• Russell 2000: +10.6% YTD
• DJIA: +8.0% YTD
• S&P Mid Cap 400: +3.1% YTD

Reviewing today's data:

• The Philadelphia Fed survey fell to -12.8 in October (Briefing.com consensus 9.1) from 23.2 in September.
• The NAHB Housing Market Index rose to 37 in October (Briefing.com consensus 33) from 32 in September.
• The Treasury Budget for September showed a surplus of $198.0 billion compared to a surplus of $80.3 billion in the same period a year ago. That is the largest monthly surplus since April 2025. The September surplus resulted from receipts ($544.0 billion) exceeding outlays ($346.0 billion). The Treasury Budget data are not seasonally adjusted, so the September surplus cannot be compared to the August deficit of $344.8 bln.
  • The key takeaway from the report is that the FY25 deficit was less than the FY24 deficit. That is the good news. The bad news is that the FY25 deficit was still $1.775 trillion, even with the collection of $195 billion in customs duties (for tariffs).