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

Market Overview - U.S. stocks experienced a decline, with the S&P 500 falling 0.6%, the Dow Jones Industrial Average dropping 301 points (0.7%), and the Nasdaq composite losing 0.5% [1][9]. Banking Sector - Zions Bancorp's stock plummeted 13.1% due to a $50 million charge-off related to loans, citing "apparent misrepresentations and contractual defaults" by borrowers [2]. - Western Alliance Bancorp's shares fell 10.8% after the bank announced a lawsuit against a borrower for fraud, although it maintained its financial forecasts for 2025 [2]. - Concerns are rising regarding the quality of loans made by banks following the Chapter 11 bankruptcy filing of First Brands Group, raising questions about potential broader industry risks [3]. Technology Sector - Taiwan Semiconductor Manufacturing Co. (TSMC) reported a profit increase that exceeded analyst expectations, with strong demand anticipated for its advanced process technologies [5]. - TSMC's role is critical in the AI sector, supplying chips to companies like Nvidia, which have significantly contributed to the stock market's performance this year [6]. Corporate Performance - U.S. companies are under pressure to deliver stronger profits after a 35% surge in the S&P 500 since April, necessitating substantial profit growth to justify current stock prices [7]. - Travelers' stock fell 2.9% despite reporting stronger-than-expected profits, as its revenue did not meet forecasts [7]. - Hewlett Packard Enterprise's shares dropped 10.1% after presenting long-term financial targets that analysts found disappointing [8]. - J.B. Hunt Transport Services saw a significant increase of 22.1% after surpassing Wall Street's profit expectations [8]. Oil Market - Crude oil prices declined, with U.S. crude dropping 1.4% to $57.46 per barrel and Brent crude also falling 1.4% to $61.06 per barrel [9][10]. Bond Market - Treasury yields decreased as investors sought safer investments, with the yield on the 10-year Treasury falling to 3.97% from 4.05% [11]. Economic Indicators - Manufacturing activity in the mid-Atlantic region unexpectedly shrank, providing limited insights into the economy as the Federal Reserve assesses inflation and job market conditions [12]. - The U.S. government shutdown is causing delays in important economic updates, including unemployment claims and inflation reports [13].