For all of Wall Street’s bellyaching over concentration risks in AI lending, it turns out that the real dangers lie in the financial community, with the usual lax oversight, unbridled greed, and arrogance, all swaggering knowing there will always be a bailout.

Fund managers acknowledged the most significant source of a potential credit event is private equity and credit.

Regional Banks are generally seen in a more wholesome vein than Wall Street’s money centers. Still, they have unique risks, such as significant real estate portfolios, and you were reminded yesterday that fraud is also a risk.

• The Fraud Factor
• The Concentration Risk
• The Systemic Implications

Filings from two regions yesterday sparked widespread selling that not only slammed Financials (XLF) but also dragged the rest of the sector lower. This happened at the same time as we were worried about smoke in the private equity space.

The S&P Regional Bank ETF (KRE) will most likely find a way to hold around the 200-day MA and hopefully close above it, heading into the weekend.

Also, we continue to monitor the action in Blue Owl (OWL).

Safe Haven

Interestingly, Technology (XLK) finished fractionally higher – investors trust the names, stories, and potential.  I like that a trucker (J B Hunt Transport Services (JBHT)) was the top performer on the S&P 500.  No time to panic, let's see how things shake out in the close today.  Also watching for China–US headlines (right now expecting positive surprises).

Today’s session

Equities are seeing volatility in the open as we enter the second half of October. Futures were down more than 1% a few hours ago, but they have rallied back, closer to the flat line, following President Trump’s comments on China.