5 Things to Know Before the Stock Market Opens Friday

This is CNBC’s Morning Squawk newsletter.

Here are five key things investors need to know to start the trading day:

Equities faced downward pressure yesterday as concerns intensified surrounding the health of regional banks and the potential proliferation of non-performing loans. This situation has triggered a wave of scrutiny as investors attempt to assess the true stability of financial institutions’ lending portfolios.

The key developments:

• Earlier this week, JPMorgan CEO Jamie Dimon issued a cautionary statement regarding the possible emergence of further financial “cockroaches,” drawing parallels to the recent financial distress experienced by auto parts manufacturer First Brands and subprime auto lender Tricolor Holdings. This analogy alludes to the “cockroach theory,” which posits that adverse revelations affecting one entity can precipitate a chain reaction of negative disclosures across interconnected businesses or sectors. The ramifications of this theory can extend beyond immediate financial losses, impacting market confidence and broader economic sentiment.
• The market reacted sharply to these concerns, with Jefferies, which has exposure to First Brands debt, experiencing a significant decline exceeding 10%. Zions Bancorporation, after disclosing a substantial charge related to problematic loans earlier in the week, closed down by 13%. Western Alliance Bancorporation also faced selling pressure, concluding the session down approximately 11% after allegations of borrower fraud surfaced.
• The collective impact of these developments resulted in a broad sell-off of regional bank stocks, which, in turn, contributed to the overall market’s decline. The unease surrounding bank credit also reverberated across European markets, adding to global economic anxieties. As evidence of investor flight to safety the yield on the benchmark
• The closely followed 10-year U.S. Treasury dipped to levels reminiscent of early April, a period marked by the announcement of significant tariff policies. This underscores the current climate of economic uncertainty and investors’ preference for lower-risk assets.
• Beyond the immediate financial sector concerns, ongoing U.S.-China trade tensions remain a critical factor. China’s Ministry of Commerce has openly criticized the U.S. for allegedly creating “panic” related to export controls on rare earth minerals, while also indicating a willingness to engage in trade discussions. This complex interplay of factors continues to influence market sentiment and economic forecasts.
• While U.S. stock futures initially showed weakness this morning, they are currently trading above their session lows. The market’s ability to recover from early losses suggests underlying resilience, but investors are advised to remain vigilant as economic uncertainties persist.

Former National Security Advisor John Bolton was indicted yesterday by a federal grand jury, facing charges related to mishandling classified information. This legal development adds another layer of complexity to the political landscape, particularly following recent indictments of former FBI Director James Comey and New York Attorney General Letitia James. The timing of these indictments raises questions about potential political motivations and their broader impact on national discourse.

On Capitol Hill, a critical bill aimed at funding the military during the ongoing government shutdown failed to pass in the Senate. This legislative setback follows a series of unsuccessful attempts to pass funding measures, further highlighting the political gridlock. United Airlines CEO Scott Kirby has cautioned that bookings could begin to slow if the government shutdown persists, underscoring the potential economic impact of the impasse on key industries like aviation.

The economic consequences of the Trump administration’s tariff policies are becoming increasingly evident, according to a recent analysis conducted by S&P Global. The firm estimates that these levies will cost businesses worldwide approximately $1.2 trillion this year. This significant financial burden is expected to be largely passed on to consumers, potentially impacting purchasing power and overall economic growth.

The U.S. budget deficit for fiscal year 2025 decreased slightly, by just over 2%, compared to fiscal year 2024. Revenue generated from tariffs has partially offset government spending, although the nation’s total shortfall remains substantial at $1.78 trillion. This underscores the ongoing need for strategic fiscal management and careful consideration of the long-term economic implications of current policies.

Apple is reportedly nearing a deal valued at $140 million annually for the U.S. media rights to Formula 1 racing. This strategic move signals Apple’s ambition to expand its sports streaming portfolio, which currently includes Major League Soccer (MLS) and MLB content. The inclusion of F1 racing aligns with Apple’s long-term vision to become a dominant player in the rapidly evolving media landscape.

Eddy Cue, Apple’s senior vice president of services, has expressed the company’s “love” for F1 racing and voiced concerns that the modern sports viewing experience has become fragmented due to the proliferation of streaming services. This signals Apple’s intention to innovate and create a cohesive, user-friendly sports-streaming platform.

EssilorLuxottica, the parent company of Ray-Ban, is attributing a significant portion of its recent revenue growth to its partnership with Meta in developing and selling smart glasses. The introduction of Meta’s smart glasses has provided a measurable “lift” to EssilorLuxottica’s financial performance, according to the company’s finance chief, Stefano Grassi. This success story highlights the potential for collaboration between tech companies and traditional manufacturers in the growing market for wearable technology.

In other news, Oracle’s shares outperformed the broader market yesterday following the announcement of a cloud deal with Meta. This partnership underlines the growing importance of cloud infrastructure in supporting the expanding digital operations of major tech companies and demonstrates Oracle’s strengthening position in the competitive cloud computing market.

Here are some stories we’d recommend making time for over the weekend:

— *CNBC’s Editorial Team*