AI + credit risk plunges bank sector KBW Banking Index ETF (KBE.US) hits largest single-day drop since the tariff turmoil last year.

Amid the intertwining impacts of artificial intelligence and high-risk credit concerns, the Bank of America Corp sector suffered a heavy blow on Friday, with the stock prices of several large banks and investment banks plunging significantly, reflecting investors' growing concerns about the economic outlook. Bank of America Corp (BAC.US) fell by more than 4%, Citigroup Group (C.US) and Wells Fargo & Company (WFC.US) both dropped by over 5%, Morgan Stanley (MS.US) fell by more than 6%, Goldman Sachs Group, Inc. (GS.US) dropped by more than 7%, while the largest bank in the United States, JPMorgan Chase (JPM.US), fell by 1.9%. The KBW Bank Index ETF (KBE.US), which measures the performance of the banking sector, fell by 4.95% on the day, marking the largest single-day decline since the tariff turmoil in April of last year. As large banks are often seen as a "barometer" of economic prosperity, the sector's weakness has sparked concerns in the overall economy. Negative expectations surrounding artificial intelligence have been unsettling the market in recent times. Payment company Block (XYZ.US) announced a 40% job cut due to AI efficiency improvements, exacerbating investors' concerns about the potential mass job losses resulting from technological advancements. Earlier this week, a report on the profound impact of AI on the economy and employment further amplified market anxiety. At the same time, the resurgence of credit risks has further impacted financial stocks. Financial Institutions, Inc., which are more sensitive to the economic cycle, performed particularly weakly, with American Express Company (AXP.US), First Capital, Inc. Credit (COF.US), and Synchrony Financial (SYF.US) all ranking at the top of the declining list. The turmoil in the private credit sector has also made investors uneasy. Following losses in several well-known loans last year, there has been an increase in redemption requests for related investment vehicles. On Friday, two listed private credit funds announced dividend cuts, further exacerbating concerns about potential increases in bad debts. The collapse of the UK financing company Market Financial Solutions has become the latest warning sign. The company provided bridge loans to real estate developers and high-net-worth clients, but recently, the related investment vehicles have not received the expected payments, with two investment vehicles entering bankruptcy proceedings. Market concerns include the possibility that the institutions providing financing may face collateral risks, with Jefferies Financial Group Inc. (JEF.US) falling by over 9% and Barclays PLC Sponsored ADR (BCS.US) dropping by around 4%. Ebrahim Poonawala, an analyst at Bank of America Corp's Merrill Lynch, stated that the weakening of tech stocks and tightening credit could weaken the previously promising prospects of the merger and IPO markets. "The market sentiment was relatively optimistic at the beginning of the year, but now investors are facing risk factors that were previously not fully accounted for, and panic is spreading."