Big US bank stocks head for longest weekly losing streak since 2008

The 24-member KBW Bank Index fell about 1.3% during the week, keeping major US bank stocks in correction territory. Its decline from the August record reached roughly 13%. The index was heading toward a sixth straight weekly loss, showing that the pressure was not a one-day reaction.

This losing run mattered because it reflected persistent weakness across a broad group of banks rather than an isolated company problem. The index had experienced an even steeper selloff earlier in the year, when it dropped nearly 17%. Still, six consecutive weekly declines would be its longest streak since 2008.

Several pressures were operating at once. Investors worried that artificial intelligence could disrupt financial services. Hotter inflation increased uncertainty about Federal Reserve policy, while higher rates for longer could slow growth and raise loan losses. Third-quarter results also failed to restore confidence because weak fixed-income trading offset stronger equity trading.

The KBW Bank Index is a market gauge made up of 24 bank stocks. It gives investors a quick way to judge how a broad group of major US lenders is performing, rather than focusing on one institution. Because banks support economic growth through credit, weakness in this index can also signal wider concern about the economy.

“Correction territory” generally means an asset has fallen at least 10% from a recent high. The article places the index about 13% below its August record. That decline indicates a meaningful retreat, although it was not the deepest selloff the group had experienced during the year.

The index’s condition reflected several concerns. Investors were weighing persistent inflation, possible higher interest rates for longer, artificial intelligence’s potential disruption of financial services, and disappointing fixed-income trading. The index also underperformed the S&P 500 in 18 of the 21 sessions after the Fed’s September 16 rate increase.

The KBW Bank Index declined about 1.3% during the week. From its August record, it had fallen roughly 13%, placing it in correction territory. That scale showed that the weakness extended beyond a brief daily market move and had become a sustained retreat for the 24-member bank group.

The index had suffered a larger decline earlier in the year, nearly 17%. However, the number of consecutive losing weeks made the latest episode historically notable. Six weekly losses in a row would have created the index’s longest such run since 2008, when markets were also under major financial pressure.

The streak pointed to several overlapping worries. Higher rates could remain in place longer, economic growth could slow, and loan losses could rise. Investors were also concerned about artificial intelligence and weaker fixed-income trading. After the Fed’s September 16 increase, the index underperformed the S&P 500 in 18 of 21 sessions.

Hotter-than-expected inflation creates uncertainty about how aggressively the Federal Reserve will act to control persistent price pressures. If investors expect interest rates to remain elevated for longer, they may worry that borrowing will stay expensive and economic growth will weaken. Those concerns can reduce confidence in banks’ future performance.

The article highlights two direct pressures. Higher rates for longer can slow the economy and increase loan losses, as borrowers may face greater difficulty meeting obligations. Banks can also face rising funding costs as they compete for money to support their business. Together, these risks can weigh on profitability and investor sentiment.

The impact is not automatically positive or negative for every bank activity. Banks’ third-quarter results showed that stronger equity trading was not enough to overcome disappointing fixed-income trading. The market therefore focused on a combination of rate uncertainty, credit risks, and uneven trading revenue rather than on interest rates alone.

Banks earn revenue from several financial-market activities, including trading stocks and bonds. In the reported third quarter, equity trading was strong, but fixed-income trading disappointed. Because the weakness in fixed-income trading was large enough to offset the equity gain, the overall results did little to repair investor confidence in bank stocks.

The key mechanism was the combined result, not the performance of one desk. A strong business line can support earnings, but it may not make up for a weaker business that contributes substantially to overall market revenue. The article does not provide separate revenue figures, so it does not quantify the size of either trading result.

The disappointing performance added to broader concerns about banks. Investors were already watching elevated interest rates, possible economic slowing, rising loan losses, and artificial intelligence’s potential disruption of financial services. The results therefore reinforced the view that large banks faced several simultaneous challenges rather than a single temporary setback.

Banks play a key role in supporting economic growth by providing credit. When their shares remain weak, investors may worry that lenders face weaker profitability, higher risks, or less capacity to expand lending. The article therefore connects persistent bank-stock weakness with concern about the wider economy.

The mechanism runs through credit. Banks facing higher funding costs, slower growth, or rising loan losses may become more cautious about extending loans. Businesses and households could then find financing less available or more expensive. The article does not state that lending had already contracted, but it identifies banks’ credit role as the reason their weakness matters beyond stock markets.

That concern was developing alongside several pressures. Elevated rates could slow economic growth and increase loan losses. Trading results were also uneven, with fixed-income weakness offsetting stronger equity trading. Artificial intelligence added another uncertainty for financial services and for capital-markets revenue linked to infrastructure investment.

In standard banking, deposits provide funds that banks can lend to borrowers. Banks generally pay depositors interest and charge borrowers a higher interest rate, with the difference supporting profitability. Low-cost deposits are especially valuable because they reduce the expense of obtaining funds. The article identifies these deposits as an important support for bank profits.

Artificial intelligence matters through two channels. Rising funding costs for AI companies created uncertainty about the durability of capital-markets revenue tied to infrastructure investment. Separately, Herman Chan said agentic AI could become a longer-term threat to the stable, low-cost deposits that support bank profitability.

That makes AI a possible challenge to both revenue and funding. The article does not describe exactly how agentic AI would affect deposits, so its warning is about a longer-term risk rather than a completed change. For now, banks were also dealing with elevated rates, possible loan losses, and disappointing fixed-income trading.