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US regional bank stocks veered wildly on Thursday and Friday, accentuating fears that federal regulators have not yet contained a crisis in the sector that could shake the financial system.

What’s happening: PacWest (PACW) shares lost half their value on Thursday after the California-based lender said it was exploring all strategic options. Shares of Arizona’s Western Alliance finished down 39% despite the company’s denouncement of a Financial Times report it was considering a sale. Utah’s Zions and Texas’ Comerica both suffered stock declines topping 12%.

Regional bank shares rallied on Friday but were still down sharply compared to one week ago.

What’s particularly alarming, according to industry insiders? These banks weren’t seeing depositors rush for the exits when investors panicked.

“The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news,” PacWest said in a statement, noting that 75% of its deposits were insured as of May 2.

Breaking it down: Wall Street is on the hunt for any signs of vulnerability in the banking system after the high-profile demise of Silicon Valley Bank, Signature Bank and First Republic Bank in a matter of weeks. While authorities stepped in to protect depositors at those banks, investors were left with stocks that were suddenly worthless. Now, they’re anxious to get ahead of the next shoe to drop.

But skittishness can become a self-fulfilling prophecy. Customers may see a drop in their bank’s share price, assume it’s in trouble, and yank their funds. Banks fail when too many people try to withdraw their deposits at once.

“Unfortunately, there’s a feedback loop here,” said Tom Michaud, the CEO of Keefe, Bruyette & Woods, an investment bank owned by Stifel that specializes in financial services.

That means this bout of instability may require a circuit breaker.

“I believe it really only ends after we get some type of government intervention,” Michaud told me. Without one, he continued, “the market will keep testing weak links — or perceived weak links.”

Michaud is advocating for the US Federal Deposit Insurance Corporation — which guarantees deposits up to $250,000 per person, per bank — to protect all deposits in the United States for one year.

That time-limited measure would help financial markets calm down and provide space for Congress to modernize the deposit insurance framework, ensuring it’s set up for the age of social media, rapid bank transfers and a growing pile of uninsured deposits, all of which can fuel or exacerbate bank runs, he said.

“The simplest way to do it is [to] insure everybody for a year until we can figure it out,” he said. “We need a time-out.”

Meanwhile, Stephen Biggar, director of financial institutions at Argus Research, is concerned that swings in regional bank stocks may be intensified by short-selling, a practice in which an investor bets against a stock and benefits when its price falls.

The value of short positions in regional bank stocks reached $15.1 billion in mid-April, up from about $13.7 billion one year ago, according to data from S3 Partners. Its analysts have tracked $569 million in new short-selling over the past 30 days.

“If there’s a discovery there’s an enormous amount of short-selling going on, I think — for the fabric of the banking system itself — that should not be allowed to stand,” Biggar said, noting short-selling restrictions were imposed in March 2020 during the thick of the panic surrounding the Covid-19 pandemic.

He also said the Biden administration — which has ramped up antitrust enforcement generally, raising questions about whether mergers will be approved — should signal that it supports more consolidation among small and medium-sized players in the sector. That would ensure depositors don’t see the handful of big US banks, such as JPMorgan Chase (JPM) and Citigroup (C), as the only safe place to park their cash.

Given there are still more than 4,000 banks in the United States, consolidation would make the system “stronger, not weaker,” Biggar said.

What to expect from the US jobs report

How quickly is the pace of hiring in the United States cooling off?

That question will dominate the release of the closely-watched US jobs report for April, arriving Friday morning.

The forecast: Economists expect to learn that the US economy added 180,000 jobs last month, according to estimates from Refinitiv.

Excluding the losses during the first year of the pandemic, that would be the smallest monthly gain since December 2019.

Moderate job gains would bolster other data indicating the US labor market is losing steam. Earlier this week, the Bureau of Labor Statistics said that in March, job openings declined, hiring was flat, layoffs spiked and the number of people quitting trended down.

Remember: Economists have been waiting for signs the US job market is moderating after 10 consecutive rate hikes from the Federal Reserve.

Fed officials want to see more slack in the labor market since it gives workers less bandwidth to ask for raises, which can prop up inflation. Slower hiring would bolster the case for the Fed to pause rate hikes.

Yet assessing the magnitude of decline from here is difficult, according to Nick Bunker, economic research director at the Indeed Hiring Lab.

“Something that starts as a cooldown can turn into a downturn pretty quickly,” he warned.

Strong iPhone sales are a bright spot for Apple

Apple’s revenue has declined two quarters in a row. That’s not good news for America’s most valuable public company.

But the tech giant’s earnings, published Thursday, also include signs it could weather the economic slowdown better than feared.

CEO Tim Cook announced that iPhone sales hit a record for the quarter ending in March “despite the challenging macroeconomic environment” that’s hurt demand for smartphones.

Sales from its services business, which includes Apple Music and Apple TV+ subscriptions, also hit an all-time high. Shares are up 2% in premarket trading Friday.

On the radar: Fears of a US recession loom. But Apple’s future may not hinge on sales in its home country.

Cook said iPhone sales had been bolstered by “emerging markets from South Asia and India to Latin America and the Middle East.” Last month, he traveled to India for the opening of the country’s first two Apple stores in Mumbai and Delhi.