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Futures down: Dow 0.82%, S&P 500 1.09%, Nasdaq 1.27%

Oct 17 (Reuters) - U.S. stock index futures slumped on

Friday as mounting concerns over risks and deteriorating credit

quality triggered a selloff in regional banks, further weakening

investor confidence strained by U.S.-China trade tensions.

The SPDR S&P regional banking ETF dropped 1.9% in

premarket trading, extending losses after its steepest one-day

drop in more than six months.

The decline was triggered by Zions Bancorporation

disclosing a $50 million loss tied to two commercial and

industrial loans, while Western Alliance said it had

initiated a lawsuit alleging fraud by Cantor Group V, LLC.

The selloff rekindled concerns over lax lending standards in

a sector already grappling with two auto bankruptcies, more than

two years after the collapse of Silicon Valley Bank.

Zions shares fell 1.8%, while Western Alliance lost 2.8%

before the bell.

Investment bank Jefferies, which has disclosed

exposure to bankrupt auto parts supplier First Brands, dropped

2.5%, extending Thursday's 10.6% plunge.

Shares of some of the major U.S. banks also dropped.

JPMorgan ( JPM ) fell 1.1% and Morgan Stanley ( MS ) lost 0.9%.

Bank of America ( BAC ) and Citigroup ( C/PN ) declined 1.8% and

1.9%, respectively.

"All these could be isolated incidents, but there are

increasing concerns about souring loans and bad credit," said

Neil Wilson, strategist at Saxo Markets.

"Add worries about trade wars (last week's edition) and the

ever-growing bubble risk from AI and you have a pretty nasty

little cocktail of excuses to end the week in risk-off mode."

At 05:05 a.m. ET, Dow E-minis were down 379 points,

or 0.82%, S&P 500 E-minis were down 73 points, or 1.09%,

and Nasdaq 100 E-minis were down 316.25 points, or

1.27%.

Investors also awaited developments between Washington and

Beijing after their trade war escalated last week.

U.S. President Donald Trump has threatened an additional

100% tariffs on China starting November 1, and other new trade

measures against the world's second-largest economy following

Chinese curbs on exports of rare earth minerals.

Optimism around AI and expectations of U.S. interest rate

cuts have propelled Wall Street to record highs this year.

However, AI-related tech stocks, which were among the biggest

contributors to the rally, also slipped on Friday.

Robust earnings from big U.S. banks this week set an upbeat

tone for the start of the third-quarter reporting season. But

with equity valuations already elevated, investors are treading

cautiously.

Among stocks, Eli Lilly ( LLY ) fell 4.4% after Trump said

he would bring down prices of weight-loss drugs.