Bank stocks dropped sharply Thursday after the government reported housing starts in September were up 4.4% to an annualized rate of 1.525 million units.
The strong figures support the argument that the Federal Reserve will raise interest rates again in November to stave off inflation, said economist Eugene J. Sherman of M.A. Schapiro Inc.
He said the housing numbers suggest an increase of a full percentage point in short-term rates. Fleet Financial Group was among the big losers in Thursday trading, dropping $2.125 to $34.25.
Fleet reported flat third quarter revenue, fueling fear that the bank has focused too much on cost cutting and not enough on retaining customers, said Thomas Theurkauf of Keefe, Bruyette & Woods.
Nancy A. Bush of Brown Brothers Harriman & Co., said Fleet was hurt by quarterly results of PNC Bank Corp. that raised questions about bank net interest margins in general.
PNC, downgraded to "neutral" from "outperform" by Smith Barney, was unchanged at $24.375.
