Banks stocks sank again Tuesday in another volatile trading session.
The Standard & Poor's bank index opened strong, advancing an impressive 2% in the first hour of trading, but then faltered and closed the day down 2%. The Dow Jones industrial average fell 0.2%.
Analysts said that until investors see concrete signs that Japan has addressed its banking crisis and emerging market economic crises are under control, there is little reason to return to such economically sensitive stocks as banks.
"The market is starved for good news," said Arthur Hogan, chief market strategist at Jefferies & Co. "Not just signs of good news, but actual, real good news."
Scott Edgar, director of research at SIFE Trust Fund, a mutual fund that invests mostly in banking companies, said the host of uncertainties these days is unprecedented.
"Latin American loans were once a problem for banks, then it was real estate, but these problems didn't come at the same time. Now a lot of problems have come at once and it's too much for the market to deal with," he said.
Mr. Edgar said his fund has lightened up on bank stocks and is sitting on a 13% cash position, about twice normal levels. "We've been sitting on our hands," he said.
Skies may brighten next week as a slew of regional banking companies report third-quarter results. Though earnings may have grown more slowly than in previous quarters, analysts generally expect these banks to beat the S&P 500.
But so far the signals are mixed, Mr. Edgar said.
Per-share earnings of Centura Banks Inc. of Rocky Mount, N.C., traditionally among the first banks to report quarterly earnings, rose 13% from a year earlier.
But Bank Atlantic Bancorp, a fast-growing thrift company in Fort Lauderdale, Fla., that has tried to create bank-like sources of earnings, warned Monday that third- and fourth-quarter earnings would be "significantly less" than a year earlier. The company partly blamed losses at Ryan, Beck & Co., a New Jersey securities firm it acquired in June.
"There's a lot of uncertainty in the estimates out there, and it's not clear how the numbers will come out in reality," Mr. Edgar said. "We want to see them before we buy anything."
