Bank stocks buckled Thursday as hopes were dashed for lower interest rates and global markets showed further signs of distress.
Banks led other stocks down. Chase Manhattan Corp. fell $2.25, to $47.6875; Citicorp $6.25, to $96.50; Mellon Bank Corp. $2.0625, to $57; and Wells Fargo & Co. $4.1875, to $331.
"This is a very difficult environment," said Jonathan Hatcher, equities analyst for Conseco Capital Management. "The uncertainty doesn't make a good case for buying."
Snapping the first four-day market rally since June, the Dow Jones industrial average lurched downward at the opening bell and traded down 200 points most of the session. The index closed at 7873.77, off 216 points, or 2.67%, while the Standard & Poor's bank index shed 3.71%. The Nasdaq bank index was down 2.12% and the S&P 500 fell 2.55%.
"It's especially hard to make a case for being in bank stocks right now," Mr. Hatcher said.
The bank group had been bid up earlier in the week on hopes that in testimony Wednesday before the House Banking Committee, Federal Reserve Chairman Alan Greenspan would lean toward a rate cut.
Selling began after Mr. Greenspan offered no such sign, and the slide was exacerbated by a new warning from the Office of the Comptroller of the Currency that lenders are still easing underwriting standards to build business and face higher credit risks as a result. (See related story on page 1.)
Still overshadowing other factors is the international financial crisis. "You still don't know just how deep the problems overseas go," said Joseph Stieven, a banking analyst at Stifel Nicolaus & Co., St. Louis.
That was reinforced when BankBoston Corp. said Thursday that it expects additional trading losses for the third quarter. The company cited unsettled markets in Latin America.
BankAmerica Corp. had made a similar announcement two days earlier.
The unsettled trading conditions had even veteran market watchers reluctant to suggest opportunist buying on Thursday.
"You'd be better off reading the Starr report or betting on whether Mark McGwire or Sammy Sosa will hit the next home run," Mr. Stieven said.
The pall also found its way to trading floors.
"People are still really nervous" about domestic and international issues, said Phil Cuthbertson, head equities trader at Keefe Bruyette & Woods. "And help is not forthcoming.
He expects the uncertainly to continue "for quite some time."
"The good old days of buying on a dip are over, at least for the time being," echoed Mr. Hatcher of Conseco Capital Management.
He said it was more prudent to take bigger cash positions until the tumult dies down.
But some stalwarts refuse to turn tail, even for the time being.
"Yes, the market is volatile," said Katrina Blecher, a banking analyst at Brown Brothers, Harriman & Co. "But you should still can be investing."
She recommends Bank of New York for its "excellent credit quality and minor exposure to troubled overseas regions."
At 50%, Bank of New York has a "superb" efficiency ratio, below the national average of 58%, Mr. Blecher said.
She also likes Norwest Corp., saying the stock is well within buying range.
"Valuation has fallen to a level where the market appears to assume the merger with Wells Fargo will alter the personality, growth, stability, and quality previously associated with Norwest," Ms. Blecher said. She does not believe that will be the case and that earnings projections will be achieved.
In other developments, the stock of BB&T Corp. dropped $1.3125, to $29.875, after the company announced plans to repurchase up to 3.8 million shares.
The stock will be reissued in connection with the purchase of Scott & Stringfellow. The move is meant to let the deal to be accounted for as a purchase instead of a pooling of interests, as originally announced, the company said.