Bank stocks fought their way into the black Tuesday afternoon after several companies assured investors that sour second-quarter earnings would not force them back to the well for fresh capital.
Wachovia Corp., which traded down sharply at the market's opening after reporting a net loss of $8.7 billion and again cutting its quarterly dividend, turned the corner rapidly as the morning progressed and ended the day up 27.4%.
Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said the reversal coincided with comments by Robert Steel, Wachovia's newly minted president and chief executive officer, that the company does not need to sell more stock.
"That says to me that he has a plan," Mr. Patten said in an interview. "And the market is saying that capital is sufficient to get this group through the cycle. It all comes down to credit now."
The KBW Bank Index rose 8.93%; the Standard & Poor's 500 index 1.35%; and the Dow Jones industrial average 1.35%.
KeyCorp in Cleveland and Fifth Third Bancorp in Cincinnati also posted losses for the quarter, but each company's stock performed well Tuesday. Key's net loss of $1.13 billion, or $2.70 a share, was less than the company had warned about this month, and Fifth Third lost $202 million, or 37 cents a share.
Executives for both companies stressed that they remain well-capitalized and would return to profitability this quarter. Key's shares rose 4.3%, and Fifth Third's were up 11.7%.
In the Southeast, SunTrust Banks Inc. shares rose 16.2% after the Atlanta company reported earnings of $535.3 million, or $1.53 a share, though the results were buoyed by the sale of Coca-Cola Co. stock and an investment management unit. Still, SunTrust said it saw no need to cut its dividend or raise capital.
Regions Financial Corp. shares rose 9.6%, though the Birmingham, Ala., company sliced its dividend by 74% after reporting earnings of $206.4 million, or 30 cents a share, which missed Wall Street expectations. The company said, however, that it has no plan to dilute shareholder value by selling common stock.
Washington Mutual Inc. shares rose 6.2%. The Seattle thrift said after the markets closed that it had lost $3.33 billion in the quarter as it increased its loan-loss reserves by $3.74 billion, to $8.46 billion. This loss more than doubled the first-quarter net loss of $1.14 billion; the company had net income of $830 million the year earlier.
Other large banking companies benefited from the sector's gains. Bank of America Corp. in Charlotte rose 13.3%; Citigroup Inc. in New York 6.1%; and JPMorgan Chase & Co. in New York 5.7%
Fannie Mae shares fell 5.1%, and Freddie Mac shares lost 10.9%. The government-sponsored enterprises have traded erratically in recent weeks over concerns about their capital levels.
Other gainers included Huntington Bancshares Inc. in Columbus, Ohio, up 13.3%; U.S. Bancorp in Minneapolis, 11.5%; and Wells Fargo & Co. in San Francisco, 10.5%.
Decliners included Sterling Bancshares Inc. in Houston, off 13.4%; National Penn Bancshares Inc. in Boyertown, Pa., 4.5%; and BOK Financial Corp. in Tulsa, Okla., 1.9%.