Bank stocks fell Tuesday on news that U.S. housing construction slowed to its lowest pace in decades.

The KBW Bank Index rose in morning trading but fell after the Commerce Department said that April housing starts had declined 12.8% from March, to 458,000 units. The bank index closed down 3.43%.

"The construction numbers were down, and that leads people to think that maybe the economic recovery isn't coming along as soon as might have been expected," said Theodore Kovaleff, the president of Informed Sources Service Group in New York.

The broader markets fluctuated throughout the day after the Commerce Department report but closed in negative territory. The Dow Jones industrial average fell 0.34%, and the Standard & Poor's 500 index 0.17%.

Marshall & Ilsley Corp.'s shares fell 16.4% after the Milwaukee banking company said it would sell as much as $350 million of stock directly into the market, possibly using part of the proceeds to help repay the $1.7 billion of capital it got last fall from the Treasury Department's Troubled Asset Relief Program.

Other decliners Tuesday included JPMorgan Chase & Co., off 3.9%; Bank of America Corp., 4.1%; Wells Fargo & Co., 5.7%; U.S. Bancorp, 2.5%; PNC Financial Services Group Inc., 3%; SunTrust Banks Inc., 4.5%; KeyCorp, 5.8%, and Zions Bancorp., 14.3%.

Gainers included Citigroup Inc., up 13 cents a share, to $3.77, and M&T Bank Corp., which rose 5.2% after Sanford C. Bernstein & Co. analysts upgraded the Buffalo company's stock from "market perform" to "outperform."

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