Bank stocks fell Tuesday in a market selloff fueled by news that former White House intern Monica Lewinsky's lawyers said she had a immunity deal with Special Prosecutor Kenneth Starr.
BankAmerica Corp. slid $3.3125 a share, to $89.50; Citicorp $3.75, to $163.875; and Wells Fargo & Co. $10, to $360.
J.P. Morgan & Co., whose shares make up part of the Dow Jones industrial average, was down $4.5625, to $123.375.
Regionals were clipped as well, with BankBoston Corp. dropping $1.25, to $49.75; First Union Corp. $1.5625, to $83.8125; and Mellon Bank Corp. $1.75, to $67.6875.
Banks were seen as particularly vulnerable because of their close ties to the government, whose stability was shaken Wednesday when it became apparent that Ms. Lewinsky was about to break her silence about her relationship with President Clinton.
News of the immunity deal fueled a 212-point drop in the Dow by early afternoon because people assumed Ms. Lewinsky's testimony would conflict with earlier testimony by the President that he did not have sexual relations with her.
By day's end, the Dow was off 93.46 points, a 1.04% drop, while the Standard & Poor's bank index was off 1.49%. The Nasdaq bank index dove 1.79%, and the S&P 500 lost 1.49%.
Observers said the development had the same kind of bombshell effect on the market as President Reagan's shooting in 1981 and President Nixon's resignation in 1974. On those occasions, trading virtually stopped before wholesale selling took hold.
"For a while there was very little trading going on and then wham!" one equity trader said of Wednesday's action.
Investors feared the President would at the very least lose credibility with the American public and might even face pressure to step down, observers said. "It's been a long time since anyone thought about" the potential for impeachment proceedings against a President, said R. Harold Schroeder, a banking analyst at Keefe, Bruyette & Woods Inc.
And banks, because of the leadership position they have enjoyed, led the dive.
"They led the market up the last several years, and there is no reason they won't lead it down now," said John W. Zimmerman, money manager at Conning Asset Management, St. Louis.
Some market players said they would not abandon banks, though they will be very cautious about their selections.
"I haven't seen reasons to bail out, but I don't see reasons for backing up the truck" and making big purchases, Mr. Zimmerman said.
Mr. Schroeder said banks' performance will win out. "It's important to keep in mind that banks continue to produce as expected-double-digit earnings gains," Mr. Schroeder said. "We don't see that changing anytime soon."
But the market is likely to remain volatile, as Ms. Lewinsky begins her grand jury testimony amid other concerns, including the laggard economy in Asia, the quality of corporate earnings, and year-2000 preparations.
"Put them all together and you have a rocky market," Mr. Zimmerman said.