Investors continued to unload bank stocks on Tuesday despite strong quarterly earnings reports.

First Fidelity Bancorp., Wachovia Corp., and National City Corp. all turned in higher than expected earnings, and all got the brush-off from investors.

They joined J.P. Morgan & Co., Chase Manhattan Corp., Society Corp., First Chicago Corp., and Barnett Banks Inc., whose share prices fell Monday after they reported robust earnings gains. Monday's losers continued to drop Tuesday, with the exception of Morgan.

"The sense that I'm getting is that it's |buy on the rumors, sell on the news,'" said Moshe A. Orenbuch, a regional bank analyst with Sanford Bernstein & Co.

Cashing In

He and others argued that share prices rose in anticipation of strong earnings and fell as investors cashed in the gains.

A more ominous scenario was drawn by Nancy A. Bush of Brown Brothers Harriman & Co. "There is a negative sentiment on the banks," she said. "There is beginning to be political and economic uncertainty."

First Fidelity reported second-quarter earnings of 93 cents a share, compared with the consensus forecast among analysts of 86 cents share. Its share price was off 75 cents, to $38.25 at the close.

Wachovia, Winston-Salem, N.C., earned $1.25 a share, up from $1.11 in the same quarter of 1991. its stock lost 50 cents, to $64.25.

And National City earned $1.02 a share, up from 81 cents. Shares of the Cleveland company fell 25 cents, to $44.875.

Against the Grain

The drop in bank stock prices was specially unusual in that the Dow Jones industrial average rose 21.08 points to close at 3,358.39.

Ms. Bush said some investors were beginning to wonder if the wide spread between banks' cost of funds and the rates they earn on loans may have plateaued.

But even she was quick to add: "We're not seeing these stocks get absolutely pummeled. That indicates to me a short-lived thing."

Although "the glory days for run-of-the-mill banks" may be over, the strong banks will recover their momentum, she predicted.

"The bank stocks have had a nice run since the July 2 easing by the Fed," said George Salem, of Prudential Securities Inc. That was the day the Federal Reserve lowered the discount rate to 3% and the federal funds rate target to 3.25%.

No Disappointments

Mr. Salem said profit taking was probably a factor in the recent price declines because uniformly impressive earnings gave investors no reason to flee the banking sector. "There hasn't been one disappointment yet," he said.

Cristoph Kotowski of Oppenheimer & Co. said that in the case of First Chicago, investors were rejecting what amounts to "indisputable evidence" that the company is growing stronger.

"Nonperformers were stable," he said. "Earnings before the loan-loss provision went up for the second consecutive quarter. And expenses, after years of promising, finally have turned down."

"You'll never be able to explain interday movement on fundamentals," he added.

Strategic Players Hold Sway

Mr. Orenbuch said that some of the stocks, notably J.P. Morgan's, shot up in heavy trading on the earnings announcement, then fell back on thin volume. He said that showed that the strategic investors were having a disproportionate influence on share price.Go Figure!Percent change in quarterlyearnings versus percent changein stock price since earningsannouncement Earnings Stock price change changeBarnett +85% -2.6%BanksSociety +53 -1.6Corp.First +47 -1.9FidelityFirst +19 -1.7ChicagoChase +15 -3.9Manhattan Price changes as of 3 p.m. TuesdaySources Company reports, Reuters, SNL Securities

Ms. Bush said, however, that strong earnings reports usually lead to price increases. "First Union had a positive result last week, and the stock was up nicely," she said. "There would be bigger volume if it were profit-taking."

In other activity, Shawmut National Corp. gained 25 cents, to $17.875, a day after Morgan Stanley & Co. added the stock to its model portfolio.

The bank is "extraordinarily well reserved for its level of credit problems," said Dennis Shea, a bank analyst at Morgan Stanley.

He said Shawmut and Bank of Boston Corp. were "clearly on a recovery track," but Shawmut is trading at a better valuation that its rival.

Bank of Boston was up 75 cents, to $24.875.

Shawmut is in a better position to take advantage of a stabilizing economy in the region, Mr. Shea said, thanks in part to its consumer lending business in wealthy Connecticut.

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