Bank stocks and the broader markets finished down Friday as investors weighed the impact of the White House's emergency "but short-term" loans to struggling General Motors Corp. and Chrysler LLC.
The KBW Bank Index rose Friday morning after President Bush announced that the Treasury Department would lend the automakers $17.4 billion from its Troubled Asset Relief Program. However, the index subsequently dropped to trade essentially flat for the remainder of the day, closing off 0.91%. After the Federal Reserve's historic rate cut and gloomy economic news, the index closed up 0.3% for the week.
"There was a little selling on the news but then not much movement one direction or the other," said Gary Townsend, the chief executive at Hill-Townsend Capital LLC.
The broader indexes also rose in the morning but fell to trade mostly flat. The Dow Jones industrial average closed off 0.3%, and the Standard & Poor's 500 index closed down 0.29%.
The $65.2 billion-asset M&T Bank Corp. in Buffalo said Friday that it would buy the $6.4 billion-asset Provident Bankshares Corp. in Baltimore for $401 million in an all-stock deal. M&T's stock fell 6.3%, but Provident's soared 60.9%, to $9.33 a share.
Sovereign Bancorp Inc.'s stock rose 1.4% after the Philadelphia banking company said Friday that it was cutting 1,000 jobs, or 8.3% of its work force, during the remaining weeks of 2008 and into 2009. Banco Santander SA, a Spanish banking company, announced in October that it would buy the 75% of Sovereign it did not already own. This deal is expected to close in the first quarter.
Standard & Poor's downgraded 11 of the world's biggest banks due to increased industry risk and the deepening economic slowdown. The six U.S. companies downgraded were Citigroup Inc., which fell 5.5%; Morgan Stanley, down 4.8%; Goldman Sachs Group, up 0.9%; Bank of America Corp., off 1.2%, JPMorgan Chase & Co., up 0.4%; and Wells Fargo & Co., which fell 1%.
Other decliners Friday included Zions Bancorp., off 4%; KeyCorp, 1.6%; and Bank of New York Mellon Corp., 0.3%.
The gainers included State Street Corp., up 3.3%; UCBH Holdings Inc., 3%; U.S. Bancorp, 1.3%; SunTrust Banks Inc., 0.6%; and Frontier Financial Corp. in Everett, Wash., 30.4%.
