Bank stocks continued to decline dramatically on Wednesday, caught in a downdraft that analysts tied to profit taking and the prospect of higher rates.
Of the top 50 bank issues, only six showed gains.
The money center banks were among the losers. Citicorp was off 37.50 cents to $40.375. Chemical Bank lost 75 cents, falling to $37,625 Chase Manhattan Corp. was down 25 cents to $36.125
The few gainers were Signet Banking Corp., which was bouncing back from a $4.50 decline on Tuesday.
Signet shares closed up 12.50 cents to $36.625.
Firstar Corp. closed unchanged at $33.50. Norwest Bancorp also was unchanged, closing at $25.625.
The DJIA closed at 3727.27, down 21.04.
Some analysts said strong second quarter earnings may have prompted investors to take profits now rather than risk a market downturn. Others cited new weakness in the bond market stemming from Federal Reserve chairman Alan Greenspan's remarks to the Senate Banking Committee.
"Bonds are definitely your answer," Brown Brothers Harriman & Co. analyst Raphael Soifer said. "It is completely apart from anything to do with earnings. Banks' P/E ratios correlate with bond rates. When the bond market has a bad day, it follows through to bank stocks."
Mr. Greenspan said he was not sure if the Fed's actions so 'far have been sufficient to head off inflation.
Analysts interpreted this to mean another rate hike is imminent. The yield on 30-year treasury bonds rose to 7.56%, from 7.46%.
"We believe bonds are near the bottom," said Mr. Soifer. The banks, he said, are in first stages of a 10% to 15% decline.
Prudential Securities analyst George Salem blamed profit taking.
"This probably is related to earnings in some way," he said. "It sometimes happens with the momentum players when they decide to go to a new game. They are taking profits on the news."
No 'Drastic' Sell-Off Needed
Mr. Salem said, however, that there seemed to be little justification for such a "drastic" sell-off.
Ronald I. Mandle of Sanford C. Bernstein said it was hard to blame the decline on any one factor.
"It doesn't seem to be anything real specific," he said. "We've had good earnings this quarter. But people have been taking profits on the news for the past two years and bank stocks have done better. I don't see any reason for it right now."