The KBW Bank Index fell 4.35% Tuesday after an analyst told investors to take some profits from the sector.
Rochdale Securities analyst Richard Bove wrote in a note that the recent rise in bank stocks did not appear to be driven by a change in the near-term earnings outlook but, rather, by a change in psychology. Thus, he contended, bank stocks were "trading on 'fumes' and not reality."
"Bank earnings will not improve in the third or even fourth quarter this year," Bove wrote. "Many of these companies will show losses. The rational investor would step away from psychology at this point and take some profits. I suggest this even though I am not changing the long-term buy ratings on my favorite stocks."
There were decliners across the board.
JPMorgan Chase & Co. was off 3.4%; Bank of America Corp., 5%; PNC Financial Services Group Inc., 4.8%; U.S. Bancorp, 4%, and Citigroup Inc., 25 cents a share, to $3.69.
Among the regional banking companies, SunTrust Banks Inc. fell 6.3%, BB&T Corp., 2.8%; Capital One Financial Corp., 3.3%; M&T Bank Corp., 3.3%; Comerica Inc., 4.8%, and Huntington Bancshares Inc., 35 cents, to $4.42 a share.
Zions Bancorp. fell 8.1% after the Salt Lake City company reported late Monday in a Securities and Exchange Commission filing that most of its subsidiary banks would be unable to pay dividends and that the parent would have to fund the shortfall.
The Dow Jones industrial average fell 1.03%, and the Standard & Poor's 500 index 1.27%.