Banking stocks fell Monday, after Federal Reserve Chairman Ben S. Bernanke described the weak labor market and tight credit environment as "formidable headwinds" that would temper the pace of economic expansion.
"We still have some way to go before we can be assured that the recovery will be self-sustaining," the central bank chairman said in a speech to the Economic Club of Washington. "My best guess at this point is that we will continue to see modest economic growth next year — sufficient to bring down the unemployment rate, but at a pace slower than we would like."
The KBW Bank Index fell 1.63%, to 43.52.
Shares of Citigroup Inc. declined 0.74%, as Wall Street continued to speculate about the firm's chances of making a quick exit from the Troubled Asset Relief Program, following the exit strategy announced last week by Bank of America Corp. Also, Kuwait's sovereign wealth fund announced over the weekend that it had booked a $1.1 billion profit by converting preferred shares in Citi into common stock and then selling the stake for $4.1 billion.
Bank of America shares fell 2.4%. The firm sold $19.3 billion of common equivalent securities at $15 apiece last week.
JPMorgan Chase & Co. fell 1.17%, while Wells Fargo & Co. dropped 2.23%. Regional banking stocks that ended the session lower included KeyCorp, down 4.38%; BB&T Corp., down 2.82%; and Associated Banc-Corp, down 1.49%.
Gainers for the session included New York Community Bancorp, which late Friday announced it had agreed to acquire deposits and assets of the failed AmTrust Bank. Shares of New York Community jumped 8.68%. The company, of Westbury,, said Monday that it plans to sell at least 60 million new shares to help finance the government-assisted transaction, which includes a loss-sharing agreement with the Federal Deposit Insurance Corp.
