Bank stocks, like the broader markets, faltered again Thursday, brought down by more negative economic news and a highly dilutive stock offering by Regions Financial Corp.
The KBW Bank Index fell 1.7%, the Dow Jones industrial average 1.54%, and the Standard & Poor's 500 index 1.68%.
The Labor Department said Thursday that initial unemployment claims for the week that ended May 16 fell to 631,000, from an upwardly revised 643,000 the week before, in line with analysts' expectations. However, the number of people continuing to claim unemployment benefits rose to nearly 6.7 million, the highest level since 1967.
Moreover, investors were continuing to be influenced by the Federal Reserve Board's Wednesday release of the minutes from the April meeting of its Federal Open Market Committee, which downgraded the full-year economic forecast. The committee now expects the economy to contract 1.3% to 2% and the unemployment rate to approach 10% this year.
Gary Townsend, the CEO of Hill-Townsend Capital LLC, said that bank stocks were also down, for a third day in a row, because the sector had such a strong runup Monday, when the KBW Bank Index rose 7.53%.
Also, Regions announced that it had raised $1.85 billion by selling 400 million shares of common stock and 250,000 shares of convertible preferred stock. But at $4 a share, the common stock was sold at nearly a 25% discount to its close on Tuesday, when the sale was announced. Regions' shares fell 79 cents, to $4.10.
"The weaker ones are coming forward, and because their offerings were not as successful as others', it's weighed on the group," Townsend said.
Two other banking companies said Wednesday that they would raise additional capital to satisfy regulators' concerns after the government's stress tests: Fifth Third Bancorp, whose shares fell 9.9% on Thursday, and Huntington Bancshares Inc., whose shares closed off 52 cents, to $4.30.
Other decliners included Bank of America Corp., off 0.7%; PNC Financial Services Group Inc., 2.1%; SunTrust Banks Inc., 3.6%; Capital One Financial Corp., 0.8%, and Zions Bancorp., 9.3%.
Gainers included JPMorgan Chase & Co., up 1%; Wells Fargo & Co., 2.4%; Comerica Inc., 2.8%, and Citigroup Inc., up 3 cents, to $3.72.
