Economic News Drags Down Bank Stocks

Economic data Thursday reinforced beliefs in a sluggish recovery, which in turn led investors to pull back on bank stocks.

The KBW Bank Index fell 1.99%, the Dow Jones industrial average fell 0.9% and the Standard & Poor's 500 index shed 1.34%.

The Labor Department said the number of workers seeking unemployment insurance was unchanged last week, at 505,000. Though in line with economists' expectations, the figure provided little evidence that the economy has turned the corner.

Similarly, the Mortgage Bankers Association reported that over 14% of homeowners with a mortgage were either in foreclosure or behind on payments at the end of September. And the Conference Board said its index of leading economic indicators rose 0.3% last month, falling short of expectations and below September's 1% rise.

"There is an ongoing wall of worry" with investors, said Gary Townsend, the chief executive of Hill-Townsend Capital, noting that bank stocks since March have had short spurts of gains followed by smaller pullbacks. "This is a market where you have to be cautious because the stocks can back off quickly."

The House Financial Services Committee added an amendment to a financial regulation reform bill that would force big banks to pay higher fees. The amendment included a formula that would require big lenders to pay more because they have relatively low levels of deposits compared with assets.

Bank of America Corp. fell 1.7%, Citigroup Inc. 0.7%, JPMorgan Chase & Co. 1.9% and Wells Fargo & Co. 1.9%.

The Treasury Department said it is preparing to sell warrants in JPMorgan Chase, TCF Financial Corp. and Capital One Financial Corp. as part of the exit of those companies from the Troubled Asset Relief Program. Capital One fell 5.2%, while TCF rose 0.3%.

Other gainers included City Holding Co., which rose 4.1%; Frontier Financial Corp. 2.5%; and First Horizon National Corp. 0.6%.

Decliners included First Midwest Bancorp Inc., which fell 4.7%; S&T Bancorp Inc. 4.7%; and U.S. Bancorp 2%.

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