Bank stocks fell along with the broader market on several negative economic reports, including an unexpected jump in initial weekly unemployment claims.
The KBW Bank Index fell 4.77%. The Dow Jones industrial average fell 2.68%, and the Standard & Poor's 500 fell 2.97%.
The Labor Department said that unemployment claims for the week that ended Aug. 30 rose 3.5% from a week earlier and 38.8% from a year earlier, to a seasonally adjusted total of 444,000. Economists had expected claims to drop to 420,000.
On Friday the Labor Department is expected to report that the July unemployment rate jumped 10 basis points from June, to 5.8%.
Investors also reacted to reports from retailers that consumers spent less at their stores last month, as a result of higher gas and food prices.
Gary Townsend, the chief executive at Hill-Townsend Capital LLC, said a market outlook published Thursday by Bill Gross, managing director at Pacific Investment Management Co. LLC, did not help bank stocks. Mr. Gross told investors that "he's not buying any more bank debt until there's some clarity with respect to Fannie Mae and Freddie Mac's" future, Mr. Townsend said.
There were decliners across the board. Wachovia Corp. fell 9.6%, Washington Mutual Inc. was off 8.2%, and Bank of America Corp. fell 7.16%
Comerica Inc. fell 8.2%. Steven Alexopoulos, an analyst at JPMorgan Securities, said presentation materials the Dallas company filed with regulators Thursday may signal a change in its approach to capital management.
In a note to clients Thursday, Mr. Alexopoulos seized on the fact that the $66 billion-asset Dallas company omitted the phrase "Expect to maintain dividend" from a regulatory filing ahead of its Sept. 10 presentation at a Lehman Brothers investor conference.
"Given that management has strongly defended the dividend over the past few quarters, this could imply that management is no longer as comfortable with the $0.66 quarterly dividend as it had been as recent as the second quarter," he wrote.
Wayne Mielke, a Comerica spokesman, wrote in an e-mail its board approved a third-quarter dividend of 66 cents per common share on July 22. The dividend is payable Oct. 1. "As is our practice, the board of directors will consider future dividends in due course."
Popular Inc.'s stock fell 5.4%. The San Juan, Puerto Rico, company said Wednesday in a regulatory filing that it could incur "significant" additional losses on the sale of $1.2 billion of subprime mortgage assets to Goldman Sachs Group Inc.
Further losses would arise if the sale forces Popular to recognize a valuation allowance for its deferred tax assets, the company said.
The estimated purchase price for the mortgage assets is $760 million, though that may change once the deal, announced last week, closes next quarter, Popular said.
Valley National Bancorp's stock fell 3.34%. The Wayne, N.J., company said late Wednesday that the fair market value of its Fannie Mae and Freddie Mac preferred stock declined by $40 million from June 30 to Sept. 2.
If it were recognized, the drop would result in an third-quarter after-tax impairment charge of $25.7 million, or about 19 cents a share, Valley National said.
The $13 billion-asset company said these securities had a cost basis of about $79 million in the second quarter. Wednesday's announcement followed the sale of a portion of the securities, and the readjusted cost basis is about $70 million, the company said. Valley National said it remains well capitalized.
Lehman Brothers fell 10.5%. Bloomberg News reported that the New York company may form and spin off a bank, tentatively nicknamed Spinco, to which it would shift about $32 billion of commercial mortgages and real estate.
The new bank would receive about $8 billion of equity from Lehman, according to anonymous sources quoted by Bloomberg, and it would borrow the remaining $24 billion from Lehman or outside investors.
There were some gainers. People's Community Bancorp Inc. in West Chester, Ohio, rose 22.7%. Community Shores Bank Corp. in Muskegon, Mich., rose 14.3%, and Abigail Adams National Bancorp Inc. in Washington climbed 10.9%.
Abigail Adams said Tuesday that Jeanne Delaney Hubbard has resigned as its chairwoman, president, and CEO, as well as the president and CEO of its Adams National Bank. No reason was given for her resignation. The company said it was seeking successors.
Its second-quarter earnings fell 88% from a year earlier, to $83,000, primarily because of an $895,000 rise in its loan-loss provision.