Bank stocks fell Wednesday after Federal Reserve Board Chairman Ben Bernanke said that any economic growth to occur later this year would not be robust.
The KBW Bank Index fell 1.47%, after Bernanke told the House Budget Committee that the country's financial stability is being threatened by large federal budget deficits and that the government cannot borrow indefinitely.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," Bernanke said in prepared remarks. "Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance."
Trish Pines, a trader at FIG Partners LLC, said Bernanke's comments and several economic reports prompted some selling of bank stocks Wednesday.
The Commerce Department said factory orders rose 0.7% in April; analysts on average were expecting an increase of 0.9%. The agency also revised its report for March orders, to a decline of 1.9%. The earlier report said the decline was 0.9%.
The Institute for Supply Management said Wednesday that its index for the services sector rose to 44 in May, from 43.7 in April, though it was slightly below economists' expectations.
Meanwhile, the Labor Department said jobless rates rose in April in all 372 metropolitan areas it tracks. It was the fourth straight month of increases.
Bank stock decliners were across the board. JPMorgan Chase & Co. fell 1.5%, Bank of America Corp. fell 1.7%, Wells Fargo & Co. fell 1.1%, PNC Financial Services Group Inc. fell 3.7%, U.S. Bancorp fell 0.4% and Citigroup Inc. fell 12 cents, to $3.39.
Among the regionals, SunTrust Banks Inc. fell 1.5%, Marshall & Ilsley Corp. fell 2.1%, Zions Bancorp. fell 4% and KeyCorp fell 22 cents, to $4.60.
Huntington Bancshares Inc. fell 19 cents, to $3.96. The Columbus, Ohio, company announced Wednesday that it had commenced a $300 million common stock offering, and suspended its discretionary equity issuance program. That program started May 20 and resulted in the issuance of 18.5 million shares worth $76 million.
The Dow Jones industrial average fell 0.75% and the Standard & Poor's 500 fell 1.37%.