Bank stocks seesawed Friday to close in the red, and investors continue to test the bottom of the market.
The KBW Bank Index fell 5.34%, after rising 6.61% Thursday. The index fell 9.9% for the week.
Laurence C. Pettit 3rd, portfolio manager at Anderson & Strudwick Inc. in Richmond, Va., said investors remain anxious about the uncertainty of the economy.
"The market is impatient — it wants to see whether banks are really going to participate in helping to resolve liquidity issues," Mr. Pettit said. "But we can't wave a magic wand and resolve this problem overnight. The conduit model is going away, and banks have to replace it with direct lending."
The broader markets also fluctuated Friday after rallying the day before. The Dow Jones industrial average fell 3.82%, and the Standard & Poor's 500 fell 4.17%.
The Commerce Department said Friday that retail sales fell 2.8% last month from September, to $363.7 billion. The drop exceeded the 2.65% one in November 2001.
Also Friday, Federal Reserve Board Chairman Ben Bernanke signaled the possibility of another interest rate cut during a speech in Frankfurt, Germany. The Federal Open Market Committee is slated to meet Dec. 16.
Citigroup Inc. fell for most of the day but closed up 0.7%. The New York company is cutting at least 10,000 positions, unnamed sources told The Wall Street Journal on Friday.
Freddie Mac fell 8.2%. The government-sponsored enterprise reported a third-quarter net loss of $25.3 billion, or $19.44 a share, compared with a loss of $1.24 billion, or $2.07 a share, a year earlier.
Freddie also said it plans to seek an additional $13.8 billion from the Treasury Department. The government has pledged up to $100 billion each for Freddie and Fannie Mae, which were put into conservatorship in September.
Tower Bancorp Inc. rose 5.9%. The Harrisburg, Pa., company jointly announced a merger-of-equals deal with another Harrisburg firm, the privately held Graystone Financial Corp., to create a $1.2 billion-asset company that would keep the Tower name.
South Financial Group Inc. rose 19.1%. The Greenville, S.C., company said late Friday afternoon that it has received preliminary approval from the Treasury to participate in its Capital Purchase Program. The government plans to invest about $347 million in South Financial's preferred stock and common stock warrants.
The company also said H. Lynn Harton has been named its interim president and chief executive officer. He is one of the candidates to succeed Mack I. Whittle Jr., who retired as the CEO last month.
JPMorgan Chase & Co. fell 7.3%, Bank of America Corp. dropped 4%, Wells Fargo & Co. fell 1.2%, and State Street Corp. fell 7.9%.
Bank of New York Mellon Corp. dropped 8.1%, Fifth Third Bancorp dropped 8.7%, and Comerica Inc. fell 6.7%.