Bank stocks fell Tuesday on reports that at least two of the country's largest banks may be required by the government to raise more money.
The KBW Bank Index fell 2.92% after The Wall Street Journal said that Citigroup Inc. and Bank of America Corp. have been told by regulators that they may need to raise additional capital, based on the early results of their stress tests, according to sources close to the matter. B of A fell 8.6%, and Citi fell 18 cents a share, to $2.89.
Gary Townsend, the CEO of Hill-Townsend Capital LLC, said the leaked report, most likely from a government official, worried investors about the banking industry in general. "It also shows that the administration — and the Treasury Department, in particular — just wants to play politics rather than deal with the financial crisis in a more circumspect manner," he said.
Decliners Tuesday included Wells Fargo & Co., off 4%; PNC Financial Services Group Inc., 1.9%; U.S. Bancorp, 2.5%, and Bank of New York Mellon Corp., 3.1%
Among the regionals, SunTrust Banks Inc. fell 6.1%, Marshall & Ilsley Corp. 7.4%, M&T Bank Corp. 1.9% and Regions Financial Corp., 20 cents, to $4.71 a share.
Gainers included JPMorgan Chase & Co., up 0.03%, Cullen/Frost Bankers Inc., 1.6%, and Fifth Third Bancorp Inc., 8 cents a share, to $3.70.
The Treasury Department struck a deal late Monday with 43 lenders to Chrysler LLC, radically reducing the automaker's debt to stave off bankruptcy, according to a Dow Jones report. Under the deal, the banks would get $2 billion for wiping out about $6.9 billion of Chrysler debt.
In another Dow Jones report, the Supreme Court heard arguments on an appeal by the New York Attorney General's office, which in 2005 sued several national banks to force them to turn over credit data for possible loan-rate discrimination cases. The banks and the Office of the Comptroller of the Currency sued to block the investigation, and two lower courts agreed that the federal regulator had preemptive power over states conducting such investigations. According to the Dow Jones report, the Supreme Court justices asked questions indicating they might side with the lower courts on the issue.
The broader markets fluctuated as investors weighed encouraging economic news against the banks' problems and the possibility of the global swine flu outbreak's stalling economic recovery. The Dow Jones industrial average closed down 0.1%, and the Standard & Poor's 500 index 0.27%.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index rose more than 12 points in April, to 39.2, up from 26.9 in March. Economists had estimated a reading of 29.5
The Standard & Poor's/Case-Shiller index released Tuesday said that home prices in 20 U.S. cities fell 18.6% in February, from a year earlier. In January, home prices fell 19% from a year earlier.