Bank stocks fell Wednesday, but investors did not severely punish the sector after the Federal Reserve Board published worsening economic conditions in its Beige Book.
The KBW Bank Index rose early in the early morning but fell into negative territory after the Fed said the economy has slowed in the last two months and will likely not recover until the end of this year or early next year. The index closed down 3.28%.
Cassandra Toroian, the president and chief investment officer of Bell Rock Capital LLC in Rehoboth, Del., said the market's oversold condition likely stemmed the losses that bank stocks could have suffered Wednesday.
"They can't go down forever," Toroian said.
The broader markets fared better Wednesday. The Dow Jones industrial average rose 2.23%, and the Standard & Poor's 500 rose 2.38%.
U.S. Bancorp fell 12.5%. The Minneapolis company slashed its dividend 88%, to 5 cents a share, and said it would seek approval from regulators this spring to give back the $6.6 billion it received from the Treasury Department, as soon as regulators complete their stress tests on the company.
Wells Fargo & Co. fell 9.5%. The San Francisco company is now the last remaining large banking company not to reduce its dividend. However, Stuart Plesser, a Standard & Poor's Corp. equity analyst, wrote in a note that Wells will cut its dividend in the coming months, because of "low capital ratios and deteriorating earnings."
Julia Tunis Bernard, a spokeswoman for Wells, said it would not comment on speculation.
Other decliners Wednesday included JPMorgan Chase & Co., which fell 8.1%, and Citigroup Inc., which fell 13 cents, to $1.13. Bank of America Corp. fell 5 cents, to $3.59. Comerica Inc. fell 2%, and Marshall & Ilsley Corp. fell 17 cents, to $3.99.
Gainers includes KeyCorp, which rose 0.5%, and Fifth Third Bancorp, which rose 5 cents, to $1.72. Regions Financial Corp. rose 9 cents, to $3.52. SunTrust Banks Inc. rose 0.7%, and UCBH Holdings Inc. rose 4 cents, to $1.33.