After several bullish trading days, bank stocks retreated Friday on news of reduced personal income and consumer spending.
The KBW Bank Index fell 0.02% but ended the week up 6.74%.
Anthony Conroy, the head trader at Bank of New York Mellon Corp.'s BNY ConvergEx Group, said in an interview that bank stocks fell because, "going into the long weekend, some people were taking their profits" on three days of gains prompted by higher durable goods orders, higher-than-expected gross domestic product in the second quarter, and a decline in initial claims for unemployment benefits.
But the mood turned Friday as the Commerce Department reported that personal income fell 0.7% in July, far more than the 0.1% drop that analysts on average had expected, according to Thomson Reuters, and inflation-adjusted consumer spending also fell.
Bank stocks dropped in the morning, began to rebound in the afternoon, then dropped again in the last hour of trading.
Tim Curran, a trader at Regions Financial Corp.'s Morgan Keegan & Co. Inc., attributed Friday's "anemic" trading to the Labor Day weekend's encroachment. "It's very easy for prices to get moved around from a few people who put in sizable orders," he said.
Decliners included Bank of New York Mellon Corp., off 2.2%; Citigroup Inc., 0.5%; Bank of America Corp., 0.9%; PAB Bankshares Inc. in Valdosta, Ga., 14.08%; and Citizens First Corp. in Bowling Green, Ky., 8.41%.
The broader markets also fell. The Dow Jones industrial average was down 1.46%, and the Standard & Poor's 500 index 1.37%.
The gainers included Popular Inc., 12.7%; Washington Mutual Inc., 4.7%; Provident Community Bancshares Inc. in Rock Hill, S.C., 30.8%; and BB&T Corp., 2.7%.
Ladenburg Thalmann & Co. Inc. analyst Richard Bove said that BB&T's stock rise could turn on speculation that the approaching change in leadership at the Winston-Salem, N.C., company may lead to a merger of equals with Fifth Third Bancorp in Cincinnati.
In an interview Friday, Mr. Bove said, "Fifth Third has spent a great deal of time trying to enter the Southeast, and at the same time, BB&T has been wanting to expand into the Midwest," so a merger of equals would make sense.
On Friday, Fifth Third's stock rose 2.8%.