Banking stocks gave back some of their gains from last week in Monday trading after another round of banks announced that they would issue common stock to raise cash for repaying their Troubled Asset Relief Program funds.
The KBW Bank Index closed down 6.79%, at 40.77, after U.S. Bancorp, BB&T Corp. and Capital One Financial Corp. announced stock offerings in the morning. The index, bolstered by positive news about the government's stress tests, closed at 43.74 on Friday after opening at 32.15 the previous Monday.
Frank Barkocy, the director of research at Mendon Capital Advisors, said the rally appears to have been stalled by some recent offerings that were priced at a discount.
Capital One, for instance, said it would issue 56 million shares at $27.75 per share, and the news sent the McLean, Va., banking company's shares down 13.53%, to $27.10. The shares had closed at $31.34 on Friday.
Wells Fargo & Co. and Morgan Stanley raised $8.6 billion and $4 billion, respectively, while issuing shares at a discount on Friday.
"I think that probably depressed some of those stocks," Barkocy said.
Investors also probably were selling off banking stocks to take advantage of their recent gains, he said.
The S&P 500 index closed down 2.15%, and the Dow Jones Industrial Average fell 1.82%.
The major banking stocks also were down Monday.
Bank of America Corp. fell 8.68%, JPMorgan Chase & Co. 7.99%, Wells Fargo & Co. 5.86%, U.S. Bancorp 9.93% and Citigroup Inc. 16 cents a share, to $3.86.
The regional banking companies also were soft; PNC Financial Services Group Inc. closed down 12.06%, Bank of New York Mellon Corp. 8.09%, State Street Corp. 11.13% and BB&T 7.56%.