Investors bought banking shares Thursday on the rumor (and sold on the news) of the release of stress test results for the country's largest 19 financial institutions.
The KBW Bank Index fell 3.46% Thursday after rising 11.47% Wednesday, when government officials leaked that most of the institutions fared better than expected on the tests. The official release was expected after the markets closed Thursday.
"There was a premarket surge, but then there was profit taking immediately after the opening," said Gary Townsend, the chief executive officer of Hill-Townsend Capital LLC. "Then in the afternoon there were reports of the difficulty with the sale of the 30-year Treasury bonds, so that became an excuse to accelerate the sell-off."
The announcement of poor results for the Treasury Department's $14 billion 30-year bond auction pushed yields higher.
The Dow Jones industrial average fell 1.2%, and the Standard & Poor's 500 fell 1.32%.
The Labor Department said Thursday that initial unemployment claims for the week that ended May 2 fell 5.3% from the previous week, to 601,000. Economists on average had expected 635,000 new claims. However, the number of unemployed people in the country rose to 6.35 million.
Wells Fargo & Co. fell 7.8% Thursday. PNC Financial Services Group Inc. fell 6.3%, and U.S. Bancorp fell 8.1%. Citigroup Inc. dropped 5 cents, to $3.81.
Among regionals, SunTrust Banks Inc. fell 5%, and Regions Financial Corp. fell 10.3%. KeyCorp fell 11.8%, and M&T Bank Corp. fell 7.2%.
There were some gainers. Bank of America Corp. rose 6.5%, and JPMorgan Chase & Co. climbed 1.9%. Huntington Bancshares Inc. rose 44 cents, to $3.89.