Bank stocks headed south again Wednesday as investors dumped equities worldwide.
Worries about economic prospects in the industrial nations and the coming presidential election in the United States, as well as talk of possible military action in Iraq, fueled the broader selloff.
For banks stocks, some investors think the 20-month rally is over.
Bank shareholders may have been motivated by "the reluctant realization that it probably can't get better than this," said analyst David S. Penn of Legg Mason, Wood Walker & Co., Baltimore.
Big Acquirers Hurt
Stumbling worst were a trio of banks that were big acquirers of other banks in the past year. Society Corp., Cleveland, was down $2, to $55.50; Chemical Banking Corp. slipped $1.125, to $34.875; and Comerica Inc., Detroit, fell $1, to $56.875.
Investors have maintained a strong interest in shares of those banks this year on good post-merger earnings expectations.
"The merger stocks have been the high-visibility issues, and naturally were the first to feel the chill, whether deservedly or not," said one analyst.
Chase Falls in Heavy Trading
But Chase Manhattan Corp. was the most active banking stock of the day, trading over three million shares in the wake of its strong earnings report. The shares fell 37.5 cents to $26.
Other losers included Wells Fargo & Co., San Francisco, down $1.125 to $69.625; NationsBank Corp., Charlotte, N.C., down 87.5 cents, to $45.875; and Wachovia Corp., Winston-Salem, N.C., down 87.5 cents to $62.
That viewpoint has been hard to accept, Mr. Penn said, "because earnings are going to be good-looking for a while longer and it is hard to think of what could hurt them, just as two years ago nobody imagined this much improvement."
Hard to Beat
But with already wide net interest margins not expandable much further and no real pickup of loan demand in sight, "it may be difficult next year for first-and second-quarter bank earnings to look better than this year," he said.
The change in psychology has occurred in the context of the entire market, he said. After a breather Tuesday for both banks and other issues, the recent downward trend in both U.S., and foreign stock markets took over again.
Taking its cue from international action, the Dow Jones industrial average was down 25 points, or 0.25%, in late afternoon trading, erasing the meager gains of the previous day.
The Japanese stock market slumped 2.9% in value on Wednesday, leaving the Nikkei average at its lowest level since April 1986. In London, the Financial Times-Stock Exchange 100 index ended up with a loss of 1.1%.
In Frankfurt, German stocks receded for the third time in four trading sessions, with the DAX index falling 1.9%.
Since the Bundesbank, the German central bank, boosted its discount rate by 75 basis points last Thursday, the DAX has dropped 112.31 points, or 6.45%.
There were gainers among banks on Wednesday. In fact, the 50 largest banks as a group contained more gainers than the rest of the stock market.
Fifth Third Bankcorp, Cincinnati, was the biggest gainer, up $1, to $42. First Chicago Corp. was up 25 cents to $34.875. Bank of New York was ahead 37.5 cents to $41.75.