Some bank stocks managed to end the day higher Tuesday, but a bumpy trading session convinced some investors that the industry's rally, now in its seventh week, may be winding down.
Citicorp shares slipped 25 cents, to $50, and Chase Manhattan Corp. was off $1.625, at $62.125. J.P. Morgan & Co. jumped $1.125, to $108.
Among regionals that were initially off, Fleet Financial Group rose 25 cents, to $41.625; KeyCorp 62.5 cents, to $31.3125; and Mellon Bank Corp. dipped 12.5 cents, to $63.0625.
Stock buyers, though relieved by the afternoon upswing, said it was time to step carefully.
"The market moved up very sharply" in the last two months, said Susan Flischel, portfolio manager for the Countrywide Industries Equity Fund. "It wasn't the normal give-and-take, and now we're beginning to see" more edgy activity.
Ms. Flischel, who helps manage more than $1 billion, is among stock buyers bracing for "considerable volatility" in the days ahead.
Market strategists said a pause was inevitable.
"We raced quickly back to the old highs" of midsummer, said John MacNeil, an equity strategist for Salomon Smith Barney. "That has placed something of a cap on the market."
At the same time, the news may not be good in days ahead. "We are coming to grips with the fact that earnings aren't going to be so great in 1999," Mr. MacNeil said. "Investors are becoming reluctant to pay up a whole lot more."
For the day, the Standard & Poor's bank index was up 0.43% and the Dow Jones industrial average added 0.19%. The Nasdaq bank index fell 1.72%, and the S&P 500 rose 1%.
In the weeks ahead, bank stocks "are not going to be much different from the market overall," said Kevin Timmons, a banking analyst with First Albany Corp. "It won't be day-to-day sways, it could be more like minute- to-minute," Mr. Timmons said.
Stock traders "will have to be nimble" and long-term investors "should look selectively to boost core holdings," he added.
Mr. Timmons said he likes the "overlooked" thrifts including Charter One Financial, which rose 18.75 cents, to $29.875; Dime Bancorp, up 31.25 cents, to $26.875; and People's Heritage Financial of Portland, Maine, off 50 cents at $20.
He also said Fleet Financial Group is showing itself to be an able consolidator and Bank of New York continues to benefit from strong securities processing business.
Some maintain the market and bank stocks will march into 2000 on an upswing.
"The incredible rate off appreciation we've seen won't continue, but through the end of year you will still have a rising market," said Katrina Blecher, a banking analyst with Brown Brothers Harriman.
Banks will continue their role of leading the way, Ms. Blecher said, adding that she likes SunTrust Inc. stock, which gained 18.75 cents, to $70;, and Wells Fargo & Co., which added 50 cents, to $36.0625
Meanwhile, brokerages slid sharply as hope faded that the group would find European buyers, building on the momentum of Deutsche Bank AG's deal for Bankers Trust.
Brokerage shares may in fact be a bit too pricey, said Merrill Lynch analyst Judah Kraushaar.
Donaldson, Lufkin & Jenrette Inc. was off $1.0625, to $39.125; Lehman Brothers $1.50, to $48.50; and Merrill Lynch & Co. $1.1825, to $73.8125.
