Bank stocks fell for a second straight day, dragged down by continued fallout from Bank One Corp.'s announcement late Tuesday that its earnings would fall far short of expectations.
After losing $15 billion of its market capitalization on Wednesday, Bank One dropped another 50 cents a share, or 1.2%, on Thursday, to $42.50. Stocks of other large banks also fell. Chase Manhattan Corp. declined $1.50, or 1.75%, to $84; Citigroup Inc., $1.3125, or 2.7%, to $47.6875; and J.P. Morgan & Co., $4.375, or 3.1%, to $134.875.
The Standard & Poor's bank index was off 2.5% and the Nasdaq bank index, 0.60%. The Dow Jones industrial average shed 1.1% and the S&P 500, 1.4%.
Analysts said Bank One's problems set the market's tone, but that banks are also being hurt by prospects of further interest rate increases.
Some analysts attributed the beating taken by Bank One to overly ambitious goals.
"Their expectations got too high," said Joseph Stieven a banking analyst at Stifel Nicolaus & Co. in St. Louis. "It doesn't sound like the bank is falling apart, it's just going to come up short on its earnings."
Investors clearly remained uneasy.
"They look at this as another in a string of earnings disruptions," Mr. Stieven said.
Aside from Bank One, First Union Corp, Hibernia Corp., and Summit Bancorp have cited difficulties this year with loans or growth prospects.
Analysts were uncertain about what's next for bank stocks.
Ben Crabtree, senior vice president at George K. Baum & Co. in Kansas City, Mo., said he does not expect news in the near future, such as interest rate hikes or quarterly earnings, to hurt bank stocks.
"The only thing that may impact bank stocks is if we get another surprise out of left field, a la Bank One," Mr. Crabtree said.
State Street Corp. dropped another $4.75, or 7%, to $63.1875 on Thursday, after a decline of $3.625, or 5%, to $67.9375 on Wednesday when an analyst cut back earnings expectations. Ruchi Madan of PaineWebber Inc. said she doesn't think the company can meets its revenue target of 15% this year.
Shares of mortgage.com continued climbing early in the day. After gaining $7.1875, or 87.8%, to $15.375 on Wednesday, its shares rose $3 early Thursday, but fell back later in the day, closing unchanged.
Analysts said the Plantation, Fla., company is the subject of takeover speculation. A spokeswoman said there was no definitive reason for the stock to increase. She said she thought mortgage.com's shares were catching up with other Internet stocks.
The company also posted second-quarter earnings on Wednesday, and reported an operating loss of $8.6 million, compared with a $763,000 loss in last year's second quarter. Second-quarter revenues increased 65.6%, to $14.3 million, from $8.6 million in the same period a year earlier.