Bank stocks slipped another notch Thursday as investors continued to worry that the Federal Reserve would soon raise interest rates to head off inflation.

"It seems a rate hike is already being factored in," said Katrina Blecher, a banking analyst at Brown Brothers Harriman & Co.

The central bank's next monetary policy session is not until June 30. A quarter-point nudge in short-term rates is the current guess, Ms. Blecher said.

Meanwhile, Wall Street's jitters persist and market players latch onto any data that might prompt the Fed to act. Today's announcements will be on retail sales and wholesale prices.

On Thursday bank stocks endured a general slide as bond yields moved higher.

"Emotionally, investors tend to sell bank stocks when bond rates go up," said Kevin Timmons, an analyst at First Albany Corp. Their aim is to shift money into less-rate-sensitive areas, he said.

The Standard & Poor's bank index surrendered 1.51% and Nasdaq banks 0.96%. Meanwhile, the S&P 500 dipped 1.2% and the Dow Jones industrial average 0.65%.

The widely held global banking companies were hardest hit, with Chase Manhattan Corp. down 0.93%, to $73.675; Citigroup 2.45%, to $42.25; and J. P. Morgan 2.02%, to $127.25.

Shares of Hibernia Corp., New Orleans, were among the few gainers in the bank sector, rising 4.86%, to $16.1875.

Market watchers attributed the action to renewed takeover speculation. The banking company was also the subject of an article on Individual Investor Online, a Web site for investors, that pointed to Hibernia as a potential target.

FirstMerit of Akron, Ohio, was off 1.46%, to $27.3125, after an investment rating downgrade to "neutral" from "outperform" by Rosalind F. Looby, a banking analyst at Morgan Stanley, Dean Witter & Co.

Ms. Looby said her action was primarily due to the price of the shares, which have outperformed similar stocks in recent weeks.

Otherwise, she said, she regards FirstMerit as an effective banking company, an impression reinforced after a recent conference call with FirstMerit executives, including chief executive officer John Cochran.

Management, she said, is comfortable with its progress on acquisitions made last year. FirstMerit bought two Ohio thrifts-$1.9 billion Signal Corp. and $678 million-asset Security First Corp.

FirstMerit said in the conference call it remains interested in doing more deals, but Ms. Looby pointed to potential drawbacks.

"Recent acquisition-related disappointments at other banks and discussions about the Internet diminishing the attractiveness of branch acquisitions has created investor skepticism toward aggressive acquirers," she said.

The Ohio company has shown that it can skillfully integrate acquisitions and meet merger-related financial projections, but is unlikely "to get full credit from the market" if it should unveil another acquisition in the near term, Ms. Looby said.

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