Bank stocks fell Wednesday after a surprisingly strong report on the U.S. economy rekindled inflation jitters just a day after the Federal Reserve left unchanged short-term interest rates.
The American Banker index of the 50 largest banks fell 0.63% and its index of 225 banks fell 0.94%. Some of the biggest losers of the day included J.P. Morgan & Co. $1.875, or 1.46%, to $126.50, and Citigroup Inc. $1, or 1.79%%, to $55.
There were positives in the group. Shares of First Security Corp. in Salt Lake City surged $1.3125, or 4.62%, to $29.75, on news that the company is moving to the Standard & Poor's 500 index. Zions Bancorp is buying First Security and will adopt its name.
Wells Fargo & Co. of San Francisco rose 43.75 cents, or 1.09%, to $40.4375, a day after it announced a $30 a share "takeunder" agreement to buy National Bancorp of Alaska in Anchorage. Andy Collins, a bank analyst at ING Barings, reiterated a "buy" rating on Wells Fargo.
National Bancorp of Alaska plummeted 27.67%, to $28.75, giving back sharp gains won in recent weeks that were fueled by widespread rumors of a deal with Wells Fargo.
Columbus, Ohio-based Bank One Corp.'s shares rose 25 cents, or 0.75%, to $33.5625, its second gain since the departure of chairman John McCoy.
Concerns about inflation flared even though a government report indicated that inflation was up only slightly. The Commerce Department revised its estimate on U.S. economic growth for the third quarter to 5.7%, from 5.5%. Inflation was only 1.1%, however.
The figures "confirmed that America is having its cake and eating it too, meaning we have a robust economy with little inflation," said Sung Won Sohn, chief economist at Wells Fargo. "But investors believe that strong economic growth must lead to more inflation down the road."
Concerns about 2000 are thought to have accelerated economic growth during the second half of 1999, because people and businesses stocked up on inventory. The early months of 2000 should see that trend reverse course, the economist said.
Analyst Alan Morel at J.J.B. Hilliard, W.L. Lyons Inc. in Louisville, Ky., downplayed the concerns.
"The biggest pressures on bank stocks are tax-loss selling and Y2K concerns, which thankfully end Dec. 31," he said.