Bank stocks tumbled as a Monday morning merger announcement failed to materialize and fidgety investors chased opportunities in other sectors.
Wells Fargo & Co. slid $7.50, to $379.75, and Fleet Financial Group was off $2.6875, to $87, after run-ups last week on intense speculation that the two institutions were next in line to be acquired.
U.S. Bancorp, seen as a likely buyer of Wells, dipped $3.125, to $126.875; and Fleet's prospective partner, BankBoston Corp., dropped $1.50, to $109.375.
The selling extended to other institutions, with BankAmerica off $1.5625, to $86.50; First Union Corp., 93.75 cents, to $60; and SunTrust Banks, $1.125, to $80.375.
Bank of New York Co. dipped $1.4375, to $59.5625, and Mellon Bank Corp. was down 37.5 cents, to $70.75, as the market continued to debate the likelihood of the banks' ever coming together.
Ruchi Madan, a banking analyst at PaineWebber Inc., gave the deal a better than fifty-fifty chance of succeeding, saying that shareholder pressure may force Mellon to reconsider its abrupt refusal of Bank of New York's overtures.
If a reconsideration doesn't come shortly, it may after this year is out and chairman Frank V. Cahouet has retired, Ms. Madan said.
The stock slide repeated this spring's pattern of investors' bailing out on a Monday to take profits from Friday run-ups on speculation that a merger would gel over the weekend.
Still, the severity of the unloading surprised some observers, given the positive economic note sounded for banks late last week.
"Interest rate fears were pretty much put to rest" by the release of data showing inflation in check, said Kevin Timmons, a banking analyst at First Albany Corp.
Other market watchers took the events in stride, saying banks should regroup.
"Banks are experiencing good relative earnings growth and we expect that to continue," said Moshe A. Orenbuch, a banking analyst at Sanford C. Bernstein & Co.
That kind of progress should be reflected in share prices, Mr. Orenbuch said.
For the day, the Standard & Poor's bank index was off 1.35%, and the Dow Jones industrial average gained 0.50%. The Nasdaq bank index gained 0.01%, and the S&P 500 added 0.10%.
Signs of interest rate stability did have a positive effect on thrifts, with the group adding to Friday's gains.
Dime Bancorp gained 12.5 cents, to $31.1875; Roslyn Bancorp rose 56.25 cents, to $30.50; and Washington Mutual was up 31.25 cents, to $70.75.
Shares of newly public Heller Financial rose 81.25 cents, to $30.8125, after being added to the "recommended" list at Goldman, Sachs & Co.
Shares of the company, a leader in the field of factoring, or supplying financing based on accounts receivable, could hit $36 within a year, said Goldman analyst Robert G. Hottensen.
He expects growth through improved efficiency, rapidly expanding fee income, and further balance-sheet leveraging.
"Longer term, debt cost improvement and access to the capital markets are pluses in the company's operating flexibility," Mr. Hottensen said.