Bank stocks continued their plunge Thursday, even as the market bounced back.
Standard & Poor's bank index fell to 453.36, a 1.61% drop for the day and a 19.25% drop from its peak of 478.2 at the close of trading Nov. 29.
Other sectors staged a recovery from their decline earlier in the week. The Dow Jones industrial average gained 14.16 points, to 6437.10.
Among the most widely traded banks, Citicorp shares fell $3.75, to $101.50; Banc One Corp. fell 50 cents, to $45; Chase Manhattan Corp. slipped $1.825, to $88.875; and NationsBank Corp. was off $1.875, to $96.
The declines among the largest banks came as no surprise to stock watchers, who said that the same stocks had outperformed the market in the recent rally.
Analysts said that as the year ends, some investors appear nervous about interest rates, while others are eager to end the year on a high note, by selling when stocks are at a peak.
"Plain old profit taking and portfolio window dressing made yesterday's yucky market," said Carole Berger, director of research at Solomon Brothers Inc.
"The market will stabilize very soon," said Catherine Murray of J.P. Morgan & Co. "The bank stocks feel a little unsteady now, but we're not looking at any prolonged correction here."
Goldman Sachs analyst Sally Pope Davis maintained that the fundamentals that drove the bank stock rally are still clearly present; revenues and asset quality are still relatively tame.
Ms. Davis suggested that forthcoming employment figures and earnings reports could help bank stocks. "In a week, we'll be getting quarterly numbers from the bank, and investors will see some good news."
Frank J. Barkocy of Josephthal Lyon & Ross Inc. agreed that concern about rising interest rates might be undermining confidence in banks, but he argued that the banking environment is still good.
"We're anticipating good earnings results will affect the market positively; stocks are just a little bit sloppy in the interim," he said.
Other analysts began to focus on investment opportunities, with smaller issues gaining some advocates.
"From a long-term perspective, the rate environment is positive for the banks," said David Stumpf, a bank analyst with AG Edwards & Sons. "The small cap banks won't suffer like the big ones, and they are a defensive way to take the bank group," he said, adding that the superregionals are up 44% year to date.