Bank stocks slipped another notch Monday as edgy investors fretted about President Clinton's uncertain job status, coupled with fresh evidence of economic weakness in Japan.
"The impeachment situation is making the whole market nervous. Nobody was paying attention, then we suddenly have the specter of this," said analyst Sally Pope Davis of Goldman, Sachs & Co.
"And when investors get nervous, it shows up in the financial stocks. They are a traditional barometer of market uncertainty," she said.
As the full House of Representatives prepares to debate the impeachment of President Clinton on Thursday, the Standard & Poor's bank index fell 2% and the Nasdaq bank index 1.86%. Action by the House would open the way for a Senate trial and perhaps an extended period of political limbo in Washington.
The continuing selloff of bank stocks "is not based on fundamentals," the analyst said. "We had our bank conference last week and it was fairly upbeat. We expect higher spreads and asset quality is still good."
Meanwhile, the latest Tankan index of business sentiment by Bank of Japan, released early Monday, revealed that business conditions and expectations continue to weaken across the board in that important Asian nation.
Also Monday, Nippon Credit Bank was forcibly nationalized by the Japanese government because of its heavy losses. The move underscores the economic straits the country is experiencing.
Some strategists, however, said it was not surprising for the market to surrender some ground-or "consolidate" in Wall Street parlance-after a dramatic 25% run-up in the Dow Jones industrial average from mid-October through November.
Ms. Davis of Goldman Sachs said bank stocks "participated selectively" in the big fall rally, which returned the market overall to its levels of last summer. The best performers include First Union Corp., up 18% for the year; Bank One Corp. and Bank of New York Corp. 17.5%; Chicago's Northern Trust Corp. 14.5%; and Chase Manhattan Corp. 11%.
Superregional banking companies overall are lagging the market by a wide margin. They have gained a mere 6% this year, while the broad market S&P 500 is ahead 20%.
In Monday trading, banks followed the trend of the overall markets, as they have for the past week.
The much-watched Dow Jones industrial average of 30 blue-chip stocks was down 126.16, to 8695.60, a drop of 1.43% that marked its sixth straight losing session. The broad market S&P 500 was down 2.17%.
Among large bank stocks, Citigroup was off $1.75, to $46, while Chase was down $2.062, to $58.81, and BankAmerica $2.50, to $56.187. Bank One was off 93.7 cents, to $51.75, and First Union 45.5 cents, to $60 per share.
J.P. Morgan & Co. was off $3.50, to $97. Morgan said Monday that it was raising its quarterly dividend to 99 cents per share from 95 cents.
Milwaukee's Firstar Corp., one of just a few bank stocks that are matching or exceeding the overall market performance right now, was up 6.25 cents, to $73.437. PNC Bank Corp. was up 37.5 cents, to $50.25, and Wachovia Corp. $1.75, to $83.50.
Also gaining was Fleet Financial Group, up 93.7 cents, to $39.625, but its shares are ahead less 2% in value this year.