Fresh concern about credit issues at the nation's banks pushed stocks across the board into negative territory Monday.
The KBW Bank Index fell 3.67% after rising 1.2% on Friday and 3.2% on Dec. 31.
Gary Townsend, the chief executive of Hill-Townsend Capital LLC, said there was likely some profit taking Monday after two sessions of light trading. "But now that everyone's back, they are thinking about fourth-quarter earnings" and bracing for lots of bad news.
Synovus Financial Corp. fell nearly 13%.
The Columbus, Ga., company announced Saturday that it would add $350 million to its reserves to cover losses in the Atlanta residential market. Analysts said the announcement — correcting one Friday that had put the reserve addition at $250 million — does not bode well for fourth-quarter results. On Monday the average analyst estimate called for Synovus to report a fourth-quarter loss of 17 cents a share, according to Thomson Reuters.
Synovus lost $26.9 million in the third quarter, when it set aside $151.4 million for weak loans.
On Monday a spokesman for Synovus relayed a statement by Thomas Prescott, its chief financial officer, that the estimate for provision hike jumped by $100 million because the company "made an estimate and subsequently discovered additional adjustments that warranted an update."
Matthew Shields, a bank stock trader at FIG Partners LP, said Synovus' announcement likely affected several other banking companies in the Southeast, including SunTrust Banks Inc., which fell 6.8%; South Financial Group Inc. in Greenville, S.C., which fell 4.7%; and BB&T Corp., which fell 3.2%.
Regions Financial Corp. of Birmingham, Ala., rose 1.3%.
UCBH Holdings Inc. fell nearly 14%. Two analysts cut their price targets for the San Francisco company.
One of the analysts, Julianna Balicka of KBW Inc.'s Keefe, Bruyette & Woods Inc., also wrote that she expects UCBH to post a loss for the fourth quarter, as well as for all of last year and this year. The other analyst, Chris Stulpin of D.A. Davidson & Co., downgraded UCBH's stock to "neutral," from "buy," but still expects it to post profits for those periods.
Mr. Stulpin also downgraded Glacier Bancorp in Kalispell, Mont., to "neutral," from "buy," but maintained his price target of $19.
"We continue to believe Glacier is one of the best-run banks in our coverage universe and is in a unique position to grow when most lending institutions are treading water," he wrote.
Glacier's stock declined 8.1%, to $17.15.
Mike Mayo and other Deutsche Bank AG analysts cut their full-year earnings estimates Monday on 16 banking companies, because of expected higher credit losses. The companies included JPMorgan Chase & Co., which fell 6.7%; Citigroup Inc., which fell 0.8%; Wells Fargo & Co., which fell 6.5%; and Bank of America Corp., which fell 2.4%.
Andrew Marquardt, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, upgraded B of A to "outperform," from "in-line," citing "greater confidence in the earnings power" after last week's purchase of Merrill Lynch & Co. Inc.
Mr. Marquardt also wrote in a research note that B of A's management team is "ahead of the curve in terms of recognizing credit losses," and that its stock valuation has long-term upside potential that "far outweighs" the potential near-term downside.
Other decliners included Bank of New York Mellon Corp., which fell 2.8%; Fifth Third Bancorp, which fell 2.2%; U.S. Bancorp, which fell 4.9%; and KeyCorp, which fell 4.4%.
Gainers included State Street Corp., which rose 1.1%; BankUnited Financial Corp., which rose 41%, to 24 cents; and Virginia Commerce Bancorp, which rose 7.6% after the company announced it had received $71 million from the Treasury Department's Capital Purchase Program.
The Dow Jones industrial average fell 0.91%, and the Standard & Poor's 500 fell 0.47%.
The Commerce Department said Monday that construction spending fell 0.6% in November. Analysts had expected a 1.3% decline.