Bank stocks fell sharply Thursday as investors became anxious about tepid fourth-quarter earnings and mounting problems in Southeast Asia.
Although bank fourth-quarter earnings have met - and in some cases exceeded - targets, investors are dubious that this year's earnings can sustain bank stocks' lofty levels, market observers said.
The Standard & Poor's bank index fell 2.39%, while the Dow Jones industrial average slipped 1%. The Nasdaq bank index fell 0.96%, and the S&P 500 dipped 0.81%.
Some of the biggest losers of the day included J.P Morgan & Co., which tumbled $3.75, to $101.50; Wells Fargo & Co., down $14.0625, to $315.6875; Wachovia Corp., down $2.3125, to $75.625; and Citicorp, down $1.9375, to $117.0625.
"People are tired of the fluff that has come out in every one of these earnings reports," said one bank stock trader who declined to be identified. "Banks do not look like they can sustain their earnings. At these levels they are better for sale."
Veteran analyst Richard X. Bove of Raymond James & Associates, St. Petersburg, Fla., has been warning his clients for four months that lackluster earnings reports by banks are inevitable.
"Net interest margins have been down across the board, loan losses are up, and loan growth is showing signs of strain," said Mr. Bove. "Repurchase programs have slowed and efficiency rates are not getting better. And if you look at the quarterly reports, it is there played out in spades."
Bank stock trader Andrew Vissicchio of UBS SecuritiesInc. pointed out that flat earnings have dampened merger speculation.
"Speculation certainly seems to be on hold," said Mr. Vissicchio. "Uncertainty has taken the wind out of these stocks' sails."
Bank stocks investors also grew jittery as more bad news rolled out of Southeast Asia.
Indonesia's currency, the rupiah, fell 15% on Thursday after its President Suharto indicated that he might select his technology minister - who is unpopular with the country's military - as his running mate in the upcoming election.
"A leader that has been in power since the early '60s, rumored to be in bad health, and a country that is on the brink of economic chaos has sent the currency to a record low,"said economist Scott J. Brown of Raymond James & Associates.
"The downward pressure on their currency also could affect the currencies of Singapore, Thailand, and Malaysia" which has affected the broader market today.
Meanwhile, Dime Bancorp's share surged on heavy volume after earning upgrades from Salomon Smith Barney and BT Alex. Brown Inc.
Salomon Smith Barney raised its recommendation on the New York thrift to "buy" from "outperform." BT Alex. Brown also lifted its recommendation to "buy" from "market performer."
Dime's shares climbed to $27.875, up 43.75 cents.