Bank stocks and the broader markets fell Tuesday on light trading during the holiday week. The KBW Bank Index was off 2%, the Dow Jones industrial average 1.18%, and the Standard & Poor's 500 index 0.97%.
"The entire market is trading at a very low volume, so strange things can happen" when even expected economic news or downgrades for certain companies can cause large movements in stocks, said Cassandra Toroian, the president and chief investment officer of Bell Rock Capital LLC in Rehoboth, Del.
The Commerce Department said Tuesday that the gross domestic product declined at an annual rate of 0.5% in the third quarter, in line with analysts' expectations. The National Association of Realtors said that existing-home sales fell 8.6% in November from the preceding month. The median price for an existing home fell 13.2% from a year earlier, to $181,300.
The Reuters/University of Michigan Surveys of Consumers said that its index of consumer sentiment was 60.1 in December, up from 55.3 in November, but below the 75.5 reading for December 2007. Economists on average had expected a reading of 58.6. Survey respondents said that lower prices provided some relief, but they remained pessimistic in light of continued job losses and income declines.
Shareholders, meeting Tuesday, approved PNC Financial Group Inc.'s $5.6 billion buyout of $150 billion-asset National City Corp. in Cleveland and Wells Fargo & Co.'s nearly $15 billion takeover of Wachovia in Charlotte. Both deals — which would give each buyer huge boosts in retail branches and deposits but plenty of soured mortgages — are to close this month.
PNC's stock rose 0.8%, and Nat City's 2.5%. Wells' fell 1.6%, and Wachovia's 2.8%.
Regions Financial Corp. fell 1% after the $144 billion-asset Birmingham, Ala., company said late Monday that a $275 million tax benefit this quarter would partially offset losses it expects to report on sales of nonperforming assets. Regions said it would sell $930 million to $1.03 billion of nonperforming assets this quarter and that its loan-loss provision would exceed chargeoffs to reflect "accelerating economic weakness."
Paul Miller, an analyst at Friedman, Billings, Ramsey & Co., said in a note Tuesday that he expects Region's fourth-quarter provision to be $1.03 billion. "We anticipate that, given the" fourth-quarter "rush among financial institutions to dispose of problem assets, Regions may not be able to sell a substantial part of targeted assets and may not be able to command pricing similar to that achieved" in the third quarter, when it got an average of 50 cents on the dollar for nonperforming assets, Mr. Miller wrote.
He also revised his estimates for Regions, as well as for BB&T Corp., Flagstar Bancorp Inc., PHH Corp., Synovus Financial Corp., SunTrust Banks Inc., Wells Fargo, and Washington Federal Inc. The analyst trimmed his fourth-quarter estimates for all except Washington Federal and Synovus, and he reduced his 2009 estimates on all of the companies except PHH.
In Tuesday trading, BB&T fell 4.1%, Flagstar 10.3%, Synovus 0.1%, SunTrust 4%, and Washington Federal 26.4%. PHH rose 2.7%. The decliners also included Citigroup Inc., off 3.4%; JPMorgan Chase & Co., 2.4%; and Zions Bancorp., 3.4%.
Gainers included Bank of New York Mellon Corp., up 1.2%; Frontier Financial Corp., 11.2%; and BankUnited Financial Corp., 16.7%.