Bank stocks retreated for a second straight session Friday on a sluggish day where at least one analyst advised investors to renew short positions in large-cap banking companies.
The KBW Bank Index fell 0.96% for the day but rose 1.71% for the week. The Standard & Poor's 500 gained 0.42% for the day but slipped 0.18% for the week. The Dow Jones industrial average edged up 0.19% for the day but fell 1.09% for the week.
Matt Shields, a bank stock trader at FIG Partners LLC, called the session "sleepy," with few investors making any major moves.
The second-quarter earnings season "hasn't been that bad," he said, though he was hard pressed to predict a sustainable direction for bank stocks. "Things should remain volatile, and I don't see things headed one way or another."
Sean Ryan, an analyst at Sterne, Agee & Leach Inc., wrote in a note that the recent surge in bank stocks should be seen largely as an opportunity to return to shorting positions.
"Bank earnings were by and large better … as anticipated," he wrote. "Still, we see little improvement in the operating environment." He recommended that investors look at companies that may not need new capital, such as National City Corp. in Cleveland and Comerica Inc. in Dallas.
Nat City shares rose 9.2% Friday, and Comerica fell 2%.
Wachovia Corp. slid 7.6%. The company said after the markets closed Thursday that Thomas J. Wurtz would step down as its chief financial officer after a successor is hired.
Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co., downgraded Wachovia's stock to "underperform," from "market perform." He recommended that investors move their money to SunTrust Banks Inc. of Atlanta and First Horizon National Corp. of Memphis, which "appear to be better positioned in terms of capital and reserves to manage through the current crisis with better earnings visibility into 2009."
First Horizon fell 2.7%, and SunTrust fell 2.4%.
Fannie Mae fell 3.9%, and Freddie Mac fell 6.1%. Standard & Poor's Corp. said it could downgrade the government-sponsored enterprises' subordinated bonds, despite the potential support they would get from the housing bill working its way through Congress.
Downey Financial Corp. rose 7.8% a day after sliding more than 34%. On Thursday the Newport Beach, Calif., company said that it lost $218.9 million, or $7.86 a share, in the second quarter, and that both its chief executive and chairman were retiring.
Other gainers included Glacier Bancorp Inc. of Kalispell, Mont., which rose 12.7%; SVB Financial Group of Santa Clara, Calif., which rose 7.3%; and State Street Corp. of Boston, which rose 2.3%.
Decliners included Regions Financial Corp. of Birmingham, Ala., which fell 10.3%; Cathay General Bancorp of Los Angeles, which fell 4.6%; and Bank of America Corp., which fell 3.5%.