Virginia banks remained near the center of Wall Street's attention on Wednesday.

"There's no question Virginia is a hot area for acquisition," said veteran southeastern bank analyst John J. Mason of Interstate/Johnson Lane, who initiated coverage of two thrifts in the state, Life Bancorp, Norfolk, and Virginia Beach Federal Financial Corp., with "buy" ratings.

Other bank stocks endured a volatile day, with the major companies seesawing between gains and losses in an uncertain market ahead of next week's monetary policy session of the Federal Reserve.

Ultimately bank stocks led the market's decline. The Standard & Poor's bank index dropped 1.44%, to 549.71, while the S&P 500 broad market index lost 0.83%, ending trading at 888.99. The Dow Jones industrial average of 30 blue-chip stocks fell 68 points, after yesterday's 153-point gain. The Dow closed at 7,689.98, an 0.88% loss.

Small banks, however, remained strong throughout the day, with the Nasdaq bank index gaining 0.42%, or 6.7 points, to close at 1609.9.

Investors continued to react to the recent consolidation activity in Virginia. Life Bancorp, with the boost from Mr. Mason, rose $1.375, or 5.56%, to $26.125.

Attention has been fixed on Virginia in the wake of Wachovia Corp.'s plans to purchase Jefferson Bancshares, Charlottesville, and Central Fidelity Banks Inc., Richmond.

Mr. Mason said there are 155 banks and 50 thrifts left in Virginia, which leaves "something to fill your game bag," he said, referring to big banks in acquisition mode. Meanwhile, he noted, several other southern states are basically tapped out.

Among the major banks in Virginia, Signet Banking Corp., Richmond, is the "No. 1 pick" of Natwest Securities analyst Thomas D. McCandless, who is cool on the short-term prospects for most banks.

Mr. McCandless said Signet has been largely overlooked by the investment community, but that its successful corporate restructuring will result in "a hockey stick-like upward revision in earnings estimates." He also said it could be a takeover target at some point.

Signet ended the day off 6 cents, at $36.06.

Last week Mr. McCandless downgraded both Fifth Third Bancorp and SunTrust Banks to "underperformer" from "hold." While fundamentals are largely intact, the stocks "are a little rich for us," he said.

The analyst downgraded CoreStates Financial Corp. "a notch" to "accumulate" from "buy," signaling that clients should acquire the stock only on lower-cost opportunities.

The volatility of the broader markets was attributed to profit-taking activities and a slumping bond market, which pulled down bank stocks. The 30-year Treasury yield rose to 6.74%, up 5 basis points.

In the major economic news of the day, durable goods orders declined 0.6% for May, which was weaker than expected, once again reinforcing the prospects for a low inflationary environment.

"In large part, stocks that are up one day are down the next," said Elizabeth Summers, bank and thrift analyst for Ryan, Beck & Co., West Orange, N.J.

"The only way people will make money (in this market) is by focusing on individual issues," said Ms. Summers. In the short term, Ms. Summers said she is "nervous" about the overvaluation of some bank stocks, but "in the long term, I'm bullish through the end of the century."

She recommends USBancorp Inc., Johnstown, Pa. Its low valuation makes it "a good buy right now, relative to the market."

The stock rose $1.125 to $53.25 on Thursday.

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