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July 1, 2010 Thursday 4:19 PM EST
SECTION: NEWS & COMMENTARY; Markets; Financial Stocks
LENGTH: 541 words
HEADLINE: Financials held under by double-dip worries
BYLINE: April H. Lee, MarketWatch mailto:firstname.lastname@example.org.
April Lee is a MarketWatch Reporter based in New York.
NEW YORK (MarketWatch) — Leading financial stocks slowly narrowed their losses but remained mostly in the red at the closing bell Thursday amid disappointing U.S. economic data that fueled fears of a double-dip recession.
Among the top decliners were regional banks, with Lincoln National Group (LNC) , which closed down 2.5%. and KeyCorp (KEY) dropping more than 4%. Lincoln National Corp. (LNC) , SunTrust Banks Inc. (STI) and Regions Financial Corp. (RF) also saw drops of about 3%.
Among the larger banks, Bank of America Corp. shares (BAC) dropped 2.9%. Citigroup Inc. (C) shares were up 0.8%.
The Treasury Department said it sold about 1.1 billion additional shares of Citi, bringing to about 2.6 billion the number of government-held shares now sold. This represents about a third of the 7.7 billion shares the government took in return for assistance extended under the Troubled Asset Relief Program. .
The Financial Select Sector SPDR exchange-traded fund (XLF) , which tracks the financial stocks in the S&P 500 Index ($SPX) , closed down about 0.9%.
The dismal performance of financial stocks this week had little do with the financial-legislation bill, now on the verge of winning final approval on Capitol Hill, according to Doug Penn, research director at RCM Capital Management.
“Much of the bill will be phased in over a number of years,” he said, stressing that restrictions arising from the so-called Volcker rule on proprietary trading won’t be effective for another two years.
“Still, once the Senate actually passes it, you’ll get a relief rally as the uncertainty completely goes away,” Penn said.
The House voted in favor of compromise legislation late Wednesday. While a Senate vote isn’t expected until the week of July 12, provisions of the bill are unlikely to change further.
“Instead, what we saw this last week isn’t really related to the bill. It’s just reflecting concerns about the economy,” said Penn. “Investors are nervous about whether we’ll roll back into a recession.”
Financials started out mostly flat in morning trading, on the heels of Labor Department data showing that initial jobless claims rose 13,000 to a total of 472,000 last week, confounding economist estimates that had called for 455,000.
This followed a weaker-than-expected reading on private-sector employment for June based on a sampling of ADP payrolls data. Markets will be focused on monthly U.S. nonfarm payroll figures due out Friday morning.
Losses in the financial sector mounted after the Institute for Supply Management’s manufacturing index fell more than expected and a report showed pending sales of existing homes tumbled in the biggest monthly drop since 2001. .
None of which is to say there weren’t financial-sector advancers to be found Thursday.
Shares of M&T Bank Corp. (MTB) were consistent gainers, closing up 2.6%, after research firm Collins Stewart wrote in a note to clients that it’s “increasingly more constructive” on M&T Bank, reiterating a hold rating.
Janus Capital Group Inc. (JNS) increased 1.4%. Janus ranked as the largest decliner among S&P 500 financial components in the second quarter.
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