Winners & Losers

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Financial Winners & Losers: Merrill Lynch

Debra Borchardt

Hawkish comments from a Federal Reserve official and the specter of added regulatory scrutiny for investment banks weighed on financial stocks Wednesday.

Kansas City Fed President Thomas Hoenig, in a speech late Tuesday, stoked fears by suggesting the central bank should consider raising rates to combat inflation.

At a Senate hearing Wednesday, a Securities and Exchange Commission (SEC) said the agency is scrutinizing the liquidity of investment banks it supervises, including their plans for raising new capital. Merrill LynchMER lost 5.6% to $48.48; Morgan StanleyMS shares fell 3.8% to $47.21; Lehman BrothersLEH ticked down 6.1% to $43.50; and Goldman SachsGS declined 3.9% to $189.94.

American ExpressAXP shares shed 4.4% to $48.70, making it among the biggest losers in the Dow Jones Industrial Average.

In the broader financial sector, stocks were pressured to the downside, as the NYSE Financial Sector Index dropped 232.10 to 7,705.32.

Poor housing data dragged shares of mortgage lender Fannie MaeFNM down 5.7% to $29.05. Prepayments on mortgage-backed securities dropped in April from March levels as home loan refinancing activity dropped.

Shares of National Financial PartnersNFP plummeted 20%, even after distributor of financial services products posted a profit of $10 million in the first quarter, vs. $8.5 million in the year-ago period. The stock was lost $5.61 to $22.46.

ProAssurancePRA shares fell 8.1% after the property and casualty insurance company reported first-quarter net income of $35 million, down from the previous year's $36 million. The profits disappointed analysts concerned about lower earned premiums. Shares fell $4.35 to $49.25.

But it wasn't all doom and gloom for financial stocks. Regional broker SWS GroupSWS jumped 14.6% to $16.02 after reporting its fiscal third quarter. The Dallas-based firm recorded increases in net income, EPS and net revenues after the market closed on Tuesday.

Private equity firm American Capital StrategiesACAS also saw shares rise on a first-quarter earnings beat. Even though the quarter was a losing one, the operating earnings and revenue came in ahead of analyst estimates. The loss came as a result of accounting rules forcing American Capital to price its investments based on fair market value and not internal models. The stock gained 2.5% to $31.29.

And finally, an analyst upgrade lifted MF Global MF 2.9% to $14.53. A Lehman analyst upgraded the stock to overweight, saying its current price had taken into account the losses incurred by a rogue trader.