Tuesday's Financial Winners & Losers

Financial stocks reacted even more negatively to the Federal Reserve's fed funds rate decision Tuesday -- which, as was widely expected, resulted in a 25-basis-point cut -- than did the rest of the market.

The NYSE Financial Sector Index, after mostly underperforming the flat-lining broad indices ahead of the announcement, took a post-Fed-decision dive of 264.49 points, or 3%, to 8,672.74. The KBW Bank Index was plunging 3.9% to 95.3.

Investors had mulled the possibility of a 50-basis-point cut, which may have contributed to the disappointment along with comments by Wells Fargo Chairman Richard Kovacevich, who foretold a rate cut as much as three times what the Fed actually implemented, according to a Bloomberg report this morning. He also predicted that this would ultimately help the economy to avoid a recession.

But far as that goes, analysts at Keefe Bruyette & Woods took the opposite view from the outset, having now officially factored in a first-half consumer-led recession in their analyses across all financial-services sectors. A slew of financial stocks got downgrades at the firm, among them BB&T (BBT Quote) and SunTrust Banks (STI Quote). KBW analyst Jefferson Harralson called each a "solid underwriter" but cut both to underperform, saying that "higher net charge-offs and reserve build are inevitable across the industry" amid the weakening economic environment. Shares lost 5.9% and 2.7%, respectively.