Financial Winners & Losers: Merrill Lynch

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 Lynch(MER Quote) lost 5.6% to $48.48; Morgan Stanley(MS Quote) shares fell 3.8% to $47.21; Lehman Brothers(LEH Quote) ticked down 6.1% to $43.50; and Goldman Sachs(GS Quote) declined 3.9% to $189.94.

American Express(AXP Quote) 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 Mae(FNM Quote) 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 Partners(NFP Quote) 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.

ProAssurance(PRA Quote) 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.