The Dark Knight Falls: Financial Loser

NEW YORK (TheStreet) -- Knight Capital Group (KCG) was the big loser among financial services companies on Wednesday, with shares dropping 33% to close at $6.93.

The Dow Jones Industrial Average and S&P 500 Index (SPX.X) ended with slight declines, while the NASDAQ Composite index pulled back 1%, on a volatile trading day, caused by what the Securities and Exchange Commission called a "technical issue" at Knight Capital.

The Jersey City, N.J., financial services company -- which said last month that its "average daily U.S. equities market making volume traded in June 2012 was $19.5 billion" -- said that its market making unit had suffered a technical glitch in the morning, which had caused a high level of volatility for a large number of individual stocks, some of which saw their trading halted by the SEC, which said it was investigating the problem.

Also on Wednesday, the Federal Reserve Open Market Committee concluded two days of meetings and said that information received since its last meeting in June "suggests that economic activity decelerated somewhat over the first half of this year," although "business fixed investment has continued to advance."

While the Fed said the Committee had "decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June," the central bank announced no further economic stimulus measures, which were anticipated by some investors.

The KBW Bank Index (I:BKX) declined 0.5% -- its third straight decline -- to close at 45.29, with 18 of the 24 index components seeing declines.

Bank of America (BAC) was the loser among the largest U.S. financial names, with shares declining 2% to close at $7.22.

On the surface, Bank of America appears to be one of the cheapest bank stocks out there, despite returning 30% year-to-date, as the shares trade for just 0.6 times their reported tangible book value of $13.22, and for less than eight times the consensus 2013 EPS estimate of 93 cents, among analysts polled by Thomson Reuters.

But Stifel Nicolaus analyst Christopher Mutascio on Monday said that after stripping expected releases of loan loss reserves from his firm's 2013 EPS estimate, Bank of America "remains the most expense stock in our large cap bank universe on an adjusted P/E multiple basis, trading at 12.5x our reserve release adjusted EPS estimate" versus a median of 10.2 times forward earnings for the dozen large-cap banks his firm covers.

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