Selloff in Thrift Shares Was First Leak in Storm Shelter

Savings and loan shares saw their role as the stock market's current safest bet tarnished Friday as investors dumped thrift stock en masse. Several big names were downgraded by brokerage analysts who cited concerns that the Federal Reserve is done easing, although the scope of the selloff surprised even them.

"It was a little bit exaggerated, [and] seemed almost like a flight to risk," said Mark Agah, analyst at Dain Rauscher Wessels, who downgraded Golden West Financial (GDW Quote) and Downey Financial (DSL Quote) to neutral from buy on Friday. "I didn't come out and say sell the things. I just said I don't see a lot of upside. And wham, they got crushed." Golden West gave up 10.4%, finishing at $54.75, and Downey lost 6.8% to end at $47.51. Both stocks are about 30% off their 52-week highs.

The Fed's rabid campaign to lower the price of money has been rocket fuel for a sector that derives its profit from the difference between what it pays on deposits and what it charges on loans. In an environment of monetary easing, the spread tends to widen, and more loans are made. ...