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Financial Winners and Losers: Wells Fargo

Financial stocks languished Thursday, after digesting data that showed rising foreclosure starts.

Updated from 2:24 p.m. EDT

Financial stocks closed higher on Thursday, after a

Federal Reserve

report showed banks have cut back significantly on borrowing from its emergency lending program, signaling possible easing in the credit crisis.

The Fed report said commercial banks averaged $38.15 billion in daily borrowing over the week that ended Wednesday. That was down slightly from $38.155 billion in the week ending May 20. Investment firms didn't draw any loans over the past week from the Fed program for the second week in a row. Prior to last week, that hadn't happened since early September.

The news cheered financial stocks, as the NYSE Financial Sector Index closed up 2.4% to 3901.45 in spite of data that showed the largest quarter-over-quarter increase in foreclosure starts since 1972.

More than 616,000 mortgages were slapped with foreclosure actions as a record 12% of homeowners are behind on their payments, according to the Mortgage Bankers Association's National Delinquency Survey. While the economic crisis started with subprime loans issued to people with fragile credit, now it has spread to homeowners with formerly good credit standings with prime loans. The largest share of new foreclosures is now represented by prime fixed-rate loans, according to the survey.

Fannie Mae



Freddie Mac


were both down marginally after the sobering, but not surprising foreclosure news. Freddie Mac said its mortgage portfolio experienced an acceleration in delinquent loans as its entire portfolio decreased by an annualized 50.9% rate in April. Fannie Mae slid 2.7% to 72 cents, while Freddie gave back 4.9% to trade at 78 cents.

PNC Financial

(PNC) - Get PNC Financial Services Group, Inc. Report


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Wells Fargo

(WFC) - Get Wells Fargo & Company Report


Bank of America

(BAC) - Get Bank of America Corp Report

all finished higher, even after

The Wall Street Journal

reported that the Fed is setting limits on the amount of future revenue big banks can use to fill capital holes identified by stress tests earlier this month. All three banks had initially intended to use future revenues as part of their plan to plug the holes, but PNC on Wednesday said it had raised the full $600 million it was required to accumulate through stock sales.

BofA announced that it was going to offer to exchange up to 200 million shares of common stock for outstanding shares of a certain series of preferred stock. The intent of the swap offer is to increase BofA's Tier 1 capital as the bank continues to make progress on raising its capital to an acceptable level for the regulators.

Wells shares added 69 cents to $24.77, while PNC ticked up $2.55 to end the day at $43.66. BofA shares added 39 cents to close at $11.30.

Another stock seeing green was

Fortress Investment Group


, after stepping up to take a stake in Florida bank First Southern Bancorp. Fortress, one of the largest public hedge fund managers, will be partnering with other investors to acquire the bank. The stock jumped 9.7% to $4.28.

Genworth Financial

(GNW) - Get Genworth Financial, Inc. Class A Report

also ticked up 9.8% to $5.18 after a positive investor presentation from the company stated it had a strong cash position at the end of the first quarter.

Credit ratings provider


(MCO) - Get Moody's Corporation Report

is in the crosshairs of hedge fund manager David Einhorn. The Greenlight Capital founder, best known for shorting Lehman Brothers prior to its bankruptcy, reportedly told some 1,200 hedge fund executives at a conference "that the parent of Moody's Investors Service squandered the value of its business after giving perfect AAA ratings to now-fallen giants like struggling insurer


(AIG) - Get American International Group, Inc. Report

nationalized mortgage banker Fannie Mae and bond insurer


(MBI) - Get MBIA Inc. Report

," according to



Shares of Moody's dropped 4.5% to $26.89.

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