NEW YORK -- During a lackluster session for the broader market, financial-sector shares likewise took a tumble Monday, hindered by pessimistic analyst actions and worries about future earnings performance.
The KBW Bank Index gave back 4.1% to 41.43, and the Amex Securities Broker/Dealer Index tumbled 4.1% to 70.06.
Dow Jones Industrial Average
was the index's worst performer, falling 7.5% to $28.63 after Merrill Lynch downgraded the stock to underperform from neutral.
Traders were also looking ahead to earnings announcements from
, both of which post fourth-quarter results this week. Goldman, scheduled to report Tuesday before the open, gave back 1.9% to $66.46.
Morgan Stanley, which is set to post results Wednesday after the close, fell 1.5% to $13.64.
Among regional banks, Stifel Nicolaus analyst Anthony Davis cut his 2009 and 2010 earnings estimates on seven firms amid expectations for further loan losses and to factor in costs tied to the banks receiving funds as part of the government's $700 billion bank investment program.
Davis cut his 2009 estimates for
First Horizon National
Marshall & Ilsley
National Penn Bancshares
In a research note, Davis said mid-cap regional banks will face further deterioration in asset quality as the economy continues to worsen. Citing rising delinquencies in outstanding loans and an expected rise in defaults, Davis forecast increased charge-off rates for the group.
Earnings estimates are also affected by added costs that the banks will have to pay to cover interest payments on preferred stock issued to the government in return for fresh capital. The government is providing banks with new cash in an effort to spur lending. In return the government received preferred stock that carries an interest rate of 5% during the first five years.
Six of the seven companies lost ground. First Horizon slipped 0.5% to $9.52; Huntington shed 4.7% to $6.97; KeyCorp stumbled 3.5% to $7.72; Marshall & Ilsley gave back 0.8% to $11.75; National Penn dropped 2.1% to $13.93; and Zions tumbled 5.3% to $24.34.
The only exception in the group, Synovus Financial eked out a 0.7% gain to $7.27.