Financial stocks burrowed back into negative territory Monday after the bears took a brief break on Friday's shortened session, suffering more than most following another wallop of bad news and a gloomy statement by former Treasury Secretary Lawrence Summers.
Writing in his
column, Summers joined the ranks of economists and analysts intoning that we have seen a mere fraction of the financial difficulties yet to be spawned from the subprime crisis and that the U.S. will probably head into a recession that will drag down the global economy.
He also named the credit-card sector as among the next to be hit and predicted that falling capital levels, among other things, will ultimately force financial-services firms to curtail new lending.
The KBW Bank Index sharply underperformed the rest of the market following those comments, plunging 4.5% to 88.12. Components
all lost 3% or more.
Citi, in particular, fell after
reported that the banking giant is planning to lay off as many as 45,000 employees, citing people with knowledge of the situation. Specific numbers haven't yet been set. Earlier this year, Citi eliminated
17,000 jobs in order to cut costs.
was also among the big losers after news of a possible buyout hurdle. According to
The Wall Street Journal
, the online broker's suitors -- which
appear to be
-- are concerned that the
battered value of E*Trade's bank assets hasn't been adjusted to current market values.
E*Trade shares surrendered 73 cents, or 13.7%, to $4.60. Ameritrade lost 4.1%, and Schwab was down 4.3%.
Senator Chuck Schumer, meanwhile, called for regulators to look into
borrowings from the Federal Home Loan Bank system, which has helped to buoy the mortgage lender during the past few tumultuous months. Shares tumbled 10.5% to close at $8.64.
were each cut to neutral from buy at UBS. The move follows this month's reports of
big third-quarter losses at
both firms. Shares closed off 7.4% and 10.2%, respectively.
hired Barry Zubrow, formerly of
, as its new chief risk officer.
additionally reported that the New York-based brokerage intends on cutting some 100 subprime-related jobs in California. Shares slipped 3.6% to $40.46.
Financial Sector Index gave up 244.81 points, or 3%, to 7,997.66.
Among very few financial gainers was
, which traded in the green after Calyon Securities raised the credit-card issuer's price target and 2008 profit estimate. Shares were up significantly before pulling back to finish with a 66-cent gain at $181.76.
, a health insurer and managed-care provider, gained 2.4% to $55.42 on a JPMorgan upgrade to overweight.