Financial stocks slipped Thursday as
Chairman Ben Bernanke delivered gloomy news to senators and companies continue to take a beating from the mortgage crisis.
Testifying before the Senate Banking Committee, Bernanke said that he expects some smaller banks to face serious challenges as a result of the problems in the real estate markets, although he said that large banking institutions appear to be in good shape.
"There probably will be some bank failures. There are some small, in some cases
newly created banks that are heavily invested in real estate in locales where prices have fallen and there probably will be some failures," Bernanke said in response to a question from Sen. Richard Shelby (R., Ala.) about whether he expected some banks to fail.
Regional banks promptly sold off.
slumped 5.1% to $22.03 and
lost 4.6% and was selling shares at $50.49.
Even large institutions battered by the mortgage crisis took a hit.
gave back 6.7% lastly trading at $15.66.
Financial Sector Index was sliding 155.5 points to 7,628.99.
Despite Bernanke's suggestion in his testimony of the likelihood of more rate cuts, his second straight day of such hints in front of Congress,
shares collapsed after the company confessed it had to deal with $300 million of margin calls since Feb. 14 and that it may have to sell assets at distressed prices to meet more calls. Lately, Thornburg shares were trading down 13.6% or $9.97 a share.
Also taking a huge hit was hedge fund firm
, whose shares fell after it took about $141 million in charges for losses on unauthorized trades. The firm said one of Man's representatives trading in wheat futures vastly exceeded his authorized trading limit and was fired. Shares were punished severely as the stock went down 24.3% to $22.16.
In deal news, Massachusetts Mutual Life Insurance Co. said it entered into an agreement to acquire First Mercantile Trust Company from
. First Mercantile, based in Memphis, Tenn., provides retirement plan record-keeping and investment management service. Unhappy shareholders sent SunTrust packing as the stock fell 3.6% to $60.43.
Deals continued as
Insurance Services unit said it plans to acquire Burkey Risk Services, an Orlando risk agency, to expand its Florida operations. BB&T, a Winston-Salem, N.C.-based bank, said the deal is expected to close in early March. BBT dropped $1.06 to $32.83.
Elsewhere, units of
, have agreed to pay $2.4 million in fines and reimburse more than $20 million to customers to settle probes into improper mutual fund sales and transfers according to the Financial Industry Regulatory Authority. Merrill shed 4.5% to $51.08 and UBS gave back $1.06 to trade at $33.79.
shares fell about 4.1% after a Goldman Sachs analyst cut estimates for the bank blaming falling house prices and citing concern over the effect of the mortgage crisis on 2008 results.
Thumbing its nose at the bad news,
FPIC Insurance Group
reported fourth quarter net income of $1.62 per share. Analysts had been expecting $1.06, so the stock was treated to an 8.1% rise, trading at $46.55.
, likes sister government-sponsored mortgage buyer
the day before, reported mounting losses yet saw its stock rise. Freddie said its loss widened to $2.5 billion in the fourth quarter of 2007 as mortgage defaults mounted and falling interest rates hurt certain investments. But its stock was treading water on Wednesday's news that the Office of Federal Housing Enterprise Oversight would lift caps on the amount of mortgages Fannie and Freddie can hold, imposed after an accounting scandal a few years ago. Freddie shares were off fractionally to $24.99.