NEW YORK ( TheStreet) -- Wells Fargo ( WFC - Get Report) was among U.S. bank stocks trading lower Friday following China's decision to tighten credit and weak economic data on eurozone growth. The People's Bank of China surprised markets with another increase in banks' reserve requirements as the country attempts to fight rising inflation. The 50-basis-point increase will take effect Feb. 25. The reserve requirement increase puts a damper on banks' ability to lend by putting a greater amount of deposits with the central bank.
Meanwhile, concerns over Greece's debt heightened after data showed the country's gross domestic product (GDP) contracted by 0.8% in the fourth quarter, which was worse that economists had predicted and widened from the revised 0.5% contraction in the third quarter. In the U.S, the University of Michigan's preliminary reading on February consumer sentiment came in at 73.7, which was down from January and worse than economists had predicted. Financial stocks fell in the aftermath of the headlines, following the broader market indices lower, with U.S. banks performing poorly. Wells Fargo was the biggest decliner, with shares retreating 1.5% to $26.68. In addition, Bank of America ( BAC - Get Report) was down 1.2% to $14.45, JPMorgan Chase ( JPM) slipped 0.9% to $38.68, Goldman Sachs ( GS - Get Report) fell 0.9% to $152.74, Citigroup ( C - Get Report) lost 0.8% to $3.18, and Morgan Stanley ( MS) dipped 0.6% to $26.95. Among overseas bank stocks, Lloyds Banking Group ( LYG) sank 5.2% to $2.94, National Bank of Greece ( NBG) fell 4.2% to $3.80, Allied Irish Banks ( AIB) lost 3.8% to $3.08, and Banco Santander ( STD) slid 2.8% to $13.07.
Among winning financial stocks, First Horizon ( FHN - Get Report) gained 0.5% to $12.94 after Keefe, Bruyette & Woods analysts upgraded the stock to outperform with a stock price target of $15. KBW argues that First Horizon will have excess capital and that it should regain profitability in the fourth quarter. American International Group ( AIG - Get Report) also traded higher, adding 0.5% to $26.43. Earlier this week, AIG unveiled a new incentive pay system where employees will be ranked on a scale of 1 to 4, based on how they do relative to their peers. -- Written by Robert Holmes in Boston. Follow Robert Holmes on Twitter and become a fan of TheStreet.com on Facebook.