NEW YORK ( TheStreet) -- Fannie Mae ( FNM) and Freddie Mac ( FRE) were among the worst performers of the financial sector Wednesday after U.S. regulators instructed the government-sponsored enterprises to delist from the New York Stock Exchange. Fannie and Freddie shares each dropped more than 40% after the Federal Housing Finance Agency (FHFA) directed both to delist from the NYSE. The FHFA said the determination to direct delisting is related to stock exchange requirements for maintaining price levels and curing deficiencies, and "does not constitute any reflection on either enterprise's current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator."
Fannie and Freddie expect that the delisting of their common and preferred stock from the NYSE will be effective 10 days after informing the Securities and Exchange Commission, which would come on July 8. After delisting from the NYSE, both stocks will move to the over-the-counter market, the companies said. Fannie Mae shares plunged 42.1% to 53.5 cents, while Freddie Mac dropped 45.6% to 66 cents. Each stock traded on more than four times the average daily share volume. Most U.S. bank stocks were falling as well as the broader market indices fell 0.7% on weak economic data. Morgan Stanley ( MS) declined 1.9% to $25.46, Citigroup ( C) was down 1% to $3.94, Goldman Sachs ( GS) was off 0.5% to $136.29, Bank of America ( BAC) slipped 0.3% to $15.75, and Wells Fargo ( WFC) was lower by 0.2% to $27.85. On the upside, JPMorgan Chase ( JPM) tacked on 0.3% to $38.35. Late Tuesday, FBR Capital Markets analyst Paul Miller initiated coverage of the bank stock with an outperform rating and a $45 price target. "Despite clear risks to its business from both legislative and regulatory pressures domestically, as well as economic pressures abroad, we believe JPMorgan's universal bank model enables it to mitigate such pressures better than peers through capital redeployment opportunities," Miller wrote in a research note. -- Written by Robert Holmes in Boston. Follow Robert Holmes on Twitter and become a fan of TheStreet.com on Facebook.