Financial Sector

Financial sector claws back after early losses
3:12p ET May 19, 2010 (MarketWatch)

BOSTON (MarketWatch) – U.S. financial stocks were on a wild ride Wednesday as the sector opened the session higher before following the Dow Jones Industrial Average deep into the red, only to recover in afternoon trading.

Investors remained focused on the headlines coming out of Europe, including speculation the European Central Bank may step in to stem the euro’s freefall.

The Financial Select Sector SPDR Fund was fractionally positive at last check after dropping about 3% on Tuesday as Germany’s ban on some short selling unnerved markets.

Stocks seemed to get a boost Wednesday afternoon following the release of the minutes of the latest meeting of the Federal Reserve Open Market Committee. Most Fed officials were against a plan to begin sales of mortgage-backed securities relatively soon. The Fed has purchased more than $1 trillion in mortgage-backed securities in an effort to keep mortgage rates low and stimulate a weak housing market.

Among the individual stock movers, MasterCard Inc. and Visa Inc. were bouncing back somewhat after Tuesday’s drubbing. Visa added 4% while MasterCard rose slightly. The credit-card networks have been under pressure on fears that financial reform that could give more power to the Federal Reserve to regulate card fees would hurt profits.

Elsewhere in the financial sector, Ambac Financial Group Inc. suffered further losses after diving 23% on Tuesday after the bond insurer reported a wider quarterly loss.

Regional bank Zions Bancorp saw its shares decline 3% on Wednesday after it announced a public offering of $150 million of warrants to acquire its common stock as part of its capital-raising plans.

H&R Block Inc. Wednesday announced a strategic realignment that includes 400 layoffs and the closure of about 400 underperforming tax offices. The stock was flat in recent action.

Eaton Vance Corp. slipped despite the asset manager reporting a 40% rise in quarterly profit.

Wells Fargo & Co. shares were also negative after the U.S. Treasury said it plans to sell 110.3 million warrants to purchase Wells Fargo common stock that the Treasury received during the financial bailout.

Other large-cap bank stocks such as Citigroup Inc. , Bank of America Corp. and Goldman Sachs Group Inc. were enjoying solid gains. Goldman shares had suffered four straight losing sessions heading into Wednesday, and the stock is down about 5% so far this month.

Investors were monitoring the progress of financial reform in Washington that could have major consequences for banks. The Senate is set to vote Wednesday afternoon on a key procedural motion that if approved could lead to enactment of a sweeping bank reform bill by the end of the week.

E-Trade Financial Corp. was the best-performing financial stock in the S&P 500 Index on Wednesday. The broker said average trading volume rose 17% in April from the previous month.