SAN FRANCISCO (MarketWatch) — The U.S. financial sector closed as the S&P 500’s worst performer Tuesday as investors focused on Europe’s debt crisis and German plans to announce a ban on so-called naked short selling.
The Financial Select Sector SPDR Fund (XLF 14.92, -0.44, -2.86%) opened flat but swung to a loss of nearly 3% by the end of the day. Compared to the broader index, financial stocks fell 2.8% versus the 1.4% decline in the S&P 500 Index (SPX 1,121, -16.14, -1.42%)
Among individual stock movers, shares of Ambac Financial Group Inc.(ABK 1.12, -0.34, -23.29%) were under pressure and lost more than 23% after the bond insurer reported a wider quarterly loss. See full story on Ambac’s earnings report.
Credit-card networks Visa Inc. (V 70.09, -4.62, -6.18%) and MasterCard Inc.(MA 202.81, -8.00, -3.79%) saw shares decline Tuesday. The shares have been under pressure in the wake of a U.S. Senate vote last week in favor of a measure that would allow the Federal Reserve to regulate fees on debit cards.
Visa and MasterCard also took a hit after Standard & Poor’s said default rates on bank card loans climbed in April for the third month in a row, to 9.1%.
Also losing ground were BB&T Corp. (BBT 32.54, -1.19, -3.53%) and U.S. Bancorp(USB 24.36, -1.25, -4.88%) in the wake of downgrades at Deutsche Bank. Analysts cut their ratings on the stocks to hold from buy, citing “increasing concerns over high government debt levels across many developed nations and the significant run [up, by 25%] in bank stocks since mid-December.”
Regional bank SunTrust Banks Inc. (STI 28.03, -1.85, -6.19%) shed more than 6% on reports Warren Buffett’s Berkshire Hathaway Inc. (BRK.A 113,300, -925.00, -0.81%)(BRK.B 75.47, -0.84, -1.10%) has unloaded its stake in the firm. Read more on Buffett’s sale of bank stakes.
Other regional banks posting declines included M&T Bank Corp.(MTB 83.61, -4.23, -4.82%), Regions Financial Corp. (RF 7.92, -0.35, -4.23%)and KeyCorp (KEY 7.87, -0.39, -4.69%).
Another Berkshire investment, Goldman Sachs Group Inc.(GS 137.36, -5.28, -3.70%), saw its shares weaken further Tuesday, slipping more than 3%. The stock had fallen the previous three sessions.
Shares of South Financial Group Inc.(TSFG 0.28, -0.02, -6.11%) lost 6% after TD Bank Financial Group Inc.(TD 69.51, -0.36, -0.52%) announced a deal to acquire the struggling bank for about $61 million.
Fidelity National Information Services Inc. (FIS 27.15, -1.73, -5.99%) also slipped after the company late Monday said talks have ceased regarding a potential leveraged buyout.
Instead, the payments and technology firm will pursue a leveraged recapitalization, “with a substantial share repurchase.” A consortium led by private-equity firm Blackstone Group (BX 11.63, -0.45, -3.73%) were reportedly negotiating a buyout of the company.
In economic news, the government reported U.S. housing starts rose nearly 6% in April and building permits declined sharply, while U.S. producer prices fell during the month.
The only S&P 500 financial stock to post a gain by Tuesday’s close was Lincoln National Corp. (LNC 28.06, +0.06, +0.21%). Shares of Lincoln closed up 0.2%
