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Wednesday's Bank Stocks: Decline reflects overbought market, low trading volumes

Bank and thrift stocks, along with the broader markets, closed in negative territory on Wednesday, Dec. 28.

The SNL U.S. Bank Index dropped 1.03% to 535.82, and the SNL U.S. Thrift Index dipped 0.15% to 971.03. In broader markets, the Dow Jones Industrial Average slid 0.56% to 19,833.68, the S&P 500 fell 0.84% to 2,249.92 and the Nasdaq composite index slipped 0.89% to 5,438.56.

Mark Germain, founder and CEO of Hackensack, N.J.-based Beacon Wealth Management, said the day's decline is linked to thin trading volumes and an "overbought" market as investors begin to tax trade.

"People are taking some profits and offsetting some of the losses that they had at the beginning of the year," Germain said. "It's not a tremendous switch in people's perception of what is going on in the market. Certainly, the economy hasn't changed... It doesn't appear that there is any true economic or strong reason for it to actually start to switch."

Germain added that an end-of-year market rally isn't necessarily "out of the window" yet.

"We should take a look at what happens tomorrow and Friday," he said. "When you take a look at how many days the market was up and then you have a little bit of a downswing and really, really light volume, I don't think it means a thing."

Among large-caps, Wells Fargo & Co. fell 1.13% to $55.32, Citigroup Inc. slipped 1.72% to $60.04, Bank of America Corp. dropped 1.24% to $22.33 and JPMorgan Chase & Co. lost 0.72% to $86.50.

Among other notable movers, Bank of the Ozarks Inc. fell 2.48% to $53.07. Bank of N.T. Butterfield & Son Ltd. declined 2.49% to $31.70, Sterling Bancorp slid 2.29% to $23.45, Customers Bancorp Inc. lost 2.02% to $35.94 and Capital One Financial Corp. dipped 1.75% to $88.19.

In thrifts, BofI Holding Inc. fell 2.42% to $29.06 and Provident Financial Services Inc. lost 1.01% to $28.41.

In other news, Compass Point analysts pointed to Investors Bancorp Inc. as a potential suitor for Astoria Financial Corp. The recent bank stock rally increases the odds of another bidder emerging, the analysts wrote, following news that Astoria Financial and New York Community Bancorp Inc. mutually agreed to terminate their merger deal. Astoria Financial dipped 0.70% to $18.47, while Investors Bancorp fell 0.71% to $13.99 and New York Community Bancorp Inc. was flat at $15.85.

In economic news, the pending home sales index dropped 2.5% to 107.3 in November, as compared to 110.0 in October, reflecting a 0.4% decrease from the year-ago period.

Market prices and index values are current as of the time of publication and are subject to change.