Bank stocks can't hang onto gains
Most bank stocks headed lower after a strong start to the day; Goldman Sachs still up after Warren Buffett's $5 billion vote of confidence, WaMu plunges on downgrade.
NEW YORK (CNNMoney.com) -- Financial stocks ended the day mostly lower after a strong start Wednesday morning, as investors began to focus more on the status of the financial bailout proposal in Congress and less on Berkshire Hathaway's investment in Goldman Sachs.
Goldman Sachs (GS, Fortune 500) gained about 6% following the announcement late Tuesday that Berkshire, the firm controlled by legendary investor Warren Buffett, was injecting $5 billion into the financial giant.
Before the start of trading, Peter Cardillo, chief market economist with Avalon Partners, said the multi-billion dollar investment from Berkshire Hathaway (BRKA, Fortune 500) "is being interpreted as a vote in confidence, and obviously that is what the markets have been lacking here."
But by the end of the day, shares of Washington Mutual (WM, Fortune 500) plunged nearly 30% after Standard & Poor's downgraded the firm to an even lower junk bond status than it had before.Citigroup (C, Fortune 500) fell over 5%, while Morgan Stanley (MS, Fortune 500)dropped more than 11%.
"[This] is a very volatile market," said Howard Shapiro, analyst for the investment bank Fox-Pitt Kelton Cochran Caronia.
Wachovia (WB, Fortune 500) closed down more than 6%, while JPMorgan Chase (JPM, Fortune 500) gave up early gains to end the day relatively flat, as did Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500) by the time trading in New York ended.
Michael Church, senior portfolio manager for Church Capital Management, said it's difficult to pinpoint one reason behind the moves of financial stocks these days given how rapidly news is changing.
Investors were also paying close attention to Federal Reserve chairman Ben Bernanke as he discussed the effects of the credit crunch and housing crisis with the Joint Economic Committee, a House-Senate panel looking at the state of the economy.
Bernanke and Treasury Secretary Henry Paulson are both urging Congress to take action on a proposed bailout package and discussed the package in front of Congress once again Wednesday afternoon.
Meanwhile, the Federal Reserve said it struck a deal with the governments of Australia, Denmark, Norway and Sweden for $30 billion in swaps. 
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