So much for a big bank bounce

By David Ellis, staff writer


NEW YORK (CNNMoney.com) -- Who cares about strong bank earnings when Goldman Sachs is under siege from the federal government?

News that Securities and Exchange Commission brought fraud charges against the venerated Wall Street firm Friday torpedoed what had been shaping up to be yet another bounce for bank stocks. Shares of Goldman Sachs (GS, Fortune 500) plunged 13% Friday.

Bank of America (BAC, Fortune 500) stock was up as much as 3% in pre-market trading after the company reported $3.2 billion in first-quarter profits, but those gains quickly evaporated following the SEC's stunning mid-morning announcement. Shares of BofA fell over 5%.

Shares of both Citigroup (C, Fortune 500) and Wells Fargo (WFC, Fortune 500) had been edging higher at the start of Friday's session as anxious investors were betting that they too would deliver better-than-expected results next week. At the closing bell, Wells Fargo's stock finished 2% lower while Citi's closed down over 5%.

"There was some non-discriminatory selling going on today," said Mark Lane, an equity research analyst who tracks Goldman Sachs for at Chicago-based investment firm William Blair & Co.

Bank stocks have been bounding higher this week -- and much of this year for that matter -- on the belief that the long-standing troubles the industry has faced are finally starting to subside.

Now there may be new fears that other large financial institutions could become targets for similar, and potentially expensive, federal enforcement actions.

Robert Khuzami, director of the Division of Enforcement for the SEC, left the door open to that possibility on Friday, saying that his agency was continuing to investigate both the investments that helped fuel the financial crisis as well those that helped create them.

"We are moving across the entire spectrum of products, entities and investors that might have been involved," Khuzami said in a phone call with reporters.

Others suggested that Friday's announcement was a calculated effort to stir up Main Street anger at Wall Street and get financial regulatory reform going again in Washington. Lawmakers have backed away from some of the most anti-bank proposals in recent months amid intense lobbying by the industry.

It remains uncertain whether the SEC's fraud charge could spur lawmakers to take up the so-called Volcker Rule, which would prevent banks from operating a hedge fund.

However, it could provide additional momentum to efforts aimed at imposing new rules on banks' derivatives trading business, which would eat away at some of the big profits Wall Street institutions have enjoyed in recent years. Lane said that's the biggest concern for bank investors. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,827.75 12.81 0.07%
Nasdaq 4,787.32 29.07 0.61%
S&P 500 2,072.83 5.80 0.28%
Treasuries 2.23 -0.03 -1.15%
Data as of 1:44pm ET
Company Price Change % Change
Kinder Morgan Inc 42.32 0.00 0.00%
Apple Inc 119.00 0.00 0.00%
Facebook Inc 77.62 1.99 2.63%
Pfizer Inc 31.10 0.00 0.00%
Bank of America Corp... 17.11 0.00 0.00%
Data as of Nov 26

Sections

The European Parliament has voted to break up Google and weaken its dominance across the region. More

At malls and department stores across America, the faithful are lining up and camping out for deals. More

Two pilots encountered drones while flying over college football games and another pilot saw one while flying over the Hollywood sign. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.