By Regina Hing, MarketWatch
NEW YORK (MarketWatch) — U.S. financial stocks retreated in unison Thursday as investors were pummeled by tepid economic data and a Goldman Sachs research call suggesting shorting the S&P 500.
Financial stocks make up make up a 14.2% weighting in the benchmark index, and at the end of May, compared to a a 13.3% weighting at the end of 2011. For the year to date through May the sector notched a 0.8% rise in its weighting in the index, but had fallen by 9.3% in May.
Goldman put a 1,285 target on the S&P 500, or about 5% off its 1,43 level earlier today.
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The call comes just a day after the Federal Reserve said it was cutting its growth and inflation forecasts for the rest of the year, and the same day that the Philadelphia Fed said manufacturing activity in its region for June plunged to negative 16.6 from a negative 5.8 reading the previous month. Read more on the Philly Fed's business outlook here.
Also on Wednesday, jobless claims for the previous week fell to a seasonally adjusted 387,000 but still short of expectations — economists surveyed by MarketWatch projected it to fall to 385,000 — thus indicating no progress in hiring trends. Meanwhile, sales of existing homes fell 1.5% in May, according to the National Association of Realtors. Read more on jobless claims here.
Genworth Financial Inc. /quotes/zigman/340124/quotes/nls/gnw GNW -4.74% led all decliners, falling as much as 4.1%. Insurance firms and real-estate investment trusts continued to register some of the biggest losses, with Metlife Inc. /quotes/zigman/252112/quotes/nls/met MET -3.18% and American International Group Inc. /quotes/zigman/557836/quotes/nls/aig AIG -2.78% both down 2.5%.
After opening the day with the biggest gains, Morgan Stanley /quotes/zigman/182639/quotes/nls/ms MS -1.41% shares fell 1.3%. Other big banks struggled as well, with Citigroup Inc. shares /quotes/zigman/5065548/quotes/nls/c C -2.60% down 2.5% and Bank of America Corp. /quotes/zigman/190927/quotes/nls/bac BAC -2.70% declining by 2.2%.
Wells Fargo & Co. /quotes/zigman/1483460/quotes/nls/wf WF -2.95% remained the only outlier and saw its shares advance 0.3%.
Financial stocks are likely in for more choppy trading today, as Moody's Investors Service is expected to announce credit-ratings downgrades for many of the biggest banks later in the day. Moody's Corp. /quotes/zigman/267181/quotes/nls/mco MCO -2.97% shares edged down 2.7%.
Elsewhere in the world, reports that Spanish banks will need up to €62 billion ($78 billion) in capital and an HSBC survey that showed Chinese manufacturing continues to weaken also dampened sentiment. Read more on the report here.
The financial Select Sector SPDR ETF /quotes/zigman/246222/quotes/nls/xlf XLF -1.60% , which tracks the financial stocks in the S&P 500, declined by 1.3%. The KBW Bank Index /quotes/zigman/627445 BKX -1.58% , which tracks the 24 leading U.S. banks, shaved off 1.4%.
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