Financial stocks are experiencing a selloff after analysts at Morgan Keegan said that shares of Wachovia Corp. (WB) are overbought.
Shares of Wachovia and Mizuho Financial Group Inc. (MFG) are posting some of the most substantial losses in the sector, with both stocks being down about 8%.
Bank of America Corp. (BAC), Citigroup Inc. (C), MF Global Ltd. (MF) and JP Morgan Chase & Co. (JPM) are down at least 3%, while UBS AG (UBS) and HSBC Holdings PLC (HBC), who reported a drop in first half profit earlier in the morning, are also on the downside.
According to a report published on Monday ahead of the opening bell by analysts at Morgan Keegan, the recent rally in Wachovia's stock was driven by short covering before a meeting between new Chief Executive Bob Steel and sell-side analysts. Also before the opening bell on Monday, HSBC reported a 29% decline in profit for the first half of fiscal 2008, mainly impacted by higher loan impairment charges and the weak US economy.
HSBC reported first-half profit of US$8.31 billion, lower than US$11.51 billion a year ago. Profit attributable to shareholders of the parent company declined 29% to US$7.72 billion from US$10.90 billion a year ago. Earnings per share fell to US$0.65 from last year's US$0.94.
In a separate statement, the company said its subsidiary HSBC Asia Pacific Holdings (UK) Limited is in discussion with LSF-KEB Holdings SCA, or Lone Star, on how to proceed with the transaction to buy 51% stake in Korea Exchange Bank, as the second deadline for the deal ended on July 31 and the deal is yet to get approval from Korean Financial Services Commission.
Around 10:50 am Eastern Time, shares of Wachovia were down $1.69 at $17.29 a share, while Mizuho's stock was down 83 cents at $8.83 per share.
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