Financials pull markets lower after fanning a rally

NEW YORK - The financial stocks that fueled Wall Street last week ran dry yesterday.

Bank shares dragged the market lower as traders worried that stocks, and particularly the financials, had risen too quickly since the stock market's rally began two months ago.

Some of last week's relief over the reassuring marks most banks earned during government "stress tests" evaporated yesterday.

Four of the banks that Washington determined were sound enough to survive if the economy worsened said yesterday that they planned to issue shares to help repay loans the government made in the fall to lubricate the nation's stalled financial system.

While it's a welcome sign that banks can again turn to Wall Street to raise money by selling stock, the reality of extra shares pouring into the market weighed on financial stocks. Technology shares fared better after Microsoft Corp. moved ahead with its first-ever debt offering.

U.S. Bancorp, Capital One Financial Corp., and BB&T Corp. said they hoped to raise amounts that varied from $1.5 billion to $2.5 billion through stock sales. Bank of New York Mellon Corp. said it would offer $1 billion in stock.

Analysts said the market was overdue for a break. Last week alone, Wells Fargo & Co. jumped 43.7 percent and JPMorgan Chase & Co. 19.9 percent.

U.S. Bancorp fell $2.04, or 9.9 percent, to $18.50, while Capital One fell $4.24, or 13.5 percent, to $27.10. BB&T fell $1.99, or 7.6 percent, to $24.34.

KeyCorp, one of the 10 big banks the government said must raise more capital to protect against possible loan losses, said it would offer up to $750 million of its shares. Key fell 30 cents, or 4.3 percent, to $6.72.

The Dow Jones industrial average fell 155.88, or 1.8 percent, to 8,418.77. The Standard & Poor's 500 index fell 19.99, or 2.2 percent, to 909.24, while the Nasdaq composite index fell 7.76, or 0.5 percent, to 1,731.24.

Wall Street will continue to keep watch over banks but also look for insights into the health of consumers.

First-quarter earnings figures are expected this week from Wal-Mart Stores Inc., Macy's Inc., and other retailers, and the government will report retail sales for April. Consumer spending accounts for more than two-thirds of U.S. economic activity.

Microsoft didn't say how much it hopes to raise in its offering, but in September the company's board said it could take on as much as $6 billion in debt. The software maker, which has more than $25 billion in cash, said it plans to use the money for working capital. The stock slipped 10 cents to $19.32.

"When Microsoft comes in and does a deal, I think it's a vote of confidence in technology," said Nick Kalivas, vice president of financial research at MF Global in Chicago. He noted that the money could allow Microsoft to go on a shopping spree for technology companies.

Energy stocks fell as light, sweet crude slipped 13 cents to $58.50 per barrel. Chevron fell $2.38, or 3.4 percent, to $68, while Occidental Petroleum Corp. fell $2.44, or 3.7 percent, to $62.88.