Frightened? Suddenly, The Bears Gain Some Traction, But Losses Just Over 1%

Remember those spinning newspapers in ’60s-era television shows that filled viewers in on key pieces of plot detail? That hokey device would be spelling out ”Wall Street Suffers Its Worst Loss In A Month” in 24-point type if it were being employed today.

And even though it’s true – banks stocks came undone and bears took advantage of one of their rare opportunities to play offense – the losses still didn’t amount to a full percentage point. The S&P 500 (GSPC)retreated 12 points on the day,nicking just overone percent out of the blue-chip indicator. So even on Wall Street’s worst day in a month – even with stocks up a ripe 50% off the March lows – there’sonly so much the bears can do.

Financials took a bruising, with MBIA (MBI)helping set the pace on the declines after JPMorgan lowered its rating on thebond insurer, which tumbled 14% in the session. American International Group (AIG), which moved up in four consecutive trading sessions coming into Tuesday’s action, declined, giving up 14%; still the stock hasdoubled over the course of the last month.

Meanwhile, the banking sector suffered broad-based declines after Dick Bove, the influential banking analyst at Rochdale Securities, said that the gains the sector has enjoyed have come thanks to improving psychology, not fundamentals. The prospect of what the Federal Reserve is going to do on Wednesday at the conclusion of its latest policy meeting – a meeting that is not expected to result in a change in monetary policy – also weighed on the stocks.

Bank of America (BAC)lost 4% on the day, Citigroup (C)fell 5%, and Wells Fargo (WFC)dropped 5%, as well.

In all, though, what shaped up as a disappointing session – one that featuredan episode ofWall Street’s rare willingness to surrender on back-to-back trading sessions – pr! oved to be something short of keenly frightening. Certainly, it’s difficult to make the argument that stocks are prepared toenter a period of pronounced consolidation, despite the oversold conditions in the market.

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