By MarketWatch www.marketwatch.com
BOSTON (MarketWatch) — The U.S. financial sector couldn’t hold on to early gains Thursday and fell into the red as the rally in banking stocks fizzled even in the wake of news the Federal Reserve would pump trillions of dollars into the mortgage and bond markets to jumpstart the economy.
Citigroup Inc. C shares rose early in the session but reversed course and were off about 6% in afternoon trade. The company announced a plan to convert preferred shares into common stock to boost its capital.
In the broader financial sector, the Financial Select Sector SPDR Fund XLF was down about 4% in recent action.
Citi in a Securities and Exchange Commission filing Thursday said that it has reached definitive agreements with private preferred shareholders to convert $12.5 billion of the securities into common shares.
Citi was also making headlines Thursday that could further inflame public anger over how financial institutions are spending bailout money they have received from the government. Citigroup plans to spend about $10 million on new offices for senior executives, according to a published report Thursday. Citigroup has also reportedly canceled orders for private jets for top executives.
Insurance stocks were weak Thursday after Moody’s cut Prudential Financial Services Inc.’s PRU credit rating.
“The financial profile of Prudential continues to be hurt by its very substantial exposure to the variable annuity business with guarantees, as well as by the increased losses from its investment portfolio,” Moody’s said in a statement.