Financial Stocks Slip as Keycorp, Regions Downgraded

The Financial Select Sector SPDR, an exchange traded fund which follows financial stocks on the S&P 500 fell 0.11 points, or 0.4 percent to 26.39. The S&P 500 index rose 1.78 points, or 0.1 percent to 1,425.35.

The Reuters/University of Michigan preliminary index of consumer sentiment fell to 59.5 from 62.6 in April. It was the lowest the index has been in 28 years.

A pair of large regional banks had the biggest financial sector losses on Friday after a downgrade due to a bigger than expected fall in housing prices in recent months. KeyCorp fell 5.5 percent to $23.72 and Regions Financial dropped 5.4 percent to $20.17 after Merrill Lynch cut its rating for the stocks to "sell" from "neutral."

Citigroup, the largest U.S. bank, fell 2.6 percent to $23.12. On Friday, a trial began in New Jersey began where Citigroup is being accused by Parmalat SpA of helping conceal corrupt activity by insiders at Parmalat. It is seeking $2.2 billion in damages. The bank also said it was considering selling its banking business in Germany, which could sell from about $7.8 billion according to an analyst's estimate.

Other significant decliners in the sector included: Lehman Bros, down 2.5 percent; Merrill Lynch, dropping 2.2 percent; Fannie Mae, sliding 1.1 percent; and Morgan Stanley, which slipped 1 percent.