NEW YORK (AP) -- Bank stocks were mixed Monday after an analyst cut his rating on several big banks, citing worries over Europe's debt crisis and the likelihood of tough U.S. banking regulations after JPMorgan Chase & Co.'s massive trading loss.
Worries mounted about the European debt crisis on growing speculation that debt-laden Greece might leave the European Union. Voters in Greece appear increasingly unwilling to accept steep austerity measures and spending cuts demanded by the European Central Bank.
Anti-bailout political parties made gains in general elections in Greece earlier this month, but the ballot proved to be inconclusive. A new vote is scheduled for June 17, and the radical left party Syriza is expected to make gains. Without the rescue package, Greece will likely default and leave the eurozone.
That would mean a financial disaster for Greece, but it will also send shockwaves throughout Europe.
JMP Securities analyst David Trone downgraded his rating on several banks on the belief that a Greek exit from the European Union is now "probable" rather than "merely plausible" as it was last year.
"We fear material damage in the eurozone will result," Trone wrote in a note to clients. He said "material losses" could pile up for big banks due to counterparty failures, the failure of euro-denominated contracts and other unforeseen issues.
At the same time, Trone said banks in the United States face the prospect of tougher regulations that could cut profits. There have been growing calls to strengthen the so-called federal "Volcker Rule" after JPMorgan Chase & Co. announced a $2 billion trading loss this month.
Earlier Monday, JPMorgan announced it was suspending stock repurchases as it prepares for new international regulations that will force banks to hold more capital to prepare for economic downturns. Meanwhile, the head of the Commodity Futures Trading Commission said Monday the agency has begun an investigation into the New York bank's ill-timed bet on complex financial instruments that led to the trading losses.
"Washington's policy response to the losses of '07 (through) '09 was already tough, but now the (JPMorgan) episode has caused a new flare-up of emotions, thus final Volcker rules are likely to be painful," Trone wrote.
Trone cut his rating on JPMorgan, Citigroup Inc. and Bank of America Corp. to "Market Underperform" from "Market Perform." He cut Goldman Sachs Group and Morgan Stanley two notches, to "Market Underperform" from "Market Outperform."
JPMorgan Chase dropped $1.08, or 3.2 percent, to $32.41 in afternoon trading.
Bank of America Corp. fell 26 cents, or 3.8 percent, to $6.75. Morgan Stanley lost 17 cents to $13.18.
Bucking the trend, Citigroup Inc. added 15 cents to $26.16 and Goldman Sachs gained 79 cents to $96.28. The broader markets edged higher as well.