Bank stocks drop again as PacWest free fall ‘feeds that narrative’ of weakness despite a ‘fundamentally sound’ business

Western Alliance Bancorp, PacWest Bancorp and First Horizon Corp. posted steep losses Thursday as clouds hung over the banking sector a day after the U.S. Federal Reserve hiked interest rates by a quarter-point.

First Horizon FHN dropped 36% after it said its merger with Toronto-Dominion Bank TD CA:TD would not close, some 15 months after the deal was announced. Jefferies analyst Casey Haire said First Horizon’s standalone stock valuation without the merger is about $11 to $13 a share, 20% below where the stock was trading…