Bank stocks fell with the broader markets Monday for a host of reasons, most of them related to the souring economy.

The KBW Bank Index lost 4.08%, but the decline in the broader market was not as steep. The Dow Jones industrial average was off 0.75%, and the Standard & Poor's 500 index 1.27%.

Frank Barkocy, the director of research at Mendon Capital Advisors, said that investors were weighing a number of concerns: "First, just the overall economic tone has been negative, and there are concerns that the economy will continue to worsen. The stalling of the bailout of the auto industry is also having some impact on the market and on bank stocks as well."

Senate Republicans last week rejected a $14 billion emergency loan for the big three U.S. automakers, but this weekend President George Bush signaled that the administration may use money from the Treasury Department's Troubled Asset Relief Program to give the automakers short-term relief.

Mr. Barkocy said that bank stocks were also down Monday ahead of expected negative earnings reports later this week from Goldman Sachs Group Inc. and Morgan Stanley due to writedowns. Goldman fell 1.9%, and Morgan Stanley's stock lost 1.5%.

Moreover, investors may also be worried that some U.S. institutions will announce exposures to a $50 billion Ponzi scheme allegedly engineered by New York investment manager Bernard Madoff. A number of foreign companies have already revealed such exposures, including HSBC Holdings PLC, Banco Santander, BNP Paribas, and Royal Bank of Scotland Group PLC.

Bank stocks may pick up Tuesday if the automakers get government bailout money and if the Federal Reserve cuts interest rates another 50 basis points, Mr. Barkocy said.

However, bank stocks could still be in for a rougher time than other sectors during the next several quarters, according to a research note Monday from Anthony Polini, an analyst at Raymond James & Associates.

"Whether or not investors are willing to look behind this period of widespread malaise, the next two quarters will likely be brutal for the industry as it deals head-on with the deepest recession in decades," Mr. Polini wrote. "Our industry average was down 9% last week compared to a fractional gain for the S&P 500."

JPMorgan Chase & Co. fell 7.5%. Merrill Lynch & Co. analyst Guy Moszkowski downgraded the New York company's stock to "underperform," from "neutral," due to an expected increase in credit losses. He predicted that JPMorgan Chase would post a fourth-quarter loss of 11 cents a share, and he reduced his 2009 earnings estimate to $1.98 a share, from $3.21.

Bank of America Corp. dropped 5.5%. A Dow Jones report Monday said that the Charlotte company made the first of its planned 35,000 job cuts last week — about 20 senior-level executives, including general counsel Tim Mayopoulos (who was succeeded by Brian Moynihan, head of corporate and investment banking); deputy general counsel David Onorato; Helga Houston, a compliance and risk management executive; Lance Drummond, who oversaw the company's Web site; and Brad Dinsmore, head of West Coast consumer banking.

On Monday, the $7 billion-asset Investors Bancorp in Short Hills, N.J., said that it plans to buy the $622 million-asset American Bancorp of New Jersey Inc. in Bloomfield, N.J., for $140 million in cash and stock. Investors' stock price fell 7.1%, but American's soared 27.8%.

Citigroup Inc. fell 3.9%, Wells Fargo & Co. 2.4%, and State Street Corp. 5.4%.

Other decliners included Zions Bancorp, off 5.3%, Fifth Third Bancorp, 6.5%, Regions Financial Corp., 5.7%, and Comerica Inc., 4.4%.

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