The rally that carried bank stocks to new highs early in the month continues to sputter.

Bank shares dipped for a second day Friday, as the economic optimism that had driven them higher was displaced by doubts about earnings, overseas markets, and consolidation prospects.

Analysts said such swings in sentiment are likely to complicate investment decisions for the foreseeable future.

"The market is manic," said Yun Jae Chung, securities analyst at Bessemer Trust Co. "Any little news seems to set it off."

Gerard Cassidy of Tucker Anthony said he is taking a cautious approach.

"The volatility in banks' stock has increased," he said. "This year will be a stock picker's market-as opposed to past years, when you could throw a dart at a bank stock page and outperform."

Market watchers said they saw few catalysts for buying bank stocks or any other stocks under current market conditions.

Bank stocks were down for most of the day before staging a modest comeback with the broader market. After a larger decline, Citigroup finished at $51.625, off 81.25 cents. Chase Manhattan Corp. fell $3.5625, to $71.8125; and J.P. Morgan lost $2.75, to $103.125.

Among regionals, BankBoston dropped $1.3125, to $37.4375; Fleet Financial Group added 25 cents to $42.9375; and KeyCorp was down 25 cents, to $31.0625.

The Standard & Poor's bank index lost 1.70%, and the Dow Jones industrial average was off 1.44%. The Nasdaq bank index shed 1.16%, and the S&P 500 fell 0.78%.

Investors said they would not be rushing into stocks as readily as they had in past months.

Jonathan Hatcher, portfolio strategist with Conseco Capital Management, said, "The market has been on quite a run since fall and may have gotten ahead of itself."

Stock buyers would do well to go with quality names "and not invest on the fringes," Mr. Hatcher said. He said U.S. Bancorp and Wells Fargo & Co. are among his favorite bank stocks.

Others said there was not much of a case for big purchases of bank stocks.

Bessemer Trust doesn't see many compelling reasons for purchasing bank shares, Ms. Chung said, adding, "We're going to remain underweighted."

Another portfolio manager said he was "watching bank stocks for an opportunity, but at this point I'm waiting on the sidelines."

Takeover speculation has seemingly left the market and, with it, the premiums that investors would pay for some shares.

"You're seeing the effects of the bloom coming off the potential consolidation wave," Ms. Chung said. "Mergers don't seem to be at the forefront of investors' minds."

Credit quality has also become an issue.

"The best days of strong asset quality are behind us," Mr. Cassidy said. "People are becoming concerned about earnings estimates."

Also, overseas markets continued to raise worries. "There are concerns that the troubles in Latin America will lead to a disruption in the U.S. economy," Mr. Cassidy said.

Banks that focus on fee income-seemingly a safer haven from interest risk businesses-were hit with the broader pack.

Among big fee gatherers, Mellon Bank Corp. dropped 12.5 cents, to $66.375; Northern Trust Co. was off $2.125, to $82.125; and State Street Corp. fell 68.75 cents, to $71.125.

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