Banking stocks fell with the broader markets Tuesday as the earnings season got off to a lackluster start.

Two closely watched banking indexes closed the day lower.

The KBW Bank Index of 24 of the country's largest banks fell 1.68%, to 46.24. The KBW Regional Banking Index of 50 smaller institutions fell 0.7%, to 47.01.

Peter Cardillo, chief market economist at Avalon Partners in New York, said an "ugly start" to the earnings season with disappointing results from Alcoa Inc. on Monday prompted investors to close their positions after last week's gains.

"The trade deficit coming in at a higher level certainly didn't help — I think both factors weighed on the market today," Cardillo said. "It gave traders an opportunity to take profits and of course, you know, the markets did quite nicely last week."

Banking stocks were also weighed down by more talk that the Obama administration was considering a fee on financial institutions to help close the budget deficit and cover the costs of last year's bailout program.

Thomson Reuters reported that a fee on banks could raise more than $100 billion, and that banks' payouts would be based on their liabilities.

Some of the largest banks had a bad day.

Bank of America Corp.'s shares fell 3.43% after the Securities and Exchange Commission filed a lawsuit alleging that the company failed to disclose massive losses at Merrill Lynch & Co. before shareholders voted on Merrill's sale to B of A. After the markets closed, Brian Moynihan, B of A's new chief executive, announced some management changes.

Citigroup Inc. fell 11 cents, or 3.03%, to $3.52 a day after the head of its retail bank, Terri Dial, stepped down and investors await further management shake-up after the company's board meets next week.

Shares of most of the country's other largest banking institutions traded in the red.

JPMorgan Chase & Co. fell 2.34%; Wells Fargo & Co., 2.5%; PNC Financial Services Group Inc., 1.03%; SunTrust Banks Inc., 3.52%; Fifth Third Bancorp, 1.88%; KeyCorp, 1.84%; and Regions Financial Corp., 1.11%.

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