As bank stocks regained theirbearings with the rest of the market Thursday, analysts were groping for an explanation for the sector's poor performance during the tumultuous week.

The Standard & Poor's bank index rose 0.32%, and the S&P 500 rose 0.76%.

Analysts were puzzled by the failure of banks to outshine other stocks in a week when the market turned bearish. Most banking analysts had argued that banks would serve as a safe harbor in a rocky market because of the group's superior earnings.

But banks plunged even deeper than the rest of the market on Tuesday and Wednesday, which left industry watchers scratching their heads.

"There's just no good explanation for why banks have taken such hits," said David S. Berry, director of research at Keefe, Bruyette & Woods Inc.

"What's different about these stocks from a week ago? I don't have a good answer," said Thomas M. Finucane, portfolio manager at John Hancock Advisers Inc. "It might be fear."

Some investors say the market swings reflect changing sentiment about bank mergers-which, along with solid earnings, have been a key factor in generating investor interest in bank stocks.

This year, Mr. Finucane observed, the stocks of regional banks, which soared late last year on takeover speculation, started to fall as investors, impatient with the companies' continued independence, started to look elsewhere to place their bets.

Now that takeover premiums have been wrung out of the banks with $10 billion to $30 billion of assets, investors looking for something to sell have set their sights on the bigger banks.

Some investors say it is also time for acquirers to get their comeuppance after doing creative accounting for expensive deals.

First Union Corp. has earned the wrath of investors for spending $2.1 billion on Money Store Inc. and then writing off virtually all the company's book value.

"That means they think the company isn't any good and money has been wasted," said Fran Scola, portfolio manager at Touchstone Investments, a hedge fund based in Larkspur, Calif. that invests primarily in specialty finance companies. "It's almost impossible to value First Union after something like that."

Mr. Scola said he expects companies to do more aggressive writeoffs to preserve their earnings if the market falls further. "To do those kinds of writeoffs, you've got to do more mergers. And that means you get more stupid mergers."

The punishment First Union shares have taken this week-a 6% drop-echoes the hits companies such as First American Corp. and Regions Financial Corp. have taken this year since announcing big mergers that failed to offer the cost cuts and earnings benefits that investors expect.

The turmoil of the past two days started to subside Thursday, and a few banking companies started to regain lost ground.

Amsouth Bancorp., Birmingham, rose 4.4%. Star Banc Corp., Cincinnati, rose 1.9%, and so did State Street Corp., the Boston banking company that makes most of its money from trust and securities clearing. J.P. Morgan & Co. rose 1.8%.

But shares of American Express Co. fell 6.8% after chief executive Harvey Golub told analysts that Asia's economic problems would make it difficult for the company to continue it recent earnings pace.

Investors are still divided over whether banks can weather the stock market's latest storm. Mr. Finucane said he is now buying some of this year's beaten up "down-cap" companies for his closely watched mutual funds.

But Mr. Scola said no financial services companies are worth buying at current prices and that the market will fall further.

He compared the current situation on Wall Street to the Japanese stock market in 1989.

At the time, Japan's economy was widely perceived to be the world's soundest and soaring stock prices reflected this optimism.

Yet once stock prices started to fall, they continued falling because share values had risen so high compared to underlying earnings.

And shortly thereafter latent weaknesses in the economy became readily apparent.

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