Bank stocks plunged for a second day this week as investors continued to react to expectations of higher interest rates.

The American Banker index of 50 banks fell 4.15%, and the AB index of 225 banks fell 5.62%. Among the biggest losers of the day were Wells Fargo & Co., down $2, or 5.11%, to $37.125; Bank of America Corp., down $2.8125 or 5.81%, to $45.625; and J. P. Morgan & Co., down $6.0625, or 4.99%, to $115.375.

Bearish sentiment was evident throughout the market. Even the technology-fired Nasdaq was down 5.56%. The Dow Jones industrial average fell 3.17%; and the Standard & Poor's 500 3.83%.

Surprisingly, bank stocks fell along with bond yields. Dropping bond yields indicate that shorter-term interest rates will fall as well, and Wall Street believes that rising rates lead to falling bank stocks.

But on Tuesday banks fell despite a slight rise in bond prices, which tumbled Monday. On Tuesday the yield on the benchmark 30-year Treasury bond rose to a 28-month high of 6.62. On Tuesday it fell to 6.535.

"There is no justice in the world," Lawrence Cohn, a bank analyst at Ryan, Beck & Co. of Livingston, N.J., said during late afternoon trading. "The bond market is up three quarters of a point and we are still getting killed."

Mr. Cohn said investors are worried that the Federal Reserve will raise interest rates more than once this year. "That is not good for banks," said Mr. Cohn. "What drove banks down yesterday is what is weighing them down today."

- Tania Padgett

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