A coordinated rate-cutting effort by the world's central banks failed to push bank stocks and the broader markets higher Wednesday.

Financial stocks and the broader market seesawed throughout the day, with financials opening sharply lower and later recovering, only to falter late in the day.

The KBW Bank Index fell 2.88%. The Dow Jones industrial average dropped 2%, to 9,258.10, and the Standard & Poor's 500 dropped 1.13%.

After Japan's Nikkei index slid more than 9% Wednesday, central banks around the world, including the Federal Reserve Board, announced interest rate cuts meant to stanch the massive sell-offs in the global markets.

The Fed cut its key interest rate 50 basis points, to 1.5%.

Though stocks, particularly banking ones, rallied Wednesday afternoon, the lift did not last.

Brett Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Research, said the brief rally was the result of "deep-value investors" scouting out institutions they believe "will make it" through the crisis. "The riskier institutions, with tighter capital ratios and credit issues, will continue to be volatile."

The KBW index sank more than 10% in early trading. However, Joseph C. Morrissey, managing director of bank and thrift stocks at Boenning & Scattergood Inc. of West Conshohocken, Pa., said the sell-off was actually not as bad as it could have been.

"Banks in some cases have bottomed out, but the overall sell-offs could have been a lot more accelerated," Mr. Morrissey said.

While the market reaction Wednesday suggested investors were not sure the Fed's rate cut would be enough to help banks, Mr. Morrissey said that most banks should be able to weather the storm, particularly since the yield curve is at its steepest since 2002.

"But we've got a long road ahead of us to get to that point," he added.

Peter McCorry, a senior trader at KBW Inc.'s Keefe, Bruyette & Woods Inc., said that while Wednesday's move to shore up the markets may not have been received with open arms its impact should be felt over time.

"In the longer term, all of the safety nets that the Fed and the global banks are casting are certainly going to be a positive," Mr. McCorry said.

"The sentiment behind the global coordinated effort to bolster the system is more important than the amount" by which rates are cut, he said. "We're fighting a confidence battle, and it had to be an united front."

Chris Nichols and Steve Brown, senior bank executives at Pacific Coast Bankers' Bancshares, wrote in a research note issued Wednesday that the Fed's emergency cut "will further hurt banks' net interest margins and increase prepayments to the extent that the credit markets get restored." However, the cut will have "a large psychological effect."

The agreement between Citigroup Inc. and Wells Fargo & Co. to extend negotiations in their legal battle over Wachovia Corp. until Friday sent Citi and Wachovia shares down. Citi shed 5%, and Wachovia lost 3.6%, while Wells gained 4.3%.

Bank of America Corp. fell 7% after settling with federal and state regulators over charges that it misled clients on auction-rate securities by claiming the products were liquid and cash-like when they were not. Other decliners included Regions Financial Corp., which fell 8.4%; Comerica Inc., which dropped 10.7%; Huntington Bancshares Inc., which fell 11.5%.

Gainers included Bank of New York Mellon Corp., which rose 7.9%; Fifth Third Bancorp, which rose 8.2%; State Street Corp., which rose 9.1%; and PacWest Bancorp, which climbed 11.8%.

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