A sell-off in bank stocks dragged down the broader markets Tuesday as investors cashed in gains from recent rallies.
The KBW Bank Index fell 5.78%, the Dow Jones industrial average fell 1.96% and the Standard & Poor's 500 fell 2.21%.
"The group has had such a good run, and so the market for financials is running out of steam and there's also been some profit-taking," said Frank Barkocy, the director of research at Mendon Capital Advisors Corp.
Additionally, rumors of an impending failure of a large bank dampened stocks, though no specific banks were mentioned, Barkocy said.
Decliners were widespread.
JPMorgan Chase & Co. fell 4.1%, Bank of America Corp., 6.4%, Wells Fargo & Co., 4.8%, PNC Financial Services Group Inc., 5.1%, U.S. Bancorp, 6.1% and Citigroup Inc. fell 46 cents, to $4.54.
Among the regionals, SunTrust Banks Inc. fell 7%, Capital One Financial Corp. fell 6%, BB&T Corp. fell 4.7%, KeyCorp fell 7.7%, Comerica Inc. fell 3.8% and Huntington Bancshares Inc. fell 31 cents, to $4.25.
Wells Fargo & Co. had its biggest slide in two weeks, even after saying it will pay back government bailout funds soon.
Some market players seemed worried about banks' future losses, observers said.
"The future for the banks is not as muddy as it was two quarters ago, but it's still not clear," said Don Wordell, the manager of the RidgeWorth Mid-Cap Value Equity Fund. "The market can't sustain these huge moves."
Other financial services sectors had a bad day as well.
American International Group Inc. fell 21% and MetLife Inc. fell 7.4% after analysts said the insurers' shares have risen too far, too fast.
Financial companies have led the S&P 500's 48% rally since March 9, gaining 123%. September is historically the worst month for U.S. stocks, with the benchmark index losing 1.3% on average since 1928, according to data compiled by Bloomberg.