Banking stocks closed lower after falling sharply in afternoon trading, reflecting investor fears about the direction of the economy.

The KBW Bank Index fell 2.2%, to 45.38.

William Rutherford of Rutherford Investment Management LLC said the "deep sell-off" of banking stocks late in the day was "a mystery" and may have reflected investor worries of more losses in commercial real estate, among other things.

Regions Financial Corp. helped drag down the sector, reporting disappointing earnings on worsening credit trends. Regions' shares fell 7.18%.

It was a rocky day, with markets rallying early in the session on better-than-expected fourth-quarter results from Apple Inc. and Travelers Cos., indicating renewed consumer confidence. The markets fell into the red late in the day thanks to a sell-off in the financial and materials sectors.

The Dow Jones industrial average fell 0.03% and the Standard & Poor's 500 index fell 0.42%.

Zions Bancorp. was the rare bank to have a good day, rising 6.47% after lower provisions helped it post a fourth-quarter loss that was narrower than Wall Street had expected.

The other largest banking companies closed down, including JPMorgan Chase & Co., 1.96%; KeyCorp, 2.41%; M&T Bank Corp., 1.69%; PNC Financial Services Group Inc., 2.5%; and Bank of America Corp., 1.4%.

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