Beware the October curse.

That's how traders are explaining much of the sharp downturn in bank stocks Wednesday, the third straight day of decline.

Although fear of higher interest rates and concerns about how computers will perform at the turn of 2000 are the major reasons why bank stocks have been so volatile, the "October fear factor" is playing its part, the analysts said.

''Excluding 1998, the year the Dow Jones industrial average gained 12.57%, October has been the worst month for the stock market in each of the last 10 years,'' said James Bohart, an analyst with Birinyi Associates in Westport, Conn. The great crashes of 1929 and 1987 were in October, and the largest point-decline in the history of the Dow was in October 1997.

Mr. Bohart said the Dow tends to become more volatile in October because "it's earnings season, and people get jittery around that time."

In the last six years, the sharpest decline in the Standard & Poor's bank index was Oct. 27, 1997, and few bank stock investors will not forget Oct. 8, 1998, when the index hit a bottom of 507.59 -- 35.6% off its high, set in July 1998.

Last October brought concerns about the impact of foreign financial woes on the U.S. economy: troubled hedge funds and their impact on the banks that had lent to them and less than ideal third-quarter bank earnings.

This October also is not shaping up well. At Wednesday's close, the Standard & Poor's bank index was down 3.12%, to 576.66 -- not much above the year's low so far of 569.48 on Sept. 29.

The largest banks took the biggest beatings Wednesday. Among the biggest losers of the day included Wells Fargo & Co., down $2, or 4.8%, to 39.6875; J.P. Morgan & Co., down $4.375, or 3.84%, to 109.50; and KeyCorp, down $1.25, or 4.83%, to 24.625.

Some market observers said people are reacting emotionally rather than rationally. "I think the October effect is overstated," said Frank Barkocy, a senior analyst at Keefe Managers in New York. "There are enough other concerns in the marketplace besides looking back at historical performance."

Despite "pretty good earnings," investors still are concerned about higher interest rates, said the analyst. From the banks that have reported so far, "numbers are running in the low double digits, margins have stabilized, loan demand and efficiency ratios have improved, and the major deterioration in credit quality has not materialized," said Mr. Barkocy. "On top of that, the group is selling close to a 50% discount to the S&P 500, so the decline in bank stocks is absolutely frustrating."

Robert B. Albertson, head of Pilot Financial Inc. a financial hedge fund in New York, discounts the October-fear theory. Nor does he agree with colleagues who blame part of the downward trend to fears concerning computer problems as 1999 turns into 2000.

The market's obsession with interest rates is "irrelevant,'' said Mr. Albertson, a long-time believer that rising interest rates do not hurt banks. "And the market's concerns that something bad will happen because of Y2K are erroneous."

"My message is this: There is not a shred of evidence that trouble is coming" regarding Y2K, said the veteran bank stock analyst. "And that's ditto on credit quality and ditto on earnings."

Scott J. Brown, an economist at Raymond James & Associates, St. Petersburg, Fla., said the market is down because it is prepping itself for bad news for two upcoming government economic reports: the Commerce Department's retail sales report, which comes out today, and the Labor Department's Producer Price Index, which is due Friday.

If they show inflationary trends, which could prompt the Federal Reserve to raise rates, it could spell more trouble for banks.

There are believers and nonbelievers in the October theory, and some observers are agnostics.

"You never know," said Mr. Brown. "If enough people believe it, it may happen. September is the worst month historically, but October is the one we remember."

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