Bank stocks dragged broader markets lower for a second day Thursday, on growing fears that economic problems in Brazil will cascade into other regions.

Investors bid up shares of regional banking companies early in the day on positive fourth-quarter earnings reports. But the stocks could not sustain the pace as investors sought less volatile havens elsewhere.

"There are still bumps in the road on the international front," said Kevin Timmons, banking analyst with First Albany Corp.

The Dow Jones industrial average declined 228.63 points, to 9120.93, one of its largest drops on record. Big banks took it on the chin, with BankAmerica Corp. losing $2.9375, to $62.50; Citigroup $1.6875, to $50.50; Chase Manhattan $3.375, to $68.75; and J.P. Morgan & Co. $4.9375, to $101.625.

The stocks took big hits in the afternoon, when credit ratings agencies tempered their outlook for multinational lenders.

"You have growing concern about real and lingering problems throughout the Americas," said Joel Naroff, chief economist with U.S. Bancorp.

As Latin America's biggest economy, Brazil is seen as a bellwether for conditions that might be developing throughout the region. And on Thursday there was little good news coming from the country. Brazilian markets tumbled and interest rates soared as the fallout from Wednesday's devaluation continued.

"People are having a chance to think the about the impacts overall," said Thomas VanLeuven, a market strategy researcher at J.P. Morgan & Co. "Our current thinking is that different groups in the market are exposed to varying degrees."

At the same time, "Our general view of the market is that it's a bit pricey," Mr. VanLeuven said.

Investors were skittish about the prospect of a repeat of last summer's market rout, when stocks fell as banks wrote off some of their foreign portfolios.

"There is a greater focus on what some of the banks might be facing if we see a financial crisis similar to that which occurred in Asia," Mr. Naroff said.

The Standard & Poor's bank index fell 3.49% and the Nasdaq bank index 1.61%. The S&P 500 fell 1.80%.

Veteran investors urged restraint. "There's been a tendency in this market that if it wasn't great, get out," said Miles Seifert, chairman and chief investment officer with Grey, Seifert.

"But if you pay attention to the earnings that are coming out, you can see some really nice value," Mr. Seifert said.

Indeed, First Union Corp., National City Corp. and Wachovia Corp. all posted positive reports in the morning, only to see their shares slide in afternoon selling.

First Union was down $1.4375, to $61; National City $1.5625, to $71.50; and Wachovia $1.9375, to $87.50.

Among the biggest decliners in the regional group, KeyCorp was off $1.125, to $30.125; PNC Bank Corp. $2.375, to $49.3125; and Summit Bancshares $1.125, to $40.875

Selling continued up to the closing bell, and bonds fell on heightened concern about loans in foreign countries.

In the midst of the upheaval some investors tried to keep a positive attitude.

Bank stocks have all the makings to rally, Mr. Seifert said. "This the ideal environment for banks-no inflation, decent earnings, and the economy showing moderate growth."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.