Wells Fargo & Co.'s stock plummeted Wednesday after it startled Wall Street with the announcement that second-quarter earnings would fall far short of analysts' expectations.

Other bank stocks were caught in the undertow, contributing to a drop in the general stock market.

Wells shares closed down $18.375, to $260.625, a 6.59% drop. The stock has dropped steadily from its 52-week high of $320.50 on March 11, dogged by problems from last year's acquisition of First Interstate Bancorp.

The Standard & Poor's bank index lost 9.51 points, or 1.69%, ending at 554.08, while the S&P 500 slipped 11.22 points, or 1.22%, to 907.5. The Dow Jones industrial average shed 119.88 points, or 1.51%, to close at 7842.43.

While analysts said they expect strong second-quarter reports from banks and view Wells Fargo's situation as isolated, some acknowledged that a handful of banks might disappoint. Chase Manhattan is not expected to meet its revenue projections, and J.P. Morgan & Co. said lower bond trading revenues will drag down its second quarter results, due out today.

"This is the first time in three or four years that there are a couple of banks with earnings problems," said Lawrence Cohn, bank analyst at Ryan, Beck & Co., West Orange, N.J. "It's been clear sailing for a while, but this could be the dawning recognition that tougher times are possible."

J.P. Morgan shares fell $3.125, to $106.375, while Chase shares shed $1.125, closing at $101.875.

San Francisco-based Wells Fargo said its earnings, due out Tuesday, would be about 30% below the first quarter's, or $1 per share below the analysts' consensus of $3.53 per share, as calculated by Zacks Investment Research.

Wednesday's drop made it the only bank stock in the American Banker index of the nation's 50 largest banks trading below its yearend 1996 price. Wells sold for $269.75 per share on Dec. 31.

First Interstate-related problems were blamed by the company again Wednesday. The second quarter shortfall was laid to "one-time, unexpected expenses" related to "various operational and back-office issues" involved in the integration of the banks.

Raphael Soifer, a banking analyst at Brown Brothers, Harriman & Co., New York, said this is the fifth straight quarter that Wells Fargo has fallen short of his expectations.

Mr. Soifer said analysts have had overly optimistic quarterly estimates for Wells Fargo, "which tended to keep the stock higher than it should be trading." Now, however, it has "become something of a low expectation stock."

He said the "unfriendly" nature of the First Interstate acquisition has caused most of Wells Fargo's integration problems.

Thomas Theurkauf, an analyst with Keefe Bruyette & Woods, New York, said he'd have a much clearer view of Wells' prognosis after the company releases its full earnings statement Tuesday. But, he added, "the consensus estimates have got to come down on this bank."

Veteran analyst George M. Salem, of Gerard Klauer Mattison & Co., New York, downgraded Wells from "buy" to "hold" in early June because of the merger problems.

"This is the last bank you'd expect to make these kind of execution errors," said Mr. Salem. The bank has "such a superb track record and reputation, I just can't imagine how they blew this one. They must have been too confident."

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