Financial stocks took a breather Tuesday as investors shifted their attention back to technology shares.

Thrifts slipped from Monday's 52-week highs after Paine Webber Group downgraded Golden West Financial Corp. and Washington Mutual Inc. to "neutral" from "attractive." Golden West fell $1.375, or 2.43%, to close at $55.25 and Washington Mutual fell $1.875, or 4.08%, to $44.0625. MGIC Investment Corp., also downgraded by Paine Webber, fell $3.8215, or 5.33%, to $67.6875. The Nasdaq rose 5.58% as several technology companies reported better-than-expected earnings. The rise in tech stocks, coupled with downgradings of the stocks of thrift companies that had reached their price targets, resulted in mixed trading after a two-day surge for financial-companies.

The American Banker index of the top 50 banks was up 1.56%, and the index of the top 225 banks rose 2.66%. The Standard & Poor's 500 index climbed 2.2%, reflecting gains in technology stocks.

Gary Gordon, an analyst at Paine Webber who downgraded the thrifts, said financial stocks have had a nice run in recent weeks. Thrifts had been particularly strong in recent days, He said, but every surge must be followed by a period of caution.

The behavior of the market in the last two days is emblematic of a pattern this year in which investors have rotated their money between financial and technology stocks, depending on each sector's outlook, Mr. Gordon said. "When the Nasdaq was getting slaughtered, financials made a nice run," he said. "Financials were weak in the first quarter as the Nasdaq rose from 4,000 to 5,000."

A number of technology firms, including EToys Inc., the travel Web site Expedia Inc., and StarMedia Network Inc., reported lower-than-expected third-quarter losses Tuesday.

Nancy Bush, an analyst at Prudential Securities, said Tuesday's performance does not necessarily mean technology shares will stop sliding or that financial stocks cannot rise some more.

"We are headed for a messy fourth quarter, but it won't be disastrous," she said. "It is a good reason for investors to run to financial stocks for a safer harbor. But we are still going to have good days alternating with bad days. This is indicative of a confused market where suddenly the leadership has shifted away from tech stocks."

The market's move in recent weeks toward financial stocks indicates a lack of conviction about other groups rather than optimism about banks and thrifts, Ms. Bush said.

"We are going to continue to see ups and downs," she said. "There just isn't a lot of enthusiasm for any sector. No one can look at any market and say definitively that there is going to be significant growth. Things are far from settled."

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.