After two days of rallies, bank stocks and the broader market retreated Tuesday.

The KBW Bank Index fell 5.41% after rising 5.52% Monday and 6.72% Friday.

"The index has been up 20% in the last week, so I think there's just profit taking," said Cassandra Toroian, the president and chief investment officer of Bell Rock Capital LLC in Rehoboth, Del.

The Dow Jones industrial average fell 2.72% Tuesday, and the Standard & Poor's 500 fell 2.31%.

"We actually think through the end of the year, the market is going to be fairly strong," Ms. Toroian said. "Investors are starting to digest all of the bad news and look beyond — the psychology is turning around a little bit more, which is good."

Shares of SunTrust Banks Inc. fell 11%. The Atlanta company said it drew down another $1.4 billion under the Treasury Department's Capital Purchase Program, bringing the total take to $4.5 billion, the maximum SunTrust is allowed.

Merrill Lynch & Co. Inc. fell 4.9%. The Wall Street Journal reported late Monday that top Merrill executives, including John Thain, its chairman and chief executive, would not be getting bonuses this year.

The Journal also said that Morgan Stanley's CEO, John Mack, would not take a bonus for the second year in a row. Morgan Stanley fell 8.2%.

JPMorgan Chase & Co. fell 6.9%. Reuters reported Tuesday that Judge George Daniels of the U.S. District Court for the Southern District of New York denied a motion by the company to dismiss a lawsuit by two former brokers claiming that it owed them overtime pay, and that it improperly deducted losses from their commissions after customers challenged certain transactions.

Bank of America Corp. fell 5%, Wells Fargo & Co. fell 6.6%, and Bank of New York Mellon Corp. fell 10.2%.

Other decliners included Zions Bancorp., which dropped 4.4%; Regions Financial Corp., which fell 8.7%; U.S. Bancorp, which fell 4.7%; and KeyCorp, which fell 4.6%.

Citigroup Inc. rose 0.8%.

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