Financial stocks saw choppy trading around the flat line Monday as investors took a breather following a barrage of miserable earnings last week that finished with a huge Friday pullback.

Recently, the

NYSE

Financial Sector Index fell 0.2% to 9,006.83 and the KBW Bank Index dipped 0.1% to 100.35.

Among the decliners was

Wintrust Financial

(WTFC) - Get Report

, whose earnings dropped by about one-third year over year to $9.9 million, or 40 cents a share, under significant pressure from what the Illinois bank called "an extreme mortgage banking environment."

Revenue was off 7.4% to $77.7 million. Analysts polled by Thomson Financial were looking for income of 64 cents a share, less special items, on revenue of $88 million. Shares surrendered $1.67, or 4.4%, to $36.67 in recent trading.

Struggling mortgage investor

Luminent Mortgage Capital

( LUM) announced that CFO Christopher Zyda has resigned effective year-end, having declined to relocate to Philadelphia from Luminent's San Francisco headquarters, which is currently being shut down. Controller Karen Chang will succeed him. Shares were losing 5.4% to $2.11.

Friedman Billings cut both

Cathay General Bancorp

(CATY) - Get Report

and student lender

Nelnet

(NNI) - Get Report

to underperform, assigning price targets of $25 and $18, respectively. Shares were sliding 4.8% to $27.95 and 3.6% to $17.82.

American Express

TheStreet Recommends

(AXP) - Get Report

and

Discover Financial Services

(DFS) - Get Report

, meanwhile, were the hardest hit of a group of credit card issuers and mortgage lenders downgraded by Lehman Brothers.

The analyst also cut the entire mortgage-finance sector to negative, saying that broad-market tremors will continue to spur mushrooming credit losses over the next few years. The specialty-finance sector was lowered to neutral from positive. AmEx gave up 1.9% ahead of a scheduled postbell earnings release today, and Discover was down 1.5%.

Countrywide

( CFC) was also among the downgraded stocks, but the struggling mortgage lender nonetheless

rebounded 2.3% to $15.58 following last week's tumble.

Elsewhere in positive territory, troubled New York broker

Bear Stearns

( BSC) inched higher after striking a new deal in which it and China's Citic Securities will

buy $1 billion worth of each other's shares.

The firms also intend to meld their existing businesses in the rest of Asia for establishment of a new 50-50 joint venture based in Hong Kong, and they plan on mutually developing new financial products and services in China itself. Bear shares ticked up 96 cents to $117.37.

Frontier Financial's

( FTBK) third-quarter earnings climbed 15% from last year to 46 cents a share, or $20.2 million, for a 2-cent earnings beat. Shares of the Everett, Wash., bank rose $1.26, or 6.1%, to $21.84.

And, after an initial slip out of the gate, shares of Chicago's

Privatebancorp

(PVTB)

added 1.5% to $28.65 despite a penny-shy third-quarter profit of 42 cents a share.