Updated from 2:02 p.m. EDT

The sliding major indices and negative analyst research kicked financial stocks lower Wednesday as the market reeled from a 12.2% drop in the July pending-home sales index to 89.9, per the National Association of Realtors.

The NYSE Financial Sector Index pulled down 172.76 points, or 1.9%, to around 8,942.84, pressured by the housing data and a number of suffering mortgage concerns. Lender IndyMac Bancorp ( IMB) fell 9.8%. Mortgage investors Impac Mortgage ( IMH) and Luminent Mortgage Capital ( LUM) fell 11.8% and 16.7%, respectively. Subprime lender NovaStar Financial ( NFI) fell 13%.

Also pressuring the NYSE index were Lehman Brothers ( LEH) and Morgan Stanley ( MS), which lost 3.7% and 2.1%, respectively, after both had their third-quarter earnings estimates cut at Citigroup.

The analyst cited an expected decline in fixed-income-trading results and chopped down Lehman's per-share estimate by 55 cents to $1.40 a share. Morgan's estimate was lowered by 15 cents to $1.60.

Credit Suisse ( CS), meanwhile, was downgraded to equal-weight from overweight at Lehman, after which shares traded down 1.7% to close at $66.22. Brookline Bancorp ( BRKL), based in Massachusetts, slumped 3% on a Friedman Billings cut to market perform from outperform. Shares closed off 38 cents at $12.13.

The KBW Bank Index sank 1.9% to 104.79.

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