Updated from 2:57 p.m. EDT with new stock prices

The financial sector pulled down the rest of the market Thursday as it sunk downward amid a slew of poor earnings.

Bank of America ( BAC), the nation's second-largest bank, slid 2.36% to $48.85 after third-quarter earnings tumbled 30.5% to 82 cents a share, or $3.7 billion. Analysts polled by Thomson Financial were seeking $1.06 a share, excluding special items. Revenue slid 11.8% to $16.3 billion, or $2 billion under consensus.

The Charlotte, N.C., bank joined multitudes of its compatriots, such as the lately beleaguered Citigroup ( C), in blaming its troubles on the fraying credit market. BofA's Global Corporate and Investment Banking division suffered an earnings plummet to $100 million from $1.67 billion last quarter and $1.43 billion last year. The bank also set aside $2.03 billion to cover credit losses -- sequential and year-over-year jumps of 12.2% and 73.5%, respectively.

Washington Mutual ( WM) missed earnings-per-share targets by 4 cents after a ballooning loan-loss provision and other effects of broad-market disruptions knocked third-quarter earnings down to $210 million, or 23 cents a share. Last year the Seattle bank made 77 cents a share.

Both Friedman Billings and Punk Ziegel cut WaMu stock to negative ratings. Shares sank 7.71% to $30.52, which, together with BofA's losses, helped drag on both the NYSE Financial Sector Index and the KBW Bank Index -- lately down 0.65% and 0.96%, respectively.

Similarly, Deutsche Bank downgraded E*Trade ( ETFC) after the online broker swung to a third-quarter loss of 14 cents a share vs. a 34-cent profit from continuing operations last year. It also sliced at least another 15 cents off its 2007 earnings guidance to between 75 cents and 90 cents a share after a steep downward revision last month. E*Trade stock fell $1.00, or 8.02%, to $11.47.

First Horizon National ( FHN) also swung to a third-quarter loss, pressuring shares down 5.39%, and Sovereign Bancorp ( SOV) gave up 7.70% after whittling down its operating earnings by more than half to 19 cents a share.

Insurer Allstate ( ALL) and banks BB&T ( BBT) and Umpqua Bank ( UMPQ) all came in below earnings targets. Shares lost 3.5% or more.

And mortgage insurer PMI ( PMI) dropped 12.91% to $23.21 after saying it will probably take a third-quarter loss of around $1.05 a share against last year's $1.16 profit. Analysts are seeking earnings of 75 cents a share.

Out of earnings, NovaStar Financial ( NFI) was one of the biggest price decliners after announcing that it's facing delisting from the New York Stock Exchange due to a change in its corporate structure, its current market capitalization and other factors.

The struggling mortgage lender now operates as a C corporation, having effectively terminated its status as a real estate investment trust last month by canceling its dividend . Shares surrendered some 19.38% to $5.95.

Elsewhere, mortgage-lending giant Countrywide Financial ( CFC) slipped after The Wall Street Journal reported that the Securities and Exchange Commission has opened an informal probe into stock sales by CEO Angelo Mozilo.

Last week, North Carolina state treasurer Richard Moore requested an SEC investigation on Mozilo, claiming that repeated changes to his prearranged stock-selling plan allowed him to "significantly" increase his stock sales ahead of Countrywide's plummet this year. Shares were down 4.84% to $16.51.

Among scarce financial winners was Bank of New York Mellon ( BK), which booked a continuing-operations profit of 73 cents a share, excluding expenses related to its Mellon merger earlier this year, among other items. The Street pegged the bank's profit at just 61 cents a share; last year, it made 51 cents a share. Its stock climbed $1.86, or 4.23%, to $45.82.

And Corus Bankshares ( CORS) recovered some of yesterday's steep losses despite missing Street views by a penny with third-quarter income of 61 cents a share, or $35.5 million -- about a 31% fall from last year. Shares were up 9.56% to $11.00 in unusually dense trading.