By Carla Mozee

Latin America's equity indexes fell Wednesday, weighed down by losses in material stocks and investor uncertainty about the U.S. financial system as it enters a new phase of government scrutiny.

Brazil's Bovespa fell 1.2% to 38,231.58. Trading in Sao Paulo was closed on Monday and Tuesday for the Carnaval holiday.

Mexico's IPC lost 0.5% to 18,200.70. Chile's IPSA fell 0.3% to 2,538.01, and Argentina's Merval slumped 2.1% to 1,009.80.

The benchmarks finished off their lows of the session, tracking an attempt by Wall Street to climb out of the red. The S&P 500 Index (SPX) and the Dow Jones Industrial Average (DJI) bounced off their lows, but each finished down 1.1%.

Stocks were under pressure as the U.S. Treasury Department began assessing capital injections into the country's 19 largest banks based on a so-called stress test. Regulators are looking at each financial institution's balance sheet, evaluating how much capital will be needed over the coming two years.

Investors in Latin America also received another piece of poor economic news from the U.S. on Wednesday, with sales of existing homes dropping 5.3% in January, the lowest sales pace in 12 years.

The health of the financial systems and economic conditions are important to Latin America, particularly for Mexico, which counts the U.S. as its biggest trading partner.

Among volume leaders, shares of Brazilian oil giant Petrobras (PBR) gained 3.2%, tracking a 6% jump in crude-oil prices to $42.50 a barrel on the New York Mercantile Exchange. Crude for April delivery surged following a report that weekly U.S. gasoline inventories fell by more than expected.

Mining giant Vale (RIO) shares dropped 4.6%, extending losses since the company last week posted a 47% decline in fourth-quarter profit. Gerdau (GGB) shares fell 2.8%, CSN (SID) lost 4.9%, and Usiminas fell 0.8%.

Itau (ITU) and Unibanco (UBB) shares each fell 1.1% after the newly merged Itau-Unibanco Multiplo posted a 16% profit decline to 7.8 billion reals ($3.28 billion) for the fourth quarter, and said loan provisions, or funds set aside to cover bad loans, rose 3.43 billion reals, up from 2.09 billion in the same period a year ago.

Shares of Redecard reversed earlier declines, and rose 3.9% to 25.66 reals. Citigroup Inc. (C) plans to shed its stake in the credit-card processor, according to a Redecard filing with Brazilian regulators, which is also available on the company's web site. The offering's size wasn't disclosed. Citi, which is among the U.S. banks that has received industry bailout funds from the government, currently owns a 17% stake in Redecard.

Itau Unibanco Multiplo reportedly said Wednesday that it's not likely to buy the stake from Citi.

Shares of other interest-rate sensitive banking stocks finished higher. Banco do Brasil rose 1.9%, Banco Bradesco (BBD) rose 2.4% and Banco Nossa Caixa rose 0.2%.

Analysts polled by the central bank continue to expect consumer prices to move lower this year, according to a survey released Wednesday. The survey's release was delayed by two days because of the holiday.

Analysts now expect the benchmark inflation measure to fall to 4.66%, down from 4.69% last week. The upper end of the central bank's inflation target is 6.5%. The projection for the key Selic rate slipped to 10.38% from 10.50% a week ago. The Selic now stands at 12.75%, and is expected to be cut when policymakers meet next month.

In Argentina, shares of steel tube maker Tenaris (TS) fell 5.1% ahead of the release of quarterly results. After market close, the company said its fourth-quarter profit tumbled 81% to $114.5 million, or 16 cents per American Depositary Share.

The company cited the decline on impairment charges of 85 cents a share related to its purchase of Maverick Tube Corp. Sales at Tenaris increased 23% to $3.24 billion.

Shares of Mexican mining company Industrias Penoles fell 8.2% a day after the company swung to a fourth-quarter loss of 1.42 billion pesos ($94.9 million).