NEW YORK — Financial stocks plummeted Thursday as investors feared Greece's problems with sovereign debt would spread across the Atlantic to U.S. financial companies.
The KBW Bank Index, which tracks large banks, plunged 10% before recovering and was recently down about 5%.
"People are very, very concerned that what's happened in Greece will happen in Spain and Portugal," said Michael Yoshikami, president and chief investment strategist of YCMNet Advisors, which manages about $1 billion.
"It's a fear of outright collapse," he said. "This is exactly what happened in March of 2009 in the U.S., but now it's happening in Europe."
Some market participants pointed a finger at program trading. "Some program trade kicked in and took us all the way down," said one asset manager who isn't authorized to speak publicly. "Now we're back to where we were. It's bizarre."
Thomas B. Michaud, president of Keefe, Bruyette & Woods Inc., said, "The concern about what's happening in Europe is real." Nervousness served as a catalyst for the decline, and bank stocks have far outperformed the market this year, making them candidates for selling, he said. The KBW index has risen more than 20% so far this year while the Dow Jones Industrial Average is up about 0.4%.
Anton Schutz, manager of the Burnham Financial Services Fund, said that, besides Greece's debt problem, a rise in the London interbank offered rate, or Libor, a measure of banks' lending to one another, suggested European banks had grown nervous about troubles among one or more of their ranks.
"There's a general fear of banks refusing to lend to each other, particularly in Europe," Schutz said.
Among U.S. banks, Michaud argued that "liquidity is not an issue. Deposits have been one of the bright spots for banks and lending has not picked up," leaving banks with sufficient capital not to have to depend on the international money markets to fund their assets, Michaud said.