Bank Stocks Slump on Dubai Worries

NEW YORK (TheStreet) -- The debt problems of Dubai weighed on the U.S. financial sector Friday with the major banks slumping as investors wrestle with a lack of clarity on the group's exposure to the situation.

The major equity indexes took a big hit in early action, falling as much as 200 points, shortly after the opening bell for the holiday-shortened session, which is the first chance for U.S. stocks to react to since Dubai World, the emirate's main corporate entity, said it would ask creditors for a "standstill" on paying back its $60 billion debt until at least May.

Losses have mitigated somewhat since then, and the Dow Jones Industrial Average was off a little less than 150 points in recent trades.

Although the early word is that direct exposure of U.S. banks to the problem is most likely minimal, their stocks still slid with Bank of America(BAC Quote) down 2% to $15.64; Citigroup(C Quote), losing 1.3% to $4.11; Goldman Sachs(GS Quote) faltering 2.4% to $164.95; JPMorgan Chase(JPM Quote) giving back 1.4% to $41.57; Morgan Stanley(MS Quote) off slightly more than 3% to $30.46; and Wells Fargo, down 1.7% to $27.35.

Richard Bove of Rochdale Research issued a note Friday saying the situation in Dubai was still in the speculative phase but that U.S. bank exposure is "thought to be minimal." He added that the indirect fallout "could be sizeable" as the global financial system will be upset until the situation is worked out -- a process that could take months -- and said commercial real estate could be the area where U.S. banks feel the impact.