NEW YORK (

TheStreet

) --

Bank of America

(BAC) - Get Report

led the banking sector down Thursday with shares sliding 8% to $8.80.

The broad indexes all saw 4% declines, turning negative for the year, as burgeoning fears of the United States could be facing a double-dip recession were exacerbated by new global worries. At its intra-day low, the

S&P 500

moved into correction territory, falling more than 10% from its near-term high in late April.

Dr. Dan Seiver, a finance professor at San Diego State University, told

TheStreet

that "the economy is still growing and will probably continue to grow, but the markets are now realizing that there won't be a bounce-back from a staggering first half."

Seiver added that "the Federal Reserve's pretty much done all that it could do, and I don't see the point in further quantitative easing, since the rest of the world's buying our bonds like crazy. The problem is that the economy has no forward momentum. Households are still trying to clean up their balance sheets. Businesses are still sitting on a mountain of cash and are still concerned."

When asked about solutions to the U.S. economy's sluggish growth, Seiver said "the old fashioned solution is to have the government spend more money on our crumbling infrastructure -- all kinds of stuff that would pay off down the road and put people to work now."

The

KBW Bank Index

(I:BKX)

declined over 5% to 42.34, with all index's components declining for the session.

Large banks seeing 7% share declines included

Citigroup

(C) - Get Report

, which closed at $34.81;

Huntington Bancshares

(HBAN) - Get Report

, closing at $5.45;

Regions Financial

(RF) - Get Report

at $5.34; and

Zions Bancorporation

(ZION) - Get Report

, which ended up at $19.40.

Large banks seeing 6% declines included

Capital One

(COF) - Get Report

, closing at $43.10;

Fifth Third Bancorp

(FITB) - Get Report

, at $11.36;

SunTrust

(STI) - Get Report

, at $21.84;

State Street

(STT) - Get Report

, at $38.59; and

Wells Fargo

(WFC) - Get Report

, which closed at $25.74.

Moving over to the insurers, investors sold off

PMI Group

( PMI), with shares plunging 53% to close at 41 cents, after the mortgage insurer announced that it would have to stop writing policies in several states because of

inadequate capital levels

at its PMI Mortgage Insurance subsidiary.

Competing mortgage insurers also tanked, with

Radian Group

(RDN) - Get Report

down 16% to $2.90 and

MGIC Investment Corp.

(MTG) - Get Report

dropping 20% to close at $3.22.

Payment processors

Visa

(V) - Get Report

and

Mastercard

(MA) - Get Report

both pulled back, following their strong gains Wednesday, after

Mastercard reported very strong second-quarter revenue gains

.

Visa was down 3% to $84.99, and Mastercard was down 5%, closing at $322.60.

--

Written by Philip van Doorn in Jupiter, Fla.

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Philip van Doorn

.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.