Trade in Banco Espirito Santo was halted after a 19 percent drop after Espirito Santo Financial Group (ESFG) , which owns 25 percent of BES, decided to suspend trading in its shares and bonds due to "material difficulties" at its own largest shareholder Espirito Santo International (ESI), while it assessed the impact of its exposure to ESI.
Read MoreTrading suspended on Banco Espirito Santo: Report
Auditors found material irregularities at ESI, a Luxembourg-registered holding company, in May, which BES said represented reputational risks for the bank. BES has sold debt issued by ESI, but ESI has failed to reimburse some of its debt holders on time. As yet it is unclear the extent to which BES and ESFG are exposed to any problems at ESI.
With concerns about the country's financial sector pushing Portugal's 10-year bond yields above 4 percent, the troubles have begun to revive memories of the country's debt crisis, when it was forced to seek a bailout in 2011 from the European Union and IMF.
Portugal exited the bailout last month but still has 6 billion euros in available funding for the banking sector.
Cashin said Thursday's selloff was "90 percent Portugal and Europe as a whole."
In terms of technicals though, Cashin warned that if the S&P 500 index falls below the 1,928 to 1,932 level, "that'll do some damage."
—By CNBC's Drew Sandholm, with Reuters.