While regulators and investors focus on what caused Thursday's massive stock market selloff, one issue seemed almost lost in the shuffle: Europe's growing debt crisis.
It was worries about the debt issue that caused the initial selling on Thursday, which apparently triggered massive computerized sell programs and sent the Dow down nearly 1,000 points before it recovered.
"The market was already under pressure because of the growing recognition that the crisis in Greece has gone from being a Greek problem to a regional problem and now it's morphing into a global problem," Mohamed El-Erian, Pimco's CEO, told Reuters.
Stocks fell again in volatile trading Friday amid continued worries about what caused the meltdown and whether it would happen again. Fears about the debt crisis also hurt confidence, though the focus was clearly on the markets themselves.
Even less noticed was Friday's employment report, which showed a huge increase in April payrolls but a higher unemployment rate.
"It's amazing that you could say the jobs report may not be the big mover on a Friday of a jobs report number," Bill Schultz, chief investment officer at McQueen, Ball & Associates said. "I think we're watching overseas and what's going on in the equities market."
Whatever is preoccupying the markets, there is a sharp debate about where stocks go from here. Though many experts advise caution, others say investors can take advantage of the market sell-off, which has seen the major indexes surrender most of their 2010 gains.
“It’s like somebody pressed a reset button on the market,” said Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “So we’re looking for an opportunity to add some positions and to establish new positions.”
Once the mystery over Thursday's meltdown is resolved, however, investors are likely to return to the fundamentals—including the global debt crisis.
The predictions are certaintly sobering. A parade of economists and market pros—though many of them renowned for their pessimism—told CNBC and CNBC.com that the problems in Greece may soon spread.
Here's a sampling of some of them:
Bove: US Banks Are Exposed
The European debt crisis could quickly spread to US banks, which are heavily exposed to Europe, banking analyst Dick Bove told CNBC.com.
Bove, of Rochdale Securities, released research showing the massive exposure US banks such as JPMorgan Chase, Morgan Stanley and Citigroup have to European debt.
"There is simply a growing recognition that Greece has got to default," Bove said. "The riots in the streets showed the decision to repay the debt was not going to be made by the people in Germany, France and Switzerland. It's going to be made by people in Greece and they're not going to repay it.
"Anyone seeing the riots is going to recognize that this government is going to be thrown out," Bove added. "And anything replacing this government is going to be far more leftist leaning and they're going to repudiate."
Global ramifications could be profound, with major US banks heavily exposed to Greek debt.
Five companies alone have $2.5 trillion in exposure, with Citigroup at 77.7 percent of the total, Morgan Stanley at 65.6 percent, and JPMorgan Chase at 59.8 percent, according to Bove's research.
"What you're faced with is you simply do not know which countries are solvent, which countries are insolvent," Bove said. "You do not know who the counterparties are for these insolvent countries, so you run for the hills." (Click for full story)
Roubini: "Tip of the Iceberg"
Despite Thursday's unexplained surge in selling, stock markets are being driven lower by fears over the global economy and the debt crisis spreading, economist Nouriel Roubini, of RGE Monitor, told CNBC.
Greece is just the "tip of the iceberg" for the problem of accumulating debt, and it must be solved by raising taxes and cutting spending, if not default will follow, Roubini said.
"My concern is eventually, not this year, it may spread to Japan and in the US," he said.
"In my view there's going to be a restructuring of the debt in Greece," Roubini added.
Euro zone members who borrow in their own currency actually act more like emerging-market countries who borrow in other currencies, because they don't have control over monetary policy, he said.
There are concerns about public debt problems in Europe expanding, there are signs of weakening in China, and the weak retail sales figures in the US were weak, he said.
"The fundamentals are those that are driving these markets," said Roubini.
But the debt problems are not confined to Europe, because printing money to finance debt is likely to lead to inflation and "at some point in the future even the bond market in the US risks to snap," he added. (Click for full story)
Marc Faber: US Facing Same Crisis
Marc Faber: US Facing Same Crisis
The US is facing the same dire economic problems as Greece, Marc Faber, author of the Gloom, Doom and Boom Report, told CNBC.
"Many people haven't woken up to the severity of the US fiscal crisis," Faber said by phone. "The only difference for the US from Greece is that it can print more money."
Faber said that most western countries as well as the US cannot pay for unfunded liabilities and that more sovereign defaults will happen in the future.
As for Greece, Faber said the country was basically bankrupt and the EU will most likely have to bail it out.
"That's good for Greece," Faber went on to say, "but it's a big negative for the EU to have to come up with the funds."
Asked about Thursday's plunge of the Dow, Faber pointed to reasons beyond the Greek government's vote for an austerity package and the following protests.
"It's not that Greece alone produced the market sell-off," said Faber. "It was a trigger but the market was probably overbought and we were ahead of economic fundamentals." (Click for Full Story)
Rogers: "Years of Currency Turmoil" Giving money to Greece will not solve its problems, it will only postpone them, as liquidity injections in other parts of the world have done, investor Jim Rogers told CNBC late Thursday. "As I've been saying to you all before, 2010 and 2011 are going to be years of currency turmoil not just in Europe but all over the world and Greece is bankrupt," he said. "We can paper it over for a while, just as we papered over some of the problems in the US and the UK but the problems are going to come back," said Rogers. (Click for Full Story)
Giving money to Greece will not solve its problems, it will only postpone them, as liquidity injections in other parts of the world have done, investor Jim Rogers told CNBC late Thursday.
"As I've been saying to you all before, 2010 and 2011 are going to be years of currency turmoil not just in Europe but all over the world and Greece is bankrupt," he said.
"We can paper it over for a while, just as we papered over some of the problems in the US and the UK but the problems are going to come back," said Rogers. (Click for Full Story)