Traders were focused on Portugal's Banco Espirito Santo, under scrutiny since accounting irregularites surfaced in its holding companies in May. Parent company Espirito Santo International delayed coupon payments relating to some short-term debt securities, spooking markets further.
Read MorePortugal concerns compound global stock selloff
"I think this is one where there's an initial reaction. The linkages are not clear between the corporate entity that missed the payment and the bank—and the bank and everything else. Authorities in Europe are saying this is ring-fenced, and when you look at the market reaction, coming in a pretty complacent market, the CDS rate only got back to where it was in May," said Sinche, referring to credit default swaps. "In the context of crisis we've seen in Europe, this is only a little tiny piece."
The five-year credit default swaps for Portugal rose to 216 basis points, but Sinche notes that level remains less than half the high over the last year and is about the same level as in May.
Jack Ablin, CIO of BMO Private Bank, said he would hope the weakness in Europe, which appears to be worsening, prods the European Central Bank to take action. "They really do need QE. I think it's a lesson for the Fed not to err on the side of restraint," he said.
The Fed has been winding down its quantitative easing program, but has been reassuring markets it will not move quickly to raise rates. Stocks rallied Wednesday after the Fed released minutes of its last meeting, but traders focused on the QE wind-down as the selloff got underway Thursday.
"I'm not worried about it. I think we could actually rally back. There's a lot of people on the sidelines with cash, and cash is just burning a hole in peoples' pockets," he said.
Ablin said he is worried about the earnings season. But if earnings do present trouble for stocks, he expects a rebound.
"I think it represents an opportunity," he said of the selloff. "Earnings will be over, and we'll focus on what's driving the market—the economy, liquidity and momentum. We're still all in."
Ablin said one trouble spot for the broader equity market is small caps. "The Russell 2000 is probably the most dangerous major market in the world. It's wildly overvalued .It's way overdone," he said.
The Russell is having its worst weekly loss in two years, down more than 4 percent.