U.S. stocks closed sharply lower on Thursday as concerns over Deutsche Bank sent its U.S.-listed shares to an all-time low and weighed on the broader financial sector.
The three major indexes hit session lows shortly after Bloomberg reported that approximately 10 hedge funds were reducing their exposure to the embattled European bank. Deutsche later told CNBC this is "typical" when doing business with hedge funds. The bank's U.S.-listed shares fell 6.67 percent, and dropped as much as 9.02 percent to $11.19, an all-time intraday low.
"When you look at what's going on in the Deutsche Bank options, you're seeing a lot of puts being bought," said Daniel Deming, managing director at KKM Financial. "So you're getting some concerns that this could turn into something bigger."
Deutsche's fall came the same day as Wells Fargo CEO John Stumpf testified in front of Congress on the scandal that has hit the bank.
In the past two weeks, the German bank has been hit with billions in fines from the U.S. Justice Department and reports that it will not be receiving help from the German government.
Jack Ablin, chief investment officer at BMO Private Bank, said the situation surrounding Deutsche Bank could be "creating uncertainty in the market," adding that one day there are reports that "Angela Merkel wants nothing to do with Deutsche Bank, and then you get another story saying Berlin is getting ready to bail them out."
"The volatility that we're seeing today ... is a symptom of a larger, underlying condition, mainly the lack of earnings growth" and high stock valuations, said Scott Clemons, chief investment strategist at Brown Brothers Harriman. "This means that the market is prone to overreact to external factors. Today, that's OPEC and Deutsche Bank."
The S&P 500 fell 0.9 percent, with health care and financials leading decliners. The Dow Jones industrial average fell as much as 247.60 points, before closing about 200 points lower.
"I think we're in a very fragile situation when it comes to the market," said Peter Cardillo, chief market economist at First Standard Financial. "These waves of selling tend to cause technical erosion."
Deutsche Bank US-listed shares intraday