It's too risky for investors to step back into major U.S. bank stocks, even after Tuesday's ripping selloff shaved more than 4 percent off of JPMorgan Chase and nearly 3.5 percent off of Goldman Sachs, says bank analyst Richard Bove.
The U.S. financial sector led the market sharply lower Tuesday amid fears that Italy will try to exit the euro zone and leave the single currency. European banks stocks were crushed, and yields spiked on Italian bank debt. The S&P financial sector was down 3.4 percent.
"It would be irresponsible," to jump in now, said Bove, an analyst with Hilton Capital Management. "You have no idea what's going to happen near-term and you understand that it's the psychology that's got to calm down first."
Bove said there would be an immediate crisis affecting Italy's banks and economy should the country try to exit the euro. Over the weekend, Italian President Sergio Mattarella blocked the formation of a government that would have been decidedly against the euro.
The anti-establishment Five Star Movement, Italy's biggest party, and the far-right League party picked euro-critic Paolo Savona as their economy minister. The two parties, both critical of Europe's single currency, had won more than half the votes in March's parliamentary elections. Mattarella vetoed the choice and instead asked Carlo Cottarelli, a former IMF official, to form a temporary government, but both parties object to him and a new vote is now expected in late July.