Financial stocks get smacked

NEW YORK (CNNMoney.com) -- Financials were among the hardest hit during Thursday's session as new credit concerns surfaced, sparking a steep selloff on Wall Street.

Among the biggest decliners was Goldman Sachs (down $11.05 to $182.25, Charts, Fortune 500), whose shares slipped more than 5.4 percent following a Wall Street Journal report that two of its hedge funds have suffered big losses in recent weeks and are selling some positions as a result.

Shares of troubled Wall Street bank Bear Stearns (down $7.07 to $114.05, Charts, Fortune 500) fell 5.4 percent in afternoon trade. Earlier in the day, an investment firm filed suit again the company claiming it did not do enough to prevent the recent collapse of two of its hedge funds invested in securities backed by subprime mortgages.

Financials helped lead stocks higher earlier this week, but concerns about the extent of credit market woes, which have kept the sector under pressure, again weighed on stocks Thursday.

"We can't quite get our hands around how big the problem is," said John Hughes, managing director at Epiphany Equity Research.

Investors around the world have been worried that tighter credit conditions could raise the cost of borrowing for companies, hurting corporate earnings and slow the buyout boom, which has helped prop up stock prices.

Other big financials including Citigroup (down $2.59 to $46.90, Charts, Fortune 500), Lehman Brothers (down $4.63 to $60.15, Charts, Fortune 500) and Merrill Lynch (down $3.49 to $74.68, Charts, Fortune 500) were all more than 4 percent lower in Thursday afternoon trade.

The KBW Bank Index (down $4.35 to $105.76, Charts) slipped about 4 percent, while the AMEX Securities Broker/Dealer index (down $8.48 to $223.01, Charts) lost 3.6 percent.