What happened

Shares of Argentinean financial stocks Grupo Supervielle (SUPV -4.16%), Grupo Financiero Galicia (GGAL -2.78%), and BBVA Banco Frances (NYSE: BFR) all plunged more than 14% in early trading Thursday, as the Financial Times reported that Argentina could be on the brink of another debt default. That's the bad news.

The good news is that, as of 1:35 p.m. EDT, Grupo Supervielle stock had recovered to a mere 0.4% loss, Grupo Financiero Galicia was down only 6.1%, and BBVA Banco Frances was off only 5%.

Map of Argentina, with a pin in Buenos Aires

Image source: Getty Images.

So what

So what sent these stocks tumbling in the first place, and is there good reason for them to be recovering?

FT reported that on Wednesday, "the cost of insuring against an Argentine debt default surged to its highest level since [Argentina's president Mauricio] Macri took office three-and-half years ago." Meanwhile, yields on Argentinean state debt surged to as much as 18% as Argentina's officials scrambled to defuse a crisis of rampant inflation -- hitting an annual rate of 55% this week -- and devaluation of the Argentine peso -- down 8% against the U.S. dollar since Monday, and down more than 50% over the past year.

None of this bodes well for the country's businesses. To point out just the most glaringly obvious effect: The less the Argentine peso is worth, the less these companies' profits are worth, when earned in the local currency.

Now what

Argentina's president is pulling out all the stops trying to find a solution to the crisis: He's trying everything from establishing "currency bands" to moderate the pace of devaluation, to imposing price controls to try to stop inflation entirely. But there's no guarantee he will succeed in the end. What's more, Macri is up for reelection in October.

If he loses that one, he may not even get the chance to succeed.