With the stock market near record highs, investors are on edge, and the slightest hint of trouble can cause near-panic. Given the news over the weekend that not only will the European island nation of Cyprus need a bailout, but it will also come at the expense of bank depositors, visions of Great Depression-era bank runs and rhetoric about the confiscation of funds led to massive sell-offs in overseas stock markets. Yet as Fool contributor Morgan Housel noted earlier this morning, Cyprus' bailout doesn't deserve the huge hype that it's getting. At least in the U.S., investors seem to have gotten that message, as the Dow Jones Industrials (DJINDICES:^DJI) have recovered from initial losses of more than 100 points to trade down just 31 points as of 10:55 a.m. EDT. Broader markets are down roughly half a percent.

Within the Dow, banking stocks took the most substantial hit, with Bank of America (NYSE:BAC) down more than 1% and JPMorgan Chase (NYSE:JPM) falling 1.2%. The biggest threat from the Cypriot bailout is that bank customers in other countries will leap to the almost certainly false conclusion that their own deposits are at risk. With FDIC insurance, U.S. depositors are protected, but with ordinary Americans already predisposed against the banking industry, anything that leads more bank customers to withdraw deposits will only put an additional strain on the financial system.

Elsewhere, Incyte (NASDAQ:INCY) declined 7.2% after the company reported that a patient taking its myelofibrosis drug ruxolitinib contracted a disease called progressive multifocal leukoencephalopathy. Although this is the first case of PML associated with the drug, Incyte will get an independent assessment of the findings and could have to take additional steps in order to ensure the safety of the drug.

Finally, J. C. Penney (OTC:JCPN.Q) soared more than 8% as two pieces of news helped boost the struggling retailer. One analyst said the company's Joe Fresh concept has had a successful launch among customers, while a research group examining the value of the retailer's real estate estimated that Penney could earn $1.2 billion in rental income by subletting store locations. Any move to unlock income will help the company, as it has been burning cash at an alarming rate during its restructuring.

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