NEW YORK (AP) -- Stocks are back to falling on Wall Street Wednesday as worries worsen about the strength of banks on both sides of the Atlantic.
The S&P 500 was 1.1% lower in early trading, while markets in Europe fell more sharply as shares of Switzerland's Credit Suisse tumbled to a record low. The Dow Jones Industrial Average was down 418 points, or 1.3%, at 31,737 as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.8% lower.
Credit Suisse has been fighting troubles for years, including losses it took from the 2021 collapse of investment firm Archegos Capital. Its shares in Switzerland sank more than 28% following reports that its top shareholder won't pump more money into its investment.
Wall Street's harsh spotlight has intensified across the banking industry recently on worries about what may crack next following the second- and third-largest bank failures in U.S. history last week. Stocks of U.S. banks tumbled again Wednesday after enjoying a brief, one-day respite on Tuesday.
The heaviest losses were focused on smaller and mid-size banks, which are seen as more at risk of having customers try to pull their money out en masse. First Republic Bank sank 15.1%, a day after soaring 27%. KeyCorp fell 9%, and Huntington Bancshares dropped 7.3%
Larger banks weren't hit as hard but still fell. JPMorgan Chase slid 3.8%.
Much of the damage is seen as the result of the Federal Reserve's fastest barrage of hikes to interest rates in decades. The Fed has pulled its key overnight rate to a range of 4.50% to 4.75%, up from virtually zero at the start of last year, in hopes of driving down painfully high inflation.
Higher rates can tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank, which collapsed Friday, because high rates forced down the value of its bond investments.
The U.S. government announced a plan late Sunday to protect depositors at Silicon Valley Bank and Signature Bank, which regulators shut on Sunday, in hopes of shoring up confidence in the banking industry. But markets have since swung from fear to calm and back again.
Some of this week's wildest action has been in the bond market, where traders are rushing to guess what all the chaos will mean for future Fed action. On one hand, stress in the financial system could push the Fed to hold off on hiking rates again at its meeting next week, or at least refrain from the larger rate hike it has been signaling.
On the other hand, inflation is still high. While taking it easier on interest rates could give more breathing space to banks and the economy, the fear is such a move by the Fed could also give inflation more oxygen.
Weaker-than-expected economic reports released Wednesday may have allayed some of those worries. One showed that inflation at the wholesale level slowed by much more last month than economists expected. It's still high at a 4.6% level versus a year earlier, but that was better than the 5.4% that was forecast.
Other data showed that U.S. spending at retailers fell by more than expected last month, though spending in prior months was revised up. Manufacturing in New York state, meanwhile, is weakening by much more than forecast. Such data could raise worries about a recession on the horizon, but they may also take some pressure off inflation in the near term.
That caused the yield on the two-year Treasury to plummet. It tends to track expectations for the Fed, and it dropped to 3.87% from 4.25% late Tuesday. That's a massive move for the bond market. The two-year yield was above 5% just a week ago, at its highest level since 2007.
The yield on the 10-year Treasury dropped to 3.45% from 3.69%. It helps set rates for mortgages and other important loans.
The weak economic data pushed traders to build bets that the Fed may end up holding rates steady next week. That's a sharp turnaround from earlier this month, when the only options seemed to be another hike of 0.25 percentage points or an acceleration to 0.50 points.
In Europe, indexes tumbled on weakness from banks. France's CAC 40 dropped 3.7%, and Germany's DAX lost 3.1%. The FTSE 100 in London fell 3.2%.
They followed up on gains across much of Asia.
On Wall Street, companies in the oil and gas business also tumbled as the price of crude dropped more than 3%.
Halliburton fell 7.6%, and Schlumberger dropped 5.3%