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U.S. stocks dropped Wednesday as turbulence at Credit Suisse revived fears of a banking crisis, eclipsing bets of a smaller interest rate hike in March following weak economic data.

Troubles at Credit Suisse have piled more pressure on the banking sector following the collapse of SVB Financial and peer Signature Bank, undoing relief from the emergency measures by U.S. authorities aimed at preventing a contagion.

U.S.-listed shares of Credit Suisse hit a record low, after its largest investor said it could not provide more financing to the bank, starting a rout in European lenders and bringing U.S. banks under pressure as well.

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European stock markets fell sharply Wednesday, amid the banking sector fallout. The pan-European Stoxx 600 index closed 3% lower, with all sectors in the red. Banking stocks sank 7%, followed by the oil and gas sector, down 6.6%.

Credit Suisse ended at the bottom of the blue-chip index overseas after the bank’s biggest lender, Saudi National Bank, said it would not be able to offer it more financial help, citing regulatory reasons. Credit Suisse closed down 24% after falling as much as 30% earlier in the session.

“Anything negative from any highly visible institution, in this case Credit Suisse, is going to have ripple effects across the financial sector,” said Michael James, managing director of equity trading at Wedbush Securities.

Meanwhile, data showed retail sales fell 0.4% last month from a 3.2% growth in January, while economists polled by Reuters had expected a contraction of 0.3%.

A separate report showed U.S. producer prices unexpectedly fell in February, offering some hopeful signs in the fight against inflation.

The data, which came on the heels of a reading on Tuesday showing a moderation in consumer inflation last month, fueled hopes of a less hawkish Fed policy as a cooling in demand could persuade the central bank to slow the pace of its rate hikes.

U.S. Treasury yields tumbled, with traders now expecting equal chances of a 25-basis-point rate hike and a pause at the Fed’s March meeting.

Amid several volatility halts, First Republic Bank fell 17.7% while PacWest Bancorp slid 17.2%, a day after shares of the battered banks staged a strong recovery.

Shares of their peer Western Alliance Bancorp as well as those of bank and brokerage Charles Schwab Corp. reversed early declines to rise 7.1% and nearly 2% respectively.

“In the financial markets, you just have to look at the ones that could weather through and don’t have as much investment risk on their on their portfolio,” said Jeffrey Carbone, managing partner at Cornerstone Wealth.

Big U.S. banks including JPMorgan Chase & Co., Citigroup and Bank of America Corp. fell between 1% and 6%.

The KBW regional banking index slid 1.4%, while the S&P 500 banking index dropped 3.7%.

Most of the 11 major S&P 500 sectors were in the red, with energy down 5.6% and leading declines.

At 11:57 a.m. ET, the Dow Jones Industrial Average was down 585.89 points, or 1.82%, at 31,569.51, the S&P 500 was down 60.75 points, or 1.55%, at 3,858.54, and the Nasdaq Composite was down 100.00 points, or 0.88%, at 11,328.15.

Weighing on the industrials-heavy Dow Jones, Boeing Co. shed 5.8% after the company on Tuesday said its aircraft deliveries fell in February.

Declining issues outnumbered advancers by a 4.63-to-1 ratio on the NYSE and by a 3.09-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 32 new lows, while the Nasdaq recorded eight new highs and 292 new lows.

© 2023 Thomson/Reuters. All rights reserved.

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