The S&P 500 was 1% lower in afternoon trading, while markets in Europe fell more sharply as shares of Switzerland’s Credit Suisse dropped to a record low. The Dow Jones Industrial Average was down 324 points, or 1%, at 31,831 as of 2:20 p.m. Eastern time after earlier being down as many as 725 points. The Nasdaq composite was 0.1% 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 24.2% following reports that its top shareholder won’t pump more money into its investment.

“They’ve had issues,” said Anthony Saglimbene, chief market strategist at Ameriprise. “It’s just coming at a time when there’s more uncertainty and there’s less confidence in the banking system.”

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 over the 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. Larger banks also fell, but not by quite as much.

First Republic Bank sank 20.6%, a day after soaring 27%. JPMorgan Chase slid 5%.

Many analysts are quick to say the current weakness for banks looks nowhere near as bad as the 2008 crisis that torpedoed the global economy. But worries are nevertheless rising that pain spreading through the banking system could spark a downturn.

“When you have worries about contagion and a financial crisis, there is increasing risk of a global recession,” said Saglimbene, pointing to a more than 5% slide for oil prices. A weaker economy would burn less fuel.

“The regional banks are so important to small businesses, mid-sized businesses” by providing loans, he said. ”They’re a centerpiece of the economy.”

Much of the damage for banks 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 over the weekend, in hopes of shoring up confidence in the banking industry. But markets have since swung from fear to calm and back again.

There’s still great uncertainty about the banking industry as it struggles to absorb the past year’s blizzard of rate hikes following years of historically easy conditions. In his annual letter to investors, BlackRock CEO Larry Fink pointed to prior eras of rising rates that led to “spectacular financial flameouts,” such as the yearslong savings and loan crisis.

“We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the U.S. regional banking sector (akin to the S&L Crisis) with more seizures and shutdowns coming,” he wrote.

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 had been potentially 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 3.90% 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 3.47% 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 3.6%, and Germany’s DAX lost 3.3%. The FTSE 100 in London fell 3.8%.

They followed up on gains across much of Asia.

On Wall Street, companies in the oil and gas business had some of the sharpest drops as the price of U.S. crude fell below $70 a barrel for the first time since 2021. They led a widespread tumble within the S&P 500, where 85% of the stocks fell.

Halliburton fell 9.8%, and Schlumberger dropped 8.1%

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AP Business Writers Joe McDonald and Matt Ott contributed.