The Fed’s fusillade of rate hikes over the year have shocked the system following years of historically easy conditions.

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. They also hurt prices for stocks, bonds and other investments.

Higher rates can tame inflation by slowing the economy, but they raise the risk of a recession later on. 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. 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 bank has been fighting troubles for years, including losses it took related to 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. Markets trimmed their losses toward the end of the day as the Swiss National Bank said it could provide some assistance to Credit Suisse “if needed.”īut that came only after a steep drop for Credit Suisse rattled investors worldwide. The Nasdaq composite rose 0.1% after erasing a steep decline. The Dow Jones Industrial Average lost 280 points, or 0.9%, after dropping as much as 725 points. The S&P 500 sank as much as 2.1% before ending the day with a loss of 0.7%, while markets in Europe fell more sharply as shares of Switzerland’s Credit Suisse dropped to a record low. NEW YORK (AP) - Markets shuddered Wednesday on worries about a spreading banking crisis and how badly it will hit the economy, and stocks and bond yields fell on both sides of the Atlantic.

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