Stocks tumble as markets wonder what will break next

Fear rattled Wall Street, and stocks tumbled Friday on worries about what will break next under the weight of rising interest rates following the biggest U. S. bank failure in nearly 15 years.

The S& P 500 dropped 1.4% to cap its worst week since September. That’s despite a highly anticipated report on Friday showing pay raises for workers are slowing and other signals Wall Street wants to see of cooling pressure on inflation.

The Dow Jones Industrial Average fell 345 points, or 1.1%, while the Nasdaq composite sank 1.8%.

Some of the market’s sharpest drops again came from the financial industry, where stocks tanked for a second day.

Regulators took over Silicon Valley Bank in a surprise midday move after shares of its parent company, SVB Financial, plunged more than 60% this week.

The company, which served the industry surrounding startup companies, was trying to raise cash to relieve a crunch. Analysts have said it was in a relatively unique situation, but it’s still led to concerns a broader banking crisis could erupt.

Friday’s struggles came amid what strategists in a Bofa Global Research report called “the crashy vibes of March.” Markets have been twitchy on worries that high inflation is proving difficult to subdue, which could force the Federal Reserve to reaccelerate its hikes to interest rates.

Such hikes can undercut inf lation by slowing the economy, but they drag down prices for stocks and other investments. They also raise the risk of a recession later on.

Higher rates tend to hit hardest on investments seen as the riskiest and most expensive, such as cryptocurrencies and the furor around moneylosing Silicon Valley startups.

“There are starting to be cracks that are appearing,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth. “SVB is a warning for the Fed that their actions are beginning to have an impact.”