Wall Street down as Credit Suisse sparks fresh bank selloff

Volatile trading gripped Wall Street Wednesday as fears of a banking crisis were revived. Stocks plunged sharply, then paired losses, with the major indexes closing mixed on the day. The Dow shed just under 1 percent, the S&P 500 shed 7 tenths of a percent, and the Nasdaq closed up a hair. Trouble at credit Suisse piled more pressure on the banking sector. U.S. listed shares of the Swiss bank hit a record low after its largest investor said it could not provide more financing to the bank.

But by the end of the day, Switzerland's central bank pledged to fund credit Suisse with liquidity if necessary. The panic came just one day after shares of U.S. banks staged a strong recovery, with regulators enacting emergency measures to prevent contagion after the collapse of SVB financial and signature bank. Some investors believe aggressive U.S. interest rate hikes by the Federal Reserve caused cracks in the financial system.

Zhou Yang, head of global product management and marketing at Market Vector Indexes, equates the Fed's policy with using a wrecking ball instead of a scalpel. In using this wrecking ball, they can kind of throw it at a target, but what we realize is that this ball is coming back. So some of the damage that we're seeing now is really kind of what was happening from their intervention with monetary easing. And so we've yet to see what's going to happen with monetary tightening and what damage is going to come out of that. First Republic Bank tumbled more than 21 percent, while PAC West plunged nearly 13 percent. Trading was halted several times for volatility. Big U.

S. banks including JPMorgan Chase, Citigroup and Bank of America also dropped. U.S. Treasury yields fell, with traders now expecting equal chances of a 25 basis point rate hike and a pause at the Fed's meeting next week.

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