Volatility gripped financial markets as new turmoil at Credit Suisse Group AG triggered a frantic rush for shelter, evoking memories of the 2008 global financial crisis and fueling speculation that major central banks will have to temper their hawkishness to avoid a harsher economic landing.

Equities pared a 2% drop in the S&P 500 after Switzerland's central bank and financial regulator said Credit Suisse will receive a liquidity backstop if needed, in an effort to stem the slump in confidence surrounding the troubled lender. A gauge of US financial behemoths such as JPMorgan Chase and Citigroup also pared losses, but fell to its lowest level since November 2020. After being downgraded to junk status by two major credit firms, First Republic Bank led a run on its regional peers in the United States.

After being relatively subdued for the majority of the year, Wall Street's so-called fear gauge reached its highest level since October. As investors fled to the safest parts of the market, gold reversed an earlier decline and the dollar strengthened against all developed-market peers except the Japanese yen.

Bond yields fell globally as rising financial-stability concerns prompted traders to abandon bets on further rate hikes and begin pricing in Fed rate cuts. They factored in a drop in the US policy rate of more than 100 basis points by year's end and reduced the likelihood of further tightening by the Bank of England and the European Central Bank.

Banks that do business with Credit Suisse rushed to protect their exposure to the lender on Wednesday, snapping up contracts that will compensate them if the crisis afflicting the Zurich-based firm worsens. The demand for the derivatives, known as credit-default swaps, was so intense that they spiked to levels that indicate the lender is in serious financial trouble - something not seen at a major global bank since at least the depths of the financial crisis.