NEW YORK (AP) — Fear rattled Wall Street, and stocks tumbled Friday on worries about what’s next to break 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.

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Such hikes can undercut inflation 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 money-losing 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.”

The Fed has already raised rates at the fastest pace in decades and made other moves to reverse its tremendous support for the economy during the pandemic. It’s effectively pulling money out of the economy, something Wall Street calls “liquidity,” which can tighten the screws on the system.

“This is a warning sign that the liquidity is draining, and the most vulnerable areas are starting to show it, which tells me the rest of the economy is not too far behind,” Schutte said.

Wall Street already in February gave up on hopes that cuts to interest rates could come later this year. Worries then flared this week that rates are set to go even higher than expected after the Fed said it could reaccelerate the size of its rate hikes.

Friday’s jobs report helped calm some of those worries, which led to some up-and-down trading. Overall hiring was hotter than expected, which could be a sign the labor market remains too strong for the Fed’s liking.

But the data also showed a slowdown from January’s jaw-dropping hiring rate. More importantly for markets, average hourly earnings for workers rose by less in February than economists expected.

That’s crucial for Wall Street because the Fed is focusing on wage growth in particular in its fight against inflation. It worries too-high gains could cause a vicious cycle that worsens inflation, even though raises help workers struggling to keep up with rising prices at the register.

Among other signs of a cooling but still-resilient labor market, the unemployment rate ticked up and the percentage of Americans with or looking for jobs edged up by a tiny bit.

Such trends mean traders are pulling back on bets the Fed later will go back to a hike of 0.50 percentage points later this month. They’re now largely betting on the Fed sticking with a more modest 0.25 point hike, according to CME Group.

Last month, the Fed slowed to that pace after earlier hiking by 0.50 and 0.75 points.

Such expectations, along with worries about banks, helped send Treasury yields sharply lower.

The yield on the 10-year Treasury plunged to 3.69% from 3.91% late Thursday, a sharp move for the bond market. It helps set rates for mortgages and other important loans.

Some of the sharpest drops on Wall Street came from banking stocks on worries about who else may suffer a cash crunch if interest rates stay higher for longer and customers pull out deposits. That would set up pain because a flight of deposits could force them to sell bonds to raise cash, right as higher interest rates knock down prices for those bonds.

Besides SVB Financial’s struggles, Silvergate Capital also said this week it’s voluntarily shutting down its bank. It served the crypto industry and had warned it could end up “less than well-capitalized.”

Stock losses were heaviest at regional banks. First Republic Bank tumbled 14.8%. It filed a statement with regulators to reiterate its “strong capital and liquidity positions.”

Charles Schwab lost another 11.7% after dropping 12.8% Thursday “as investors stretched for read-throughs” from the SVB crisis, according to analysts at UBS. The analysts called them “logical but superficial” because of differences in how companies get their deposits.

Larger banks, which have been stress-tested by regulators following the 2008 financial crisis, held up better. JPMorgan Chase rose 2.5%.

All told, the S&P 500 fell 56.73 points to 3,861.59. The Dow lost 345.22 to 31,909.64, and the Nasdaq dropped 199.47 to 11,138.89.