Stocks Fall on Bank Jitters Despite First Republic Rescue

Investors are cautious heading into the weekend after a volatile week in which the fallout from two bank failures has rippled through financial markets. On Thursday, 11 U.S. banks stepped in to rescue First Republic Bank with a flood of cash totaling $30 billion. Fears about the stability of banks have also spread across the Atlantic, hitting beleaguered Swiss lender

Credit Suisse.

“Sentiment is highly fragile,” said

Edward Park,

chief investment officer at U.K. investment firm Brooks Macdonald. “There’s this feeling of ‘What’s next?’ and no one’s getting excited too quickly.” 

Despite Friday’s losses, both the S&P and the Nasdaq are on track for weekly gains of 1.3% and 4.1%, respectively, while the Dow was poised for a small weekly loss. Some investors are hopeful that the fallout from bank failures will lead the Federal Reserve to pause its recent flurry of interest-rate hikes at next week’s meeting.

Shares of First Republic plunged 25% on Friday as analysts said it still faced a dire outlook. The bank has suspended its dividend and borrowed heavily from the Federal Reserve’s discount window. Shares of other regional lenders also dropped sharply, with

PacWest Bancorp

down 12% and

Zions Bancorp

down 6.3%.

The uncertainty has prompted some investors to add to assets typically seen as safe to hold in times of market volatility, such as government bonds and gold. 

In bond markets, the yield on the 10-year U.S. Treasury note fell to 3.384%, from 3.580% Thursday. Yields fall when prices rise. Front-month gold futures rose 2.4% to $1964.90, on track for their highest settle since April of last year. 

Bitcoin, whose proponents sometimes call it a form of digital gold, touched an intraday high of nearly $27,000, its highest price so far this year, according to CoinDesk. It was recently trading at $26,382, up 6.8% from its price at 5 p.m. ET on Thursday.

New survey data from the University of Michigan on Friday showed that consumer sentiment declined in early March for the first time in four months, even before bank failures unleashed the recent bout of market volatility.

All 11 sectors of the S&P 500 were in negative territory on Friday. Among the bright spots in the stock market was

FedEx.

Shares of the delivery giant jumped 8% after it raised its outlook and said it would reduce costs.

In energy markets, futures on benchmark Brent crude oil tumbled 4.2% to $71.60 a barrel. 

Overseas, the pan-continental Stoxx Europe 600 fell 1.3%. Shares of Credit Suisse dropped 8% in Swiss trading as investors remained wary despite a lifeline from the

Swiss National Bank.

The cost of insuring against default on some of Credit Suisse’s debt has more than doubled this week. 

In Asia, major indexes closed with gains. Hong Kong’s Hang Seng added 1.6% while Japan’s Nikkei 225 gained 1.2%. Shares of some of Japan’s largest banks closed down 8% to 10% for the week, after bouncing off their recent lows.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Alexander Osipovich at alexo@wsj.com