Wall Street stocks were mostly in the red early on Friday after the Federal Reserve opted to not extend a Covid-19-era capital break for banks fuelled a rise in bond yields and a financial sell-off.
As of 1530 GMT, the Dow Jones Industrial Average was down 0.82% at 32,593.46 and the S&P 500 was 0.33% weaker at 3,902.57, while the Nasdaq Composite started out the session 0.23% stronger at 13,146.82.
The Dow opened 268.46 points lower on Friday, extending losses recorded in the previous session as the yield on the 10-year Treasury note soared, fuelling another tech sell-off.
In focus on Friday was the 10-year Treasury yield, sitting just below yesterday’s 14-month high at around 1.72%.
However, the day’s main market-mover was the central bank decision to not extend a rule expiring at the end of March that allowed banks to hold less capital against Treasurys and other holdings during the Covid-19 pandemic.
The Fed’s move was seen as potentially having some adverse effects by traders, with some thinking that it could send yields even higher.
Markets.com‘s Neil Wilson said: “Rates backed up a touch and we saw some movement on NDX futs as the Fed announced it will let the SLR exemption expire as planned on Mar 31st. Following yesterday’s spike, there was not a lot of bid coming back in bonds.
“There is some debate about whether ending the SLR exemption will lead to selling of Treasuries by banks, but what is obvious is that the Fed is confident to let things move now and this means we should be seeing higher yields still. It’s a good sign that the Fed is confident in the way some of the market plumbing like repo markets are functioning well and some of the supports for banks can be removed.”
Shares in FedEx were also in focus after the delivery agent topped third-quarter expectations on both the top and bottom lines, while Nike stocks were under the cosh after posting weaker than expected quarterly revenues.
No major corporate earnings or data points were slated for release on Friday.