The Dow fell for a second straight day Friday, paced by a decline in bank stocks as bond yields retreated sharply after hitting more than one-year highs earlier this week.
The Dow Jones Industrial Average fell 0.71%, or 234 points. The S&P 500 was down 0.07%, while the Nasdaq Composite was up 0.76%
The United States 10-Year yields, which trade inversely to prices, retreated Friday after hitting 1.75% as the Federal Reserve said it would not extend the supplementary leverage ratio exemptions– a measure that had allowed banks to hold lower capital reserves – beyond the March 31 deadline.
Under the exemption, banks weren't required to hold capital against the Treasuries held on their balance sheets. But with the exemption set to end, banks likely sold Treasuries – contributing to the recent rate spike -- into month-end ahead of the deadline to ensure they would comply with the ratio.
"What this means is that banks will have to take further steps toward reducing Treasuries on their balance sheets before month-end in order to comply with the SLR now that Treasuries and reserves will have to be included again," National Bank Australia said.
The action from the Fed and subsequent move in yields dealt a blow to banking stocks, sending financials nearly 1% lower. Still, the retreat comes as financials have made a strong start to the year, up more than 30% during the last month.
JPMorgan Chase (NYSE:JPM), down 2%, and Wells Fargo (NYSE:WFC), down 3%, led the declines.
The pain in value stocks - those that tend to move in tandem with economy -- proved to be tech's gain, with the Fab 5 ending the day mostly higher.
Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN) and Google-parent Alphabet (NASDAQ:GOOGL), were higher, while Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) ended in the red.
Energy, meanwhile, ended flat even as oil prices stabilized a day after falling 9% on fears over the global recovery with another wave of Covid-19 cases hitting Europe.
Losses in industrials were kept in check by a 6% surge in FedEx Corporation (NYSE:FDX) after the delivery company's Q4 results topped Wall Street expecting, driven by a record holiday quarter.
In other news, Visa (NYSE:V) slumped 6% as the payments company is reportedly under investigation from the Justice Department for alleged anticompetitive practices in the debit-card market, according to Reuters.