By Yasin Ebrahim
Investing.com – The Nasdaq steadied Friday, as the spike in Treasury yields subsided, paving the way for bargain-hunting investors to snap up growth stocks following a rout a day earlier.
The Dow Jones Industrial Average fell 0.37%, or 123 points. The S&P 500 was up 0.23%, while the Nasdaq Composite was up 0.9%.
Facebook (NASDAQ:FB), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN) and Google-parent Alphabet (NASDAQ:GOOGL), were higher, while Apple (NASDAQ:AAPL), was flat.
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 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 pullback from the highs in Treasury yields was overdue as analysts had noted rates look overstretched given their recent run higher.
"As noted yesterday, [w]e think the TNX charts are due for a pullback to reduce overbought pressures," Janney Capital Montgomery said. But the overall trend here is still bullish, and firm expects the 10-year rate to possibly hit 2% this year.
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 strong start to the year, up more than 16% during the last month.
JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) led the declines, falling more than 1%.
Energy, meanwhile, was among the biggest gainers as oil prices stabilized a day after falling 9% on fears over the global recovery with another wave of Covid-19 cases hitting Europe.
Industrials were propped up 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 5% as the payments company is reportedly under investigation from the Justice Department for alleged anticompetitive practices in the debit-card market, according to Reuters.