The New York Stock Exchange weakened early in Friday, just after the Central Bank (Fed) told banks it was lifting a temporary measure to ease their required capital, taken during the pandemic to support activity.
An hour after the opening, the Dow Jones lost 0.74%, the Nasdaq index, which had experienced its largest drop in three weeks the day before, dropped 0.26% and the S&P 500 dropped 0.50%.
Thursday, the Nasdaq, which concentrates technology stocks sensitive to fears of inflation and tightening financial conditions, had plunged 3.02% to 13,116.17 points. The index of flagship stocks Dow Jones had dropped 0.46% to 32,862.30 points and the S&P 500 had dropped 1.48% to 3,915.46 points.
Before the open, futures were in the green, trying to bounce back from Thursday’s poor session, but clues nosedived when the Fed announced it was lifting a banking measure (SLR) taken during the pandemic which had temporarily relaxed the rules on capital requirements in banks.
“Just before the market opened, the Fed said it was not extending the rule that allowed banks to relax their capital levels,” said Peter Cardillo of Spartan Securities.
Financials immediately plunged, with the S&P 500 banking sector falling 1.63% at 2:00 p.m. GMT. Bank of America lost 2.68%, Wells Fargo 3%, Goldman Sachs 1.79%.
Although this measure to ease required levels of capital was temporary, the banks wanted it to be extended.
“We are coming out of the pandemic and things have to get back to normal and it is harder,” said Peter Cardillo.
The dollar accelerated its rise after the Fed’s decision and, more importantly, bond rates which seemed to calm down started to rise again, above 1.74% at the opening. These yields on 10-year Treasuries rebounded to levels close to their 14-month high.
The session promised to remain volatile in the absence of macroeconomic indicators and while several contracts on financial products expire on this quarterly day called the Four Witches.
FedEx gained almost 6% after announcing good results Thursday evening with quarterly turnover up 23% for the express carrier, driven by the surge in online commerce.
Nike lost 4% after mixed quarterly results the day before due in particular to stocks blocked by congestion at US ports.