The major U.S. stock index futures finished mixed, but mostly lower on Friday despite U.S. Treasury yields taking a breather from their recent surge. The NASDAQ Composite was the lone winner as so-called growth stocks mostly outperformed value stocks viewed as more likely to outperform as the economy recovers from the coronavirus pandemic, reversing a recent trend.
In the cash market on Friday, the benchmark S&P 500 Index settled at 3913.10, down 2.36 or -0.06%. The blue chip Dow Jones Industrial Average finished at 32627.97, down 234.38 or -0.72% and the technology-based NASDAQ Composite closed at 13215.24, up 99.07 or +-.75%.
The S&P 500 Index and Dow were initially lifted by Facebook and energy shares, but both were dragged lower late in the session after the Federal Reserve’s decision to not extend a pandemic-era capital break for banks stoked a rise in bond yields and a sell-off in financial stocks.
Treasury Yields Soften after Spike Higher
Treasury yields took a break from a recent surge, but continued to hover near a 14-month peak at 1.742%. The yield on the U.S. 10-year notes spiked higher the previous session while trending higher the past seven weeks on rising growth expectations.
Several bond managers believe the recent pace of the rise in yields has been unsettling and also worry the market could be viewed as disorderly if the momentum continues.
Growth Stocks Outperform Value Stocks
So-called growth stocks helped the NASDAQ Composite mostly outperformed value stocks, or those that make up most of the composition of the Dow Jones Industrial Average. This reversed a recent trend that showed the Dow outperforming the technology-based NASDAQ.
Optimism about a $1.9 trillion fiscal package and the Fed’s promise to maintain its ultra-loose policy stance for years has accelerated a shift into economy-linked stocks, powering the S&P 500 and the Dow to record levels this week.
However, the NASDAQ Composite is still about 6% below its February 12 all-time closing high as technology and high-growth stocks have lost favor in recent months, with their valuations looking less attractive as Treasury yields rise.
On Friday, the S&P Growth Index rose 0.4%, outperforming the value index’s 0.1% dip.
FedEx Corp rallied about 6% after the U.S. delivery firm said quarterly profit jumped more than expected on higher prices and surging volume from pandemic-fueled e-commerce deliveries during the holiday shipping season.
Nike Inc shed almost 4% after the sports apparel maker missed quarterly sales estimates due to shipping issues and a pandemic-related slump at brick-and-mortar stores.
Banking Sector Retreats on Fed Decision
The S&P 500 Banks Index dropped 1.4% after the U.S. Federal Reserve said it would not extend temporary capital buffer relief put in place to ease a pandemic-driven stress in the funding market.
The central bank on Friday declined to extend a rule expiring at the end of the month that relaxed the supplementary leverage ratio for banks during the pandemic. The rule allowing banks to hold less capital against Treasurys and other holdings was implemented to calm the bond market during the crisis and encourage banks to lend.
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This article was originally posted on FX Empire