US: Stocks end lower after Fed tightens banking regulations

[NEW YORK]The Dow and S&P 500 closed lower on Friday while tech stocks gained, as markets weighed bond risks and a Federal Reserve decision to tighten capital requirements for banks.

Investors were rattled before markets opened after the Fed said a temporary rule that allows banks to exclude central bank deposits and Treasury bonds from capital requirements will expire at the end of the month.

That raised fears that banks will dump their bond holdings, which would cause yields to rise further and constrain borrowing. Traders have watched as the 10-year US Treasury bond climbed in recent sessions, which was yielding over 1.7 per cent as markets closed.

Tech stocks have been the hardest hit by the rise in bond yields, which is also fuelled by inflation fears. But investors bought up cheaper tech stocks on Friday, and the tech-rich Nasdaq Composite Index closed 0.8 per cent higher at 13,215.24.

The benchmark Dow Jones Industrial Average, which had managed to climb amid recent turbulence, closed 0.7 per cent lower at 32,627.97, while the broad-based S&P 500 lost 0.1 per cent to close at 3,913.10.

"Investors were buying back technology stocks today," Karl Haeling of LBBW said, but the Nasdaq was down 0.8 per cent for the week, as was the S&P 500. The Dow was also 0.5 per cent in the red.

Assuming bond yields don't increase rapidly, Mr Haeling predicted "the market will still go higher". Bank stocks were hit hardest, with Goldman Sachs and Citigroup closing 1.1 per cent lower and JPMorgan Chase losing 1.6 per cent.

Visa was down 6.2 per cent after The Wall Street Journal reported the US Justice Department is probing potential uncompetitive practices by the company in the debit card market.

AFP