Wall Street Close: Mixed end to the week as growth outperforms value

It was a mixed final day of the week on Wall Street; the S&P 500 index was flat, recovering from an early session sell-off that saw the index briefly drop under 3900 but slipping back from session highs in the 3920s to end the session around 3910. The late downside in the S&P 500 was a result of selling pressure in “value” stocks in the industrial, material and real estate sectors.

As a result of underperformance in these sectors, as well as in the financial sector after the Fed announced that it would not be extending pandemic-era supplementary leverage ratio (SLR) rules beyond the end of the month (meaning banks will have to hold reserve capital for their US treasury holdings from 31 March), the Dow underperformed, ending the session 0.7% lower.

The Fed’s announcement spurred some short-lived upside in US government bond yields, and some market commentators pointed out that going forward, higher yields are likely to be positive for US bank stocks. Meanwhile, Bank of America was out with a market calming announcement that it does not expect the expiration of SLR relief to hit its dividend plans. However, some desks pointed out that the Fed could now put limits on bank stock buybacks out of concern they might limit Treasury market functioning, which could weigh on financials.

Elsewhere, the Nasdaq 100 was an outperformer, as tech and “growth” stocks breathed a sigh of relief amid a more subdued US bond yield environment. The tech-heavy index ended the session with gains of about 0.6%, though is yet to reclaim the 13K level. The Russell 2000 ended the session up 0.9% and the VIX dropped 0.63 to back under 21.00.

In terms of other drivers, there wasn’t really that much. US/China trade talks are underway and don’t seem to be going particularly well, with both sides hurling public insults at each other, although the US State Department recently said the two sides were having serious discussions. Meanwhile, news out of Europe is mostly still negative, as EU authorities gradually come to the realisation that the bloc is in the grips of a third Covid-19 wave and countries re-enter lockdown (France being the latest to announce large-scale new restrictions on Thursday).