US stocks struggled at the open on Friday after the Federal Reserve said it would allow an emergency rule that temporarily relaxed capital reserve requirements for banks to lapse.
As business restrictions to stop Covid-19 spread across the United States and plunged the economy into crisis, the Fed last April allowed banks to exclude Treasury bonds and central bank deposits from capital requirements, aiming to calm markets amid fears of a liquidity crunch.
Before markets opened, the Fed announced it would let the change to the supplementary leverage ratio expire as scheduled on March 31, saying in a statement, "the Treasury market has stabilized."
It was unwelcome news on Wall Street, where tech and other growth stocks have suffered in recent weeks as bond yields rise amid worries that a recovering US economy will bring inflation with it -- a malaise that's spread to the wider market.
About 30 minutes into trading, the benchmark Dow Jones Industrial Average was down 0.8 percent at 32,592.03, while the broad-based S&P 500 was lost 0.5 percent to hit 3,897.67.
The tech-rich Nasdaq Composite Index fell 0.1 percent to 13,099.13.
Yields on the 10-year US Treasury bond had stabilized before markets opened, but had ticked up to 1.74 percent as trading commenced, which Peter Cardillo of Spartan Capital Securities blamed on the Fed's move that he viewed as inevitable.
"We are coming out of the pandemic and have to get back to normality," he said.
Bank stocks were hit hardest, with Citigroup losing 1.8 percent, Goldman Sachs 1.7 percent and JP Morgan 3.4 percent.