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U.S. stocks tumble the most in 10 months after U.K. Brexit vote

  • ASSOCIATED PRESS

    Trader John Romolo worked on the floor of the New York Stock Exchange today.Global stocks and the pound plunged after Britons voted to leave the European Union.

U.S. stocks plunged the most in 10 months, joining a selloff in global risk assets on speculation that the the U.K. decision to leave the European Union will hamper worldwide growth.

Equities sank to session lows in afternoon trading, with the Dow Jones Industrial Average sliding more than 600 points. The S&P 500 Index extended losses after falling below the 2,050 level, an area where other pullbacks during the prior two months found a floor. Banks and industrial shares capped their worst single-day declines in more than four years.

“Market participants are right to be concerned,” said Dean Maki, chief economist of investment firm Point72 Asset Management. “This is a legitimate risk-off event. We’re likely to see weaker growth as a result of this, and it’s appropriate that markets are reacting to this. Exports are likely to be weaker and earnings are a function of exports. U.S. exporters are going to have to deal with a stronger dollar again.”

The S&P 500 fell 3.6 percent to 2,037.35 at 4 p.m. in New York, the most since August 24. The benchmark erased its gain for the year, which reached as much as 3.7 percent earlier this month. The Nasdaq Composite Index tumbled 4.1 percent, the most in almost five years.

The victory of the “Leave” campaign stunned many investors who’d put wagers on riskier assets over the past week as bookmakers’ odds suggested the chance of a so-called Brexit was less than one in four. The pound plunged the most in 30 years and European equities dropped as investors weighed the implications for the global economy.

The day’s turbulence was accompanied by a chorus of central-bank assurances that policy makers stand ready to intervene. Governor Mark Carney said the Bank of England could pump billions of pounds into the financial system, while the European Central Bank said it will give banks all the funding they require to counter market turmoil. The Federal Reserve said it was “carefully monitoring” financial markets.

As if results of the U.K. vote wasn’t enough, today is also the date of the annual rebalancing of FTSE Russell’s stock indexes, a procedure that reliably exacerbates trading. In 2015, the reconstitution helped fuel a jump in volume to more than 10 billion shares, the seventh-highest total of the year.

Overnight, stock futures on the benchmark fell far enough to reach trading curbs that blocked further losses. Declines today also came after markets had rallied during the past week on optimism the U.K. would vote to remain in the EU, with the S&P 500 rising 1.7 percent in four sessions.

Banks Battered

Banks plunged after rallying the most in five weeks Thursday, with Citigroup Inc. down the most in four years. JPMorgan Chase & Co. and Goldman Sachs Group Inc. lost more than 6.7 percent. Caterpillar Inc. and Boeing Co. sank at least 5.1 percent after pacing the Dow’s biggest gain in three months Thursday. Energy shares fell 3.2 percent as crude decreased more than 4 percent.

“Fundamentally, this probably doesn’t impact many U.S. companies that aren’t invested in the U.K., though it impacts sectors like financials because it looks like there won’t be a Fed rate hike for a little bit longer, though even they don’t really know,” said Tim Ghriskey, who oversees $1.5 billion as managing director and chief investment officer at Solaris Asset Management.

Traders abandoned bets on future interest-rate increases well into 2017, after expectations for higher borrowing costs this year had crept up yesterday on optimism the U.K. would remain in the EU. Odds of a Fed move by February plunged to 17 percent from 52 percent Thursday, while probability of an actual rate cut before the December meeting rose to 13 percent.

The vote comes at a time when uncertainty already plagues U.S. stocks, with questions around the Fed’s ability to stoke growth after the worst month for hiring since 2010, a four- quarter decline in corporate profits, price-earnings ratios that are close to a decade high and a presidential election looming in the fall.

The S&P 500 plunged 11 percent in its worst-ever start to a year before recovering through April. It’s virtually been stuck in place since, struggling to hold above the 2,100 level that has capped three rallies since November. It fell from that perch again after closing above it Thursday for the first time in two weeks.

Fallout from the U.K.’s secession vote leaves global investors as reliant on their hedges as any time since the selloff that rocked markets in January and February. Trading of options and derivatives over the last week has risen in instruments that gain in times of market turbulence, among them futures on the CBOE Volatility Index. The measure of turmoil known as the VIX jumped 40 percent today, the most since August.

With assistance from Bailey Lipschultz, Joseph Ciolli, Carolynn Look, Oliver Renick, Lu Wang and Eric Lam.

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  • UK millennials are now saying … Oh No! It was a protest vote and didn’t really want the change. I would vote to stay if we voted today. Too bad … so sad … to live without a clue.

  • As an investor I believe this is great for England. I’d be happy to see Hawaiexit. Good rid dens to the reprobates in DC and thier $19+trillion debt, and the thieft of our earned wages.

    • England’s economy is collapsing and you think this is great? Already, people there are losing their jobs. What, exactly, is wrong with you?

      And what could make more sense that Hawai’i leaving the United States? You would be able to find the silver lining in the cloud of abject depression that would sweep over the island. Great analysis!

      • Stop Lying Klasti! Spreading your “Doom and Gloom” mantra again. The EU exit, is a self determination strategy of who they truly are: One of the main producers of the EU. In fact The are the third in the EU when it comes to the GDP.All the others like Greece are just the Hang on Sloopy countries…..waiting to get another “Bailed” out ! Funny though how the US dollar has strength from all this.
        Of course those of us who know business,knows that this is only temporary and Great Britain will Bounce back. Starting next week.This not only good for great Britain ,but also good for the USA…..not so good for Obama! my analysis.LOL

        • Oh my goodness. You’re listing the reasons that they should have stayed in, and why their markets are being so badly punished now. Why is it that you think that money is fleeing England?

          Never mind. You’ll never understand.

        • An article on reasons to leave–http://www.vox.com/2016/6/22/11992106/brexit-arguments

      • Seems like an exaggeration. Everything that was there before the vote: the factories, highways, universities, etc etc is still there. It did not evaporate.

        From what I have read, the EU was good for corporations, less good for labor. This may be a boon for the British worker.

        It will also allow the UK to negotiate previously restricted trade agreements with countries outside the EU.

        As per the stock market, Ben Stein claimed that this is what traders do: stampede the public with doom and gloom, buy it up and then sell at a profit.

      • Collapsing is simply hyperbole and fear mongering. No doubt the economy takes big hit but to claim that their economy is collapsing exists only in your imagination. You suffer from myopia as the issue is not solely related to the economy but of a larger issue related to unchecked immigration and its consequent effects on the UK society. Obviously the voters decided that the immigration issue was paramount to taking back control of their country at the expense of economic turmoil and uncertainty.

  • So Trump a) blamed Brexit on Obama, b) said Brexit is a good thing, c) bragged about how he can profit from Brexit, d) claimed he predicted Brexit, and e) in an interview on June 1 drew a complete blank when asked a question about Brexit — HE DIDN’T KNOW WHAT THE INTERVIEWER WAS ASKING ABOUT! His completely unhinged press conference in Scotland, where no local officials showed up because they regard him as toxic, revealed the intellectual vacuum that resides under his buffoonish hair weave.

    • Trump was Right!….ever wonder why Obama creates such a Reverse effect ,where ever he goes? Not just the 2012 Congress,where many Dems lost their seats,because they backed Obama. Same here has happened with The Mouth piece…Prime Minister David Cameron,who resigned.lol Who’s next Germany’s Angela Merkle or Francois Hollande….”Toxic ” ,only to those who are Libs!
      btw.you know that Scotland’s officials are full of Socialist Libs right? Reason they remain in the UE….That’l soon change.when they run out of other peoples money. BS indeed!

    • I watched the live press conference. You have misrepresented what transpired at the conference. Trump suggested that the Brexit vote may have been a result of the voters influenced in part by an outsider such as Obama coming to their country to dictate to them how to vote. Trump speculated that such a crass move by Obama could have been perceived by the voters as condescending and disrespectful. In Trump’s opinion, Brexit is a good thing…so did the majority of voters…any problem with that? He can profit from Brexit…what did he say and why is it inherently wrong for Trump or anyone else for that matter to profit from Brexit? If people profit from it and their lives improve economically then isn’t that the whole point? He did not say he predicted the outcome and left it up to the voters to decide. Moreover, you should do more homework before making claims that you cannot substantiate lest your credibility suffer even more. On 6/1 Wolff’s interview with Trump went like this:
      “Brexit, your position?” Wolff asked.
      “Huh?” Trump responded.
      “Brexit,” Wolff said.
      “Hmm,” Trump said.
      “The Brits leaving the EU,” Wolff said.
      “Oh yeah, I think they should leave,” Trump said.

      For you to claim that Trump “DIDN’T KNOW WHAT THE INTERVIEWER WAS ASKING ABOUT!” is patently false as Piers Morgan on Twitter contradicts your claim:
      Piers Morgan Verified account
      ‏@piersmorgan

      @Kia_Mak I spoke to Trump re EU referendum 3 weeks ago, he was very aware of the vote. BREXIT is not a mainstream phrase in US.
      4:44 AM – 1 Jun 2016

      You really ought to utilize your bsdetection meter.

      • “Brexit” may be over the heads of people, like Trump, who depend on The National Enquirer for their news, but anyone who has followed this issue to any degree at all knows the term. For a Presidential candidate to be ignorant of it displays appalling ignorance. The idea that Trump could criticize someone for being crass boggles the mind.

        • So do you dispute what Piers Morgan testified to? He stated Trump was “VERY AWARE OF THE VOTE.” Having trouble reading or having read the quote, do you still persist in your fabrications?

  • If you are in the stock market, you should get the hell out. The only reason the stock market is seemingly doing well despite the very terrible economy, high unemployment and
    millions on the dole from the government is because of low to nonexistent interest and bond rates. People are therefore being persuaded to get into stocks which buoys up the
    stock market but it is eventually going to crash leaving many bankrupt. It is all an illusion. You must as well go to Las Vegas and gamble because that is all you are doing
    when you are into stocks.
    The better options are buying precious metals, and commodities which you can store yourself. Putting money into banks are a bad idea as well given the many federal restrictions and controls now on depositing and withdrawing your money. For example did you know that the money you deposit into a bank becomes the bank’s money and no longer legally your
    money according to banking laws. This is why banks can have a so called “banking holiday” and prevent you from withdrawing your money. Or worse, they could declare a
    “bail in” and confiscate your money and use it to pay off their debts and you have no legal recourse.
    I know this is hard to believe but I would urge you to check on the banking laws and you will find that what I am saying is correct.
    Back in the day, people did not trust banks and for very good reason.
    In Japan, the banks are now charging what they call “negative interest” where they charge you for having them safeguard your money .
    Which is why, people there are buying home safes in droves rather than put their money in banks.

    • fiveo, do you seriously think that individuals buy and store commodities such as metals, agriculture, meat, livestock, oil, sugar, coffee? That’s what commodities are, you know. I’m in the stock market; everyone with 401K’s and most IRA’s are in it, too. Since I opened my IRA, it’s up 47.232%. If I left my $ in Bank of Hawaii, my $1,000 deposit would earn me 20 cents in one year! Then the bank will loan it out and make $180 on my $1,000 in the same year! Isn’t that insane?!!So following your advice, savers who keep $1,000 at home will have that same amount in 12 years. Savers who bank their $1,000 will have $1,002.40 in their account in 12 years. That $1,000 you loaned the bank will balloon to $7287.59!! That’s 2619 times(!!!) what they paid to borrow YOUR money!!! In one of my mutual fund/stock market mix, I’d have $1472.32 in the same period! That’s over 196 times(!!!) what the bank offers their customers!! Ahhh, the power of MODERATE stock market investing and the power of compound interest. LOL, fiveo, let’s see how long your money will last, if you’re not investing in the stock market! And compared to Las Vegas, your odds of winning slots might be 6%. That means you’re almost 17 times more luckily to lose ALL! your money than win! Nice odds, yes? Oh, and fiveo, your “Bank money” is federally insured to more than $100,000. Have you seen any local BANK go belly up in 200 years? That is, IFF! you want to save money in the bank. I’d rather keep the money in a safe FOR A SHORT PERIOD OF TIME, than have the bank take advantage of me. Hey, but that’s just me. You COULD buy real estate, but it’s much less fluid.

    • iwanaknow, I’ll be more than ok. I’m neither rich nor poor. Just Social Security benefits and my pension puts me squarely into middle class.

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