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U.S. stocks were off the lows, but were still trading sharply lower, Friday after the U.K. declared its intention to end its four-decade relationship with the European Union after a so-called Brexit vote.
Investors are fretting that the unprecedented decision to leave the bloc could destabilize Europes fragile union.
The stunning moves come after global markets rallied a day earlier on a bet that Britons would vote to reject Brexit.
On Friday, the main indexes were all down more than 2%, hitting one-month lows. The S&P 500 SPX, -2.91% dropped 51 points, or 2.4% to 2,062, with eight of the 10 main sectors trading sharply lower. Financials and technology stocks were leading the losses. Utilities and telecoms sectors were trading higher due to heightened demand for safer, defensive plays.
The Dow DJIA, -2.77% plunged 385 points, or 2.1%, to 17,622, with nearly all 30 blue-chip stocks trading lower, led by bank stocks. J.P. Morgan Chase & Co., JPM, -5.39% dropped 4.4% and Goldman Sachs Group Inc, GS, -6.17% declined 5.4%.
Meanwhile, the Nasdaq Composite Index COMP, -3.49% tumbled 137 points, or 2.8%, to 4,772.
The market was pricing in a different outcome yesterday even when the odds were too close to call and within a margin of error. The unexpected outcome is shaking up markets, said Ben Carlson, money manager at Ritholtz Wealth Management.
The Brexit vote will have wide implication for monetary policy round the globe, according to analysts. On Tuesday, Federal Reserve Chairwoman Janet Yellen, in her congressional testimony, said that a U.K. vote to exit the European Union could have significant economic repercussions. She also noted that such risk would warrant more cautious approach to normalizing interest rates.
The vote will definitely make it very difficult for the [Federal Reserve] to raise rates this year, and in fact the futures are currently giving better chances of a rate cut in the U.S. than a rate increase. Lower for longer is what we continue to expectthe global economy is going to face lower growth prospects and rates are therefore going to be kept lower for longer, said Chris Gaffney, president at EverBank World Markets.
On Friday, the Fed said it was prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.
European stock-market indexes were being punished in the aftermath of the vote, with the Stoxx Europe 600 SXXP, -7.03% skidding 5.6% at 326.75.
But moves in currencies, in particular, the British pound USDGBP, +9.3694% were the most pronounced. Sterling hit a low of $1.3230, a more than 12% plunge from $1.4871 late Thursday in New York. But it has since recovered somewhat, trading most recently at $1.3775.
Read: Soros looks set to make a killing on Brexit result
The victory by the leave vote sets up global markets for the most volatile and frightening trading day since the market sank last August on fears about a slowdown in Chinas stock market.
Read: Panic and bloodbathanalysts react to U.K.s decision to Brexit
In the wake of the shocking Brexit vote, U.K. Prime Minister David Cameron said Friday morning he will resign. Cameron has been campaigning for the remain camp.
In other assets:Gold GCQ6, +4.65% surged more than $70, but was most recently up $57.90, or 4.5%, to $1,319.5 and yields on the benchmark 10-year U.S. Treasury TMUBMUSD10Y, -10.46% fell to 1.58% as investors flocked to safety.
Leave opens a period of lasting uncertainty, said Torsten Slock, chief international economist at Deutsche Bank, in a research note late Thursday.
We think it will be three years before a new UK-EU deal is settled. Politics will determine the long-term cost. A leap forward for European integration is unlikely, he said.
On the data front: Economic releases in the U.S. have been overshadowed by the Brexit vote. Market reaction to durable-goods orders was muted. Consumer sentiment sank to 93.5 in June, according University of Michigan.
Corporates: Newmont Mining Corp. NEM, +4.27% was up 5.4%, following a historic jump in gold prices to the highest level in two years.
But the vast majority of the S&P 500 stocks were tumbling, however. Banking stocks were hit the hardest. Citigroup Inc. C, -8.11% was down 7.9%, Morgan Stanley MS, -9.64% down 8.8%, Bank of America Corp. BAC, -6.98% tumbled 5.8%.
Oil companies were among the biggest losers. Chesapeake Energy Corp. CHK, -6.68% was down 5.87%, Transocean Ltd. RIG, -5.82% fell 5.4%.
Source: http://www.marketwatch.com/story/historic-brexit-vote-sends-dow-futures-plunging-650-points-2016-06-24
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