Wall Street’s top ticker held the 2,000 level – just – but smaller caps were punished as the rout following the UK’s decision to quit the European Union continued to find casualties on Monday.
The S&P 500 index, which briefly dipped below 2,000 intraday for the first time since March, managed to close down 1.8% at 2,000.
Last Thursday, Britons defied opinion polls suggesting a comfortable lead by the “Remain” camp in the EU referendum and voted to Leave by 52% to 48% for Remain. The turnout was tipped to be over 80% but in the end it was just 72% - lower than for a General Election. On Friday markets were in freefall in London and New York as the extent of the Leave victory became apparent.
The S&P Midcap 400 closed down 2.8% at 1,416 on Monday, and the S&P Smallcap 600 finished sharply lower by 3.1% at 670. The wider small-cap Russell 2000 index ended down the most, by 3.4% at 1,089.
As well as depressed banks, energy stocks also suffered, as the oil price continued to ease. The US benchmark West Texas Intermediate ended down 1.1% at $48.85.
Midsession
US stocks clung to the 2000 level at midsession on Monday, after earlier dipping below that level for the first time since March, as north American investors continued to absorb the shock news of the UK’s decision to quit the European Union, while oil prices sag.
The sell-off in US equities heated up in mid-morning action, with the S&P falling 1.8% to 1,991, extending the 3.6% bloodbath on Friday. The S&P 500 index had modestly recovered by midsession to be down 1.6% at 2,004.
The major ticker’s decline also came in the wake of London’s blue-chip FTSE 100 index closing the session below 6,000.
The small-cap stocks fared even worse. The S&P Midcap 400 was down 2.4% at 1,422 led, not surprisingly, by financials. The biggest faller was Genworth Financial Inc (NYSE:GNW) down 12.5% to $2.67.
But energy stocks were also punished, after the almost-overlooked post-Brexit, oil price continued to decline. The US benchmark West Texas Intermediate was down a hefty 3.2% at $46.10. In the mid-caps, Sm Energy Company (NYSE:SM) was one of the biggest decliners, of 9.3% to $25.01.
The S&P Smallcap 600 was down 2.9% at 671.
Economically-sensitive shares performed the worst on Monday, with financials sustaining particularly heavy selling.
Bank of America (NYSE:BAC), the second-biggest US lender by assets, dropped by 5.5% to $12.29, while JPMorgan Chase (NYSE:JPM) fell 2.8% to $57.93 and Citigroup (NYSE:C) declined by 3.3% to $38.96.
By example, JPM’s stock volumes were 23mln shares versus a daily average of 14.6mln while Bank of America’s normal 89mln shares swelled to 149mln by midday.
Defensive sectors outperformed as investors sought shelter, with utilities and telecommunications logging mild advances.
Preview
Wall Street shares are poised to start lower on Monday after crashing Friday after the UK's referendum result, which called it to quit the EU.
The Dow Jones crashed 610 points, or 3.4%, to 17,401 and the broader-based S&P 500 tanked 76 points, or 3.6%, to 2,037.
The S&P 600 Small Cap index was hit just as hard as its bigger brother, tumbling 27 points, or 3.8%, to 692, and the mid-cap-focused S&P 400 fared worse still, plummeting 60 points, 0r 4%, to 1,458.
Uncertainty in global markets continues to reign supreme today, as FTSE100 in London is down over 2% at 6,014, while the French and German markets are both down around 2% too.
In futures today in the US, the Dow is seen a whopping 122 lower; the Nasdaq lost 36.5 and the S&P500 shed 14 points.
The noise throughout the whole weekend has been about what the UK will do now. The EU appears to be putting pressure on the UK to trigger the withdrawal process.
But the politicians want more time to negotiate and plan before that happens.
It is also no clearer who will become the Tory leader and Prime Minister following David Cameron's resignation and the opposition Labour party appears rudderless with its leader Jeremy Corbyn on the ropes.
The UK pound has taken another hit- falling to a 31 year low and many stocks, including banks are under pressure.
Analysing the US Fed moves is also high now on the investor agenda as it looks likely the June interest rate hike will now not happen.
Broker Hargreaves Lansdown noted today that the swaps market was now pricing in a 15% chance of UK interest rates turning negative over the course of the next year, on the back of the vote.
"The market is now also giving a 50% chance of an interest rate cut in July, a 65% chance of a cut by August, and an 80% chance of a cut by the end of the year.
"The Bank of England may soon find itself between a rock and a hard place, if the economy and inflation start pointing in different policy directions," it said.