Stock Market News For June 23, 2016

Benchmarks ended lower on Wednesday as polls showed a neck-and-neck contest between the “remain” and “leave” camps in the run up to the Brexit vote. As the Brexit debate reaches a climax, opinion polls have clearly failed to give a direction, eventually keeping traders on the edge. Possibility of a Brexit raised concerns about the U.K. sinking into a recession and the markets falling prey to fresh bouts of volatility. Decline in energy shares, thanks to a drop in oil prices also weighed on the broader markets yesterday. Smaller-than-expected inventory drawdown adversely affected oil prices.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.

The Dow Jones Industrial Average (DJI) declined 0.3% to close at 17,780.83. The S&P 500 dropped 0.2% to close at 2,085.45. The tech-laden Nasdaq Composite Index closed at 4,833.32, decreasing 0.2%. The fear-gauge CBOE Volatility Index (VIX) gained 6.2% to settle at 19.63. A total of around 6.3 billion shares were traded on Wednesday, less than the last 20-session average of 6.8 billion. Decliners outpaced advancing stocks on the NYSE. For 57% stocks that declined, 40% advanced.

Investors remained increasingly edgy over the referendum, which is slated today, on whether the U.K. should stay in the European Union (EU). Opinion polls on Wednesday showed that the referendum remains highly contested, with an online survey by Opinium indicating 45% in favor for the U.K. to leave the EU, while 44% was in favor of remaining. Another poll from TNS showed support for “leave” having an upper hand over the “remain”. Nevertheless, opinion polls have sent conflicting signals. On Tuesday, polls had showed growing support for the “stay” camp.

Amid all the uncertainty, if a Brexit does happen then the quality of trade that Britain has with the rest of the world and its centuries-old tradition of entrepreneurship will all stand to lose. This will eventually trigger market turbulence.

As investors braced for the U.K. vote on whether to leave the EU, Federal Reserve Chairwoman Janet Yellen in her second day of testimony to the Congress warned that a Brexit and a slowdown in U.S. hiring will have economic repercussions. However, she did play down the risk of a recession.

Oil prices declined on Tuesday, which eventually dragged energy shares down. WTI crude decreased 1.5% to $49.13 a barrel, while Brent crude too fell 1.5% to $49.88 per barrel. A smaller-than-expected decline in U.S. crude inventories had a negative impact on oil prices. According to the U.S. Energy Information Administration (EIA) stockpiles for the week ended June 17 dropped 917,000 barrels, less than a 1.7 million-barrel drawdown forecasted by analysts.

The Energy Select Sector SPDR ETF (NYSE:XLE) declined 0.6%, the highest among the S&P 500 sectors. Key energy stocks including ConocoPhillips (NYSE:COP) (COP) and EOG Resources (NYSE:EOG), Inc. (EOG) fell 1.8% and 1.5%, respectively. Dow components Exxon Mobil Corporation (NYSE:XOM) (XOM) and Chevron Corporation (NYSE:CVX) (CVX) also decreased 0.4% and 0.9%, respectively.

Separately, the Utilities Select Sector SPDR (XLU) dropped 0.5% and was also the second biggest loser among S&P 500 sectors. Key stocks from the sector such as Duke Energy Corporation (NYSE:DUK) (DUK), Xcel Energy Inc (NYSE:XEL). (XEL), American Electric Power Co., Inc. (AEP), PG&E Corporation (PCG) and NextEra Energy (NYSE:NEE), Inc. (NEE) decreased 0.2%, 0.4%, 0.4% and 0.8%, respectively.

In economic news, sales of existing homes rose in May to a more than 9-year high. On a seasonally adjusted annual rate, sales climbed 1.8% to 5.53 million last month. April’s sales pace, however, was revised down to 5.43 million from an earlier reported 5.45 million units.

Record low mortgage rates were responsible for boosting U.S. home sales in May. According to mortgage finance firm Freddie Mac, the average of 30-year fixed mortgage rate came in at 3.6% in May, the lowest level since May 2013.

CONOCOPHILLIPS (COP): Free Stock Analysis Report

EOG RES INC (EOG): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

DUKE ENERGY CP (DUK): Free Stock Analysis Report

XCEL ENERGY INC (XEL): Free Stock Analysis Report

AMER ELEC PWR (AEP): Free Stock Analysis Report

PG&E CORP (PCG): Free Stock Analysis Report

NEXTERA ENERGY (NEE): Free Stock Analysis Report

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