Stock Market News For June 24, 2016

Benchmarks ended higher on Thursday, with the Dow posting its biggest gain since March as the latest poll showed support for the U.K. staying in the EU. If Britain opts to stay in the European Union (EU) a financial crisis will be averted while volatility will decline. Financial stocks gained the most yesterday, thanks to rise in treasury yields, while riskier assets such as oil rose when polls suggested Britain would stay in the EU, eventually boosting energy shares.

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) gained 1.3% to close at 18,011.07. The S&P 500 advanced 1.3% to close at 2,113.32. The tech-laden Nasdaq Composite Index closed at 4,910.04, increasing 1.6%. The fear-gauge CBOE Volatility Index (VIX) soared 16.2% to settle at 24.59. A total of around 3.2 billion shares were traded on the NYSE on Thursday. Advancers outpaced declining stocks on the NYSE. For 81% stocks that advanced, 16% declined.

With investors betting that the U.K. will choose to remain in the EU, all the three major indexes closed in the green. The “Remain” camp accounts for 52% compared with the 48% backing the “Leave” side, according to an Ipsos Mori poll for the Evening Standard newspaper. This latest poll showed a marked change from its previous poll in June 16 that showed 53% voted for “leave”, with 47% siding with “remain”. Meanwhile, bookmakers also forecasted a 76% chance that Brits will opt to stay in the EU.

Markets have been rattled in recent times as investors fretted about the consequences of Britain's exit from the EU, a scenario that would possibly result in financial crisis. Possibility of a Brexit raised concerns about the U.K. sinking into a recession and the markets falling prey to fresh bouts of volatility. 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 stand to lose.

Federal Reserve Chairwoman Janet Yellen in her testimony to the Congress had warned that “a U.K. vote to exit the EU could have significant economic repercussions”. However, investors did take solace yesterday from her optimism about the U.S. economy. She in her testimony had played down the risk of a U.S. recession.

The Financial Select Sector SPDR ETF (NYSE:XLF) gained 2.1%, the highest among the S&P 500 sectors. Financial stocks, which are incidentally the worst performer this year, notched up their biggest gain yesterday since April. Financial stocks moved north due to rising yields that are considered to boost a bank’s profitability. As investors predicted Britain to stay in Europe, demand for safe heaven assets such as bonds dampened leading to higher bond yields.

Key stocks from the financial sectors including Berkshire Hathaway Inc. (NYSE:BRKa) (BRK-B), JPMorgan Chase & Co (NYSE:JPM). (JPM), Wells Fargo & Company (NYSE:WFC) (WFC), Bank of America Corporation (NYSE:BAC) (BAC) and Citigroup Inc (NYSE:C). (C) increased 1.4%, 2.1%, 2%, 3.2% and 4.2%, respectively.

Investors’ appetite for riskier assets increased as investors wagered that a Brexit won’t happen. This helped oil prices moves north. Oil prices were also benefitted by a report of a drawdown of nearly 1 million barrels at the Cushing, Oklahoma storage base during the week to June 21. WTI crude increased 1.9% to $50.11 a barrel, while Brent crude advanced 2% to $50.91 per barrel.

Rise in oil prices boosted energy shares. The Energy Select Sector SPDR ETF (NYSE:XLE) gained 1.7%, the second highest among the S&P 500 sectors. Key energy stocks including ConocoPhillips (NYSE:COP) (COP) and EOG Resources (NYSE:EOG), Inc. (EOG) advanced 3.7% and 1.1%, respectively. Dow components Exxon Mobil Corporation (NYSE:XOM) (XOM) and Chevron Corporation (NYSE:CVX) (CVX) increased 0.9% and 2.1%, respectively.

In economic news, initial claims for the week ending June 18 came in at 259,000, a decline of 18,000 from the prior week. Jobless claims fell to an eight month low. In another report, new home sales declined 6% to a seasonally adjusted annual rate of 551,000 in May. The drop was expected given the outsize climb in April.

BERKSHIRE HTH-B (BRK.B): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

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

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