Stock Market News For June 27, 2016

Benchmarks closed in the red on Friday after results from “Brexit” referendum showed that most voters were in favor of leaving the European Union. The surprising referendum results pulled the global financial sector downward, which in turn negatively impacted the domestic financial domain. This eventually pulled the benchmarks downward. All the three key U.S. indexes slumped more than 3% on Friday and more than 1.5% for the week.

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

The Dow posted its eighth biggest points decline in history. Both the blue-chip index and the S&P 500 registered their largest percentage fall since Aug 2015 and the Nasdaq posted worst percentage decline since Aug 2011. For the year, the Dow and S&P 500 entered into negative territory and joined the Nasdaq. Moreover, the CBOE Volatility Index (VIX) had its highest percentage rise since Aug 8, 2011.

The Dow Jones Industrial Average (DJI) decreased 3.4%, or 611.21 points to close at 17,399.86. The S&P 500 fell 3.6% to close at 2,037.30. The tech-laden Nasdaq Composite Index closed at 4,707.98, losing 4.1%. The fear-gauge CBOE Volatility Index (VIX) jumped 49.3% to settle at 25.76. A total of around 15.3 billion shares were traded on Friday, considerably higher than the last 20-session average of 6.8 billion shares. Decliners significantly outpaced advancing stocks on the NYSE. For 83% stocks that declined, 16% advanced.

Despite most of the recent poll results were more tilted towards “Bremain”, U.K.’s referendum results came in favor of “Brexit”. While, total percentage of the “Leave” vote was 51.9%, “Remain” came in at 48.1%. Moreover, after the referendum results, British Prime Minister David Cameron announced that he will resign by October.

Cameron said on Friday that “the will of the people to leave the EU must be respected.” He added that “British people have made a very clear decision to take a different path” and so “the country requires fresh leadership to take it in this direction.” Following the results, the global markets tumbled. The German DAX and UK FTSE 100 fell 6.8% and 2.8%, posting their biggest slump since Nov 2008 and Jan 2016, respectively.

The global financial sector was badly hit with the STOXX Europe 600 Banks index registered a slump of 14%, the largest since 1987. Additionally, shares of Goldman Sachs Group (NYSE:GS), Inc. (GS), which generates nearly 20% of its revenue from its U.K. operations, declined 7.1%, becoming the biggest decliner in the Dow.

This in turn led the Financial Services Select Sector SPDR (XLFS) to fall 6.2%, which ended as the worst performer among the S&P 500 sectors. Top holdings from this sector such as U.S. Bancorp (USB), Bank of America Corporation (NYSE:BAC) ( BAC), Citigroup Inc (NYSE:C). (C) and Wells Fargo & Company (NYSE:WFC) (WFC) declined 5.6%, 7.4%, 9.4% and 4.6%, respectively. Dow component JPMorgan Chase & Co (NYSE:JPM) ( JPM) fell 7%.

The Financials Select Sector SPDR (XLF) also fell 5.4%, posting biggest percentage decline since Nov 2011. Further, both the SPDR S&P Bank ETF (KBE) and SPDR S&P Regional Banking ETF (KRE) fell 7.2% and 7.3%, respectively. Most of the key S&P 500 sectors ended in the red following the “Brexit”, with only the safe-haven Utilities Select Sector SPDR (XLU) managed to end in positive territory.

Separately, the final reading of consumer sentiment index released by University of Michigan came in at 93.5 in June, below the consensus estimate of 94.2, and was also lower than the May’s reading of 94.3.

The U.S. Department of Commerce reported that durable orders decreased 2.2% in May to $230.7 billion, compared to a rise of 3.3% in April. It was also wider than the consensus estimate of 0.4% fall.

For the week, both the Dow and S&P 500 declined 1.6% and the Nasdaq fell 1.9%. Recent poll results showed that U.K. was most likely to stay in the EU. However, the referendum of the U.K.'s membership of the European Union on June 23 indicated that “Leave” vote percentage was more than “Remain” vote. Increasing chances of a “Brexit” led the key indexes to post weekly declines.

Meanwhile, housing data was mixed with new home sales declining last month, while, existing homes sales rose in May to a more than 9-year high. Also, initial claims for the week ending June 18 came in at an eight month low.