MARKET SNAPSHOT: U.S. Stocks Close Sharply Lower For Second Day After Brexit Vote

By Wallace Witkowski and Ellie Ismailidou, MarketWatch

Dow finishes down 261 points; pound plunges to 31-year low

U.S. stocks posted a second sharp daily loss Monday as investors continued to dump assets perceived as risky in the wake of the U.K.'s vote last week to leave the European Union.

Amid the global flight to quality, so-called risk assets like European equities (http://www.marketwatch.com/story/european-stocks-drop-to-4-month-low-as-brexit-fallout-continues-2016-06-27)and oil got hammered, while the pound slid to a 31-year low (http://www.marketwatch.com/story/pound-continues-to-slide-as-brexit-shock-waves-linger-2016-06-27). Gold futures settled up 0.2% at $1,340.70 an ounce (http://www.marketwatch.com/story/gold-at-2-year-high-in-post-brexit-rally-2016-06-27), while bonds benefited from safe-harbor purchases, pushing various benchmark yields to record lows.

See:Brexit more a political shock than a financial one, and that's important (http://www.marketwatch.com/story/brexit-vote-more-a-political-than-a-financial-one-and-thats-important-2016-06-27)

The S&P 500 closed 36.87 points lower, a loss of 1.8%, at 2,000.55, with eight of its 10 sectors in negative territory. The index trimmed its decline from an earlier 46-point deficit and narrowly avoided closing below 2,000. The last time the index closed below 2,000 was March 10.

Materials and financial stocks led the losses, down 3.4% and 2.8%, respectively, while utilities and telecom, sectors typically viewed as a safety play in times of distress, were the best performers.

The Dow Jones Industrial Average dropped 260.51 points, or 1.5%, to close at 17,140.24, led by a 4% loss in shares of American Express Co. (AXP). Earlier, the average was off by as many as 337 points.

Meanwhile, the Nasdaq Composite lost 113.54 points, or 2.4%, to close at 4,594.44, following an earlier 134-point deficit.

The selloff follows Friday's carnage, when the market saw its sharpest drop since last August after the U.K.'s decision to quit the EU, known as Brexit.

Read: S&P 500 could drop as much as 7% in Brexit swoon (http://www.marketwatch.com/story/brexit-sparked-volatility-will-continue-to-weigh-on-us-stock-market-2016-06-25)

As the stock market got hit across the board, there were few places to hide for investors hoping to weather the storm, said Mike Bailey, director of research at FBB Capital Partners, pointing to "the traditional safety trades, like telecom and utilities, as well as dividend-paying stocks."

Even as stocks sold off, the CBOE Volatility Index declined. While that might seem counterintuitive, it may just underscore how much traders overreacted on Friday, sending the VIX up nearly 50% in the biggest one-day percentage jump since 2011 (http://www.marketwatch.com/story/wall-street-fear-gauge-sees-sharpest-jump-since-aug-24-on-brexit-2016-06-24). At last check, the so-called "fear gauge" declined 10% to 23.11.

"That's encouraging because it tells me that while there's a fair amount of uncertainty, there's not a lot of panic," said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research.

Even with the pullback in the VIX, expect volatility to stick around for a while as the level of uncertainty the Brexit vote created is not likely to go away in the next few weeks, Frederick said.

On Friday, the Brexit vote sparked a tumble of 611 points, or 3.4%, for the Dow. The Nasdaq Composite Index and S&P 500 lost 4.1% and 3.6%, respectively. On Monday, all three benchmarks were in negative territory for the year, with the Nasdaq leading the losses, off 8.1% so far in 2016.

Meanwhile, both the Dow and the S&P closed Monday below their widely watched 200-day moving average (http://www.marketwatch.com/story/dow-sp-500-drop-below-200-day-moving-average-joining-other-major-stock-market-indexes-2016-06-27) for the first time in three months, joining all the other major market indexes below the key technical threshold. Many chart watchers view the 200-day moving average as a dividing line between longer-term uptrends and downtrends.

Read:Brexit just sparked the worst global stock rout ever, says S&P's Silverblatt (http://www.marketwatch.com/story/brexit-just-sparked-the-worst-global-stock-rout-ever-sps-silverblatt-2016-06-27)

Banks bore the brunt of the selloff, with U.K. banks taking it on the chin, as shares of Lloyds Banking Group PLC (LLOY.LN), Barclays PLC (BCS) and Royal Bank of Scotland Group (RBS.LN) all tumbled more than 10% on Monday, following an over 20% drop on Friday.

The selloff spilled over to the U.S., as "investors are assuming that central banks will treat this as yet another reason to keep rates low--and thus banks will not be able to make money," said Kim Forrest, senior portfolio manager at Fort Pitt Capital, pointing to the fact that ultralow government yields are traditionally viewed as hurting bank profitability.

On Monday, shares of Bank of America Corp.(BAC) closed 6.3% lower, while J.P. Morgan Chase & Co.(JPM) fell 3.3%, and Goldman Sachs Group Inc.(GS) slipped 1.7%.

"There is little doubt that global monetary policy will have to adjust to this historic decision, and with markets now pricing in a 50% chance of a July rate cut from the [Bank of England], the idea of a [Federal Reserve] rate hike appears dead in the water," said Joshua Mahony, market analyst at IG, in a note.

Fed Chairwoman Janet Yellen said ahead of Thursday's historic referendum in the U.K. that a Brexit was one of the risks facing the global economy that could justify a cautious approach to raising interest rates. According to the CME Fed Watch tool, there's currently a 0% probability of a Fed rate increase in July and a 6% probability of a rate cut.

Also read: Post Brexit, odds are up for Fed interest-rate cut (http://www.marketwatch.com/story/post-brexit-odds-are-up-for-fed-interest-rate-cut-2016-06-24)

Other markets: The pound was hit hard again (http://www.marketwatch.com/story/pound-continues-to-slide-as-brexit-shock-waves-linger-2016-06-27), sliding to a 31-year low of $1.3154 from $1.3676 late Friday in New York. In recent trade it recovered slightly to $1.3201.

The Brexit fallout continued to keep European stock markets under pressure (http://www.marketwatch.com/story/european-stocks-drop-to-4-month-low-as-brexit-fallout-continues-2016-06-27). The Stoxx Europe 600 index fell 4.1%. The FTSE 100 index declined 2.5% (http://www.marketwatch.com/story/ftse-100-slides-as-brexit-continues-to-spook-traders-2016-06-27) with the main British political parties, the Conservatives and Labour, in turmoil after the referendum.

Stocks in Asia mostly rebounded (http://www.marketwatch.com/story/nikkei-rebounds-post-brexit-leads-asian-stocks-higher-2016-06-27). Japan's Nikkei 225 index rallied 2.4%, helping lead much of Asian equities higher.

The dollar rose against most other major currencies, while oil prices (http://www.marketwatch.com/story/oil-prices-rise-as-dollar-strengthens-in-brexit-aftermath-2016-06-27) settled down 2.8% to $46.33 a barrel.

The yield on 10-year U.K. government bonds dropped below 1% for the first time (http://www.marketwatch.com/story/uk-10-year-bond-yields-drop-below-1-for-first-time-ever-2016-06-27-591257) ever on Monday.

Other movers and shakers: U.S.-listed shares of Randgold Resources Ltd.(RRS.LN) climbed 5.7% as gold continued to rise in a post-Brexit flight to safety.

Apple Inc. (AAPL) shed 1.4% on Monday after falling 2.8% on Friday.

Shares of Twilio Inc.(TWLO), a cloud communications company that went public Thursday, closed up 3.6% Monday, bucking the overall stock market slump.

United Continental Holdings Inc.(UAL) shares slumped 8.1% to finish at $37.75, their lowest close since January 2014

Economic news: The U.S. trade gap (http://www.marketwatch.com/story/us-trade-gap-in-goods-widens-in-may-on-increased-imports-2016-06-27) in goods widened in May, as imports grew while exports fell slightly.

Markit's flash purchasing managers index registered at 51.3 this month, unchanged from May's level and hanging above the 50 mark that divides expansion from contraction.

See:

--Sara Sjolin in London contributed to this article.

(END) Dow Jones Newswires

June 27, 2016 16:34 ET (20:34 GMT)

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