Brexit Vote Leads To Sell-Off On Wall Street - U.S. Commentary

(RTTNews) - With traders reacting to the Brexit vote overnight, stocks moved sharply lower during the trading session on Friday. The steep drop on the day more than offset the substantial rally that was seen over the course of the previous session.

The major averages ended the day firmly in negative territory, near their lows for the session. The Dow plunged 611.21 points or 3.4 percent at 17,399.86, the Nasdaq plunged 202.06 points or 4.1 percent and the S&P 500 dove 76.02 points or 3.6 percent to 2,037.30.

As a result of the steep losses on the day, the major averages all closed notably lower for the week. The Nasdaq tumbled by 1.9 percent, while the Dow and the S&P 500 both fell by 1.6 percent.

The sell-off on Wall Street came on the heels of the U.K.'s surprise vote in favor of leaving the European Union on Thursday.

In a referendum, the British people voted 52 percent to 48 percent to leave the EU amid substantial turnout of more than 72 percent.

While the so-called Brexit had been discussed intensely across the world in the run up to the poll, the actual decision to leave came as a surprise, sending the British pound to a 31-year low. Global markets were caught off guard and plummeted during the day.

Among the casualties of the Brexit was Prime Minister David Cameron, who announced on Friday that he will step down in October.

Cameron, who had strongly called for a "Remain" vote, said the British people voted to leave the EU and their will must be respected.

The Brexit vote overshadowed the day's U.S. economic data, including a report from the Commerce Department showing a bigger than expected drop in durable goods orders in the month of May.

The Commerce Department said durable goods orders fell by 2.2 percent in May after jumping by 3.3 percent in April. Economists had expected orders to drop by 0.7 percent.

Excluding orders for transportation equipment, durable goods orders edged down by just 0.3 percent after rising by 0.5 percent in the previous month.

A separate report from the University of Michigan showed a modest deterioration in consumer sentiment in the month of June.

Sector News

Reflecting concerns about the Brexit's impact on the global economy, steel stocks showed a steep drop on the day. The NYSE Arca Steel Index has plummeted by 7.9 percent after posting a strong gain in the previous session.

ArcelorMittal (MT), Allegheny Technologies (ATI), and U.S. Steel (X) turned in some of the steel sector's worst performances.

Financial stocks also showed a sharp decrease, with the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index tumbling by 7.9 percent and 6.8 percent, respectively.

Electronic storage, semiconductor, networking, and energy sotcks also came under pressure, reflecting the broad based sell-off on Wall Street.

Meanwhile, gold stocks were among the few groups to buck the downtrend, with the NYSE Arca Gold Bugs Index spiking by 6 percent.

The strength in the gold sector came amid a sharp jump by the price of the precious, with gold for August delivery soaring $59.30 to $1,322.40 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Friday. Japan's Nikkei 225 Index plunged by 7.9 percent, while Hong Kong's Hang Seng Index tumbled by 2.9 percent.

The major European markets also showed substantial moves to the downside on the day. While the U.K.'s FTSE 100 Index slumped by 3.2 percent, the German DAX Index and the French CAC 40 Index plummeted by 6.8 percent and 8 percent, respectively.

In the bond market, treasuries showed a sharp rebound after trending lower over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dove 16 basis points to 1.579 percent.

Looking Ahead

Reaction to the Brexit vote may continue to impact trading next week, although traders will also be presented with reports on consumer confidence, personal income, and manufacturing activity.