Friday, June 24, 2016

Market update: S&P 500 post Brexit referendum (24 June 2016)

  • The S&P 500 fell 3.6 percent to 2,037.35, the most since August 24. The benchmark erased its gain for the year, which reached as much as 3.7 percent earlier this month. It closed at 2,037.30, down 76.02. The Dow dropped 611.21 points, or 3.4 percent, to 17,399.86, amid the biggest retreat since January.  The Nasdaq Composite Index tumbled 4.1 percent, the most in almost five years, to end the day at 4,707.98, a 202.06 point drop.  

  • U.S. stocks plunged the most in 10 months, joining a selloff in global risk assets on speculation that the U.K. decision to leave the European Union will hamper worldwide growth. Banks and industrial shares capped their worst single-day declines in more than four years.

    SPY before (6/23) and after (6/24) the Brexit vote

    The pound plunged the most in 30 years and European equities dropped as investors weighed the implications for the global economy.

    As if results of the U.K. vote wasn’t enough, today is also the date of the annual rebalancing of FTSE Russell’s stock indexes, a procedure that reliably exacerbates trading. In 2015, the reconstitution helped fuel a jump in volume to more than 10 billion shares, the seventh-highest total of the year.

    London bookies blew the Brexit call: none of the UK pollsters, bookmakers and city experts realised was there was a huge groundswell of anger

    Declines Friday also came after markets had rallied during the past week on optimism the U.K. would vote to remain in the EU, with the S&P 500 rising 1.7 percent in four sessions.

    The vote comes at a time when uncertainty already plagues U.S. stocks, with questions around the Fed’s ability to stoke growth after the worst month for hiring since 2010, a four-quarter decline in corporate profits, price-earnings ratios that are close to a decade high and a presidential election looming in the fall.

    The S&P 500 plunged 11 percent in its worst-ever start to a year before recovering through April. It’s
    virtually been stuck in place since, struggling to hold above the 2,100 level that has capped three rallies since November. It fell from that perch again after closing above it Thursday for the first time in two weeks.


    European banks

    S&P 500 heatmap

    Wednesday, June 15, 2016

    Market update: FOMC announcement of no rate hike (15 June 2016)

    • Fed leaves interest rates unchanged
    • Fed raised inflation expectations and lowered growth expectations.
    • Fewer Federal Reserve officials expect the central bank to raise interest rates more than once this year, as policy makers gave a mixed picture of a U.S.
    • "July isn't impossible."
    • Markets are even more pessimistic than the Fed. The yield on the benchmark 10-year Treasury fell to 1.574 percent, the lowest level since 2012. That is part of a broader decline in global rates that, in recent days, also has sent the yield on 10-year German debt below zero for the first time.


    Monday, June 6, 2016

    Market update: After June's jobs report & Janet Yellen's speech (6 June 2016)

    In a closely watched speech in Philadelphia, Yellen conceded that Friday's dismal job figures would keep the US central bank on hold – at least until the direction of the US economy becomes much clearer.

    Her comments are in stark contrast to her position less than two weeks ago, when she opined that the strengthening US economy meant the Fed would likely hike interest rates in the "coming months".

    The plans of Yellen and her fellow Fed policy-makers have been thrown into disarray by the latest US employment figures, which showed employers added a mere 38,000 jobs in May – about a quarter of the number that economists were expecting. Job growth over the last three months in the US has averaged about 116,000.