Updated onJune 24, 2016 – 10:10 AM EDT
(Bloomberg) — U.S. stocks tumbled, joining a worldwide selloffwith the Dow Jones Industrial Average dropping more than 350 points, as the U.K.s decision to leave the European Union fanned speculation that a divided Europe would put another brake on already fragile global growth.
Banks were among the worst hit after yesterday rallying the most in five weeks, with Citigroup Inc. down 7.9 percent, while JPMorgan Chase & Co. and Goldman Sachs Group Inc. lost more than 4.2 percent. While severe, declines in equities were about half of what was signaled by losses in stock futures before markets opened.
The S&P 500 fell 2.1 percent to 2,068.76 at 10:08 a.m. in New York, the most in four months. The Dow dropped 358.64 points, or 2 percent, to 17,652.43,after sliding as much as 538 points. The Nasdaq Composite Index lost 2.5 percent, its worst since February. Trading volume in S&P 500 shares more than double the 30-day average for this time of day.
Overnight, stock futures on the benchmark fell far enough to reach trading curbs that blocked further losses. The steep selloff Friday was compounded by the fact that 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 poundslidthe most on record to its weakest since 1985, while the yen rallied on demand for haven assets.Polling before the referendum had indicated a vote too close to call.The final tally, announced just after 7 a.m. London time, showed voters had backed Leave by 52 percent versus 48 percent for Remain.
U.S. stocks are clearly following the European market, said Joe Rundle, head of trading at ETX Capital in London, who has been awake all night. The risk is that this will trigger a U.K. recession and that will in turn cause a European and global recession. For me, this is as big as 2008 and has the potential to be even bigger. I dont see the Fed raising interest rates any time soon, at least not this year.
The New York Stock Exchange has temporarily widened the collars for trading halts in all securities to 10 percent.A plunge of 7 percent in the S&P 500 at any time before 2:30 p.m. in New York will trigger a marketwide circuit breaker that shuts down trading for 15 minutes in an effort to restore order. That would occur if the index slides to 1,965.38, based on Thursdays close of 2,113.32.
Central banks have sounded the alarm over a potential Brexit, with chiefs of the Federal Reserve, Bank of Japan and Bank of Canada all citing the vote as a potential disruption to the global economy. Fed Chair Janet Yellen said the decision could have consequences for financial markets, and in turn for the U.S. economic outlook. The International Monetary Fund had warned that a so-called Brexit risked damage to the U.K. economy.
The Federal Reserve said Friday in a statement on its website it is carefully monitoring global financial markets along with other central banks, and is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the economy.