Financial stocks in red on Brexit impact

Financial stocks, led Wall Street, were sharply lower yesterday, in the aftermath of a shock vote by Britons to leave the European Union.

The S&P financial index .SPSY fell 1.55 per cent, leading the decliners for the second-straight day, as uncertainty over London’s future as the region’s finance capital lingered.

JPMorgan was also down by two per cent, while Bank of America was also fell by three per cent. The stocks were among the top losers on the S&P 500.

European stocks were hammered for a second day and the sterling fell more than two per cent. The European banks index .SX7P also hit its lowest since July 2012.

The selloff on Friday eroded $2.08 trillion in market capitalisation globally – the biggest one-day loss ever, according to Standard & Poor’s Dow Jones Indices, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis.

U.S. Treasury Secretary Jack Lew, however, said the market impact from Brexit had been orderly so far and there were no signs of a financial crisis arising from the vote.

“There is a crisis of confidence in the markets,” said Todd Morgan, Chairman at Bel Air Investment Advisors in Los Angeles, California. “But there is a lot of cash lying around and interest rates are low, the world will survive.”

At 9:41 a.m. ET (1341 GMT) the Dow Jones Industrial Average .DJI was down 216.06 points, or 1.24 per cent, at 17,184.69. The S&P 500 .SPX was down 24.47 points, or 1.2 per cent, at 2,012.94. The Nasdaq Composite .IXIC was down 62.16 points, or 1.32 per cent, at 4,645.82.

Nine of the 10 major S&P sectors were lower. The utilities sector .SPLRCU was the only one in the black.

The Brexit vote, which Federal Reserve Chair Janet Yellen had said would have significant repercussions on the U.S. economic outlook, is expected to scuttle the Fed’s ability to raise short-term interest rates.

Traders have priced a meager 1.9 per cent bet on an interest rate increase in November, according to CME Group’s FedWatch tool.

Yellen pulled out from the ECB Forum on Central Banking summit which started yesterday.

Declining issues outnumbered advancing ones on the NYSE by 2,285 to 487. On the Nasdaq, 1,969 issues fell.

The S&P 500 index showed one new 52-week high and 18 new lows, while the Nasdaq recorded 7 new highs and 53 new lows.