Wall Street ends worst day in 10 months after Brexit

U.S. stocks fell sharply on Friday, with the Dow Jones industrial average dropping as much as 538 points, as Britain’s vote to quit the European Union roiled global financial markets.

The most jittery part of the business world following this result was the financial sector, with a number of Wall Street banks sending around memos to reassure staff who, in turn, you’d imagine will seek to reassure nervous clients. The volatile stock market is better for long-term investments that can be left alone during periods of uncertainty.

USA stocks gave up all their gains from earlier in the year. Dow Jones industrial futures were down almost 3 percent, pointing toward sharp losses when trading opens. Still, even after a drop of 3.6 percent on Friday, the S&P 500 stayed near the roughly 80-point range between 2,040 and 2,120, in which it has been locked since late March. The Nasdaq composite sank 153 points, or 3.2 percent, to 4,755.

In Britain, the country’s largest banks all took a body blow, with Lloyds and Barclays both down 30 percent.

“Once the dust settles, the sun will still come out and nothing really changes”, Chris Semenuk, manager of TIAA Global Asset Management’s $4.3 billion International Equity Fund, said by phone.

Moreover, European equities are trading at far lower valuations than US shares to begin with. This is a wall that just went up.

The U.K. imports about 9 in 10 vehicles sold there, including 8 of 10 from European Union members.

USA short-term interest rate futures rose amid speculation the Federal Reserve could cut interest rates to help shield the economy from any global fallout.

The selloff might have been exacerbated with the vote coming on a Friday.

Many actually see opportunity for those willing to invest in a down market.

In a referendum, the British people voted 52 percent to 48 percent to leave the European Union amid substantial turnout of more than 72 percent. “Though the flip side of a weakened pound is that British goods are cheaper to buy, so export demand could rise”. USA banks have big London operations. Airfare for peak summer months probably won’t dip, but any taxes and fees levied in Europe will be cheaper. The yen, however, surged as much as 4 percent to the US dollar as investors seeking safety snapped up the Japanese currency. Bond yields are used to set interest rates on many kinds of loans including mortgages.

“Two polar opposite things happened: Equities across the globe all tanked today. but bonds, especially those backed by strong governments like the United States, did well”, said Bob Walters, chief economist and vice president of the Capital Markets Group for Quicken Loans Inc.

The CBOE Volatility Index (VIX – 25.76) skyrocketed 8.5 points, or 49.3%, for its highest finish since February 11.

On Friday, the Fed said it was 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 USA economy.

“Investors overreacted”, University of MI business professor Erik Gordon said Friday in an email.

In Scotland, where “remain” won in every local polling authority, the Scottish National Party may well follow through on its threat to demand a new independence referendum so that Scotland can remain in the European Union after the United Kingdom voted to leave.

“What is occurring is traders are rushing for the exits and can’t get out fast enough”, said Robert Pavlik, chief market strategist at Boston Private Wealth, in emailed comments.

“In the very near term, uncertainty will prevail and the stock market has no appetite for uncertainty”, he said. The stock was the biggest percentage loser among NYSE-listed stocks.

Amid this frantic risk-off market action, gold and US Treasurys rallied. Citigroup plummeted $4.05, or 9.1 percent, to $40.42 and JPMorgan Chase fell $4.24, or 6.6 percent, to $59.81.