Stocks close well off lows; energy, financials weigh

U.S. stocks closed lower Friday, weighed by renewed global growth concerns as benchmark yields fell to record lows and investors looked ahead to U.K. vote on whether to leave the European Union.

“I think some of this today is “Brexit,” some of it is global growth concerns, some of it’s the Fed,” said John Canally, chief economic strategist at LPL Financial.

“Clearly the “Brexit” vote has not been priced in until the last couple of days,” he said.

The Dow Jones industrial average closed about 120 points lower after earlier falling 172 points. Goldman Sachs had the greatest negative impact on the index as most constituents declined.

U.S. stocks fell to session lows after a new poll from The Independentshowed the “leave” camp rose to 55 percent of respondents, versus 45 percent who favored staying in the European Union. That marked the largest portion of respondents who favored exiting since research firm ORB began polling the issue for it last year, the publication said.

“It hit the market,” said Andres Jaime, global FX and rates strategist at Barclays. The euro and sterling both fell to session lows against the U.S. dollar amid the early afternoon release of the poll results.

“This poll in particular, it has nothing specific compared to the others. It is just the most recent one and we’re approaching the event,” he said.

The Federal Reserve is scheduled to meet next week, while the U.K. is set to vote the following week on June 23 on whether to leave the European Union.

The U.S. dollar index was up more than half a percent, with the euro near $1.126 and the yen near 106.7 yen against the greenback. Sterling hit $1.418, its lowest against the dollar since mid-April.

“I think everyone is spooked by European stocks, especially the DAX, getting slammed today. Everyone’s getting really nervous, discomfited today. If the German 10-year bund yield gets below 0, they’re just spooked by that,” Jeremy Klein, chief market strategist at FBN Securities, said of morning declines in stocks.

“I think it’s a combination of, this is not good for financials and, is this emblematic of what’s going with the economy?” he said.

The major European averages were down more than 2 percent, with the DAX off 2.5 percent and the STOXX Europe 600 Banks index more than 3.5 percent lower.

The German 10-year bund yield hit a fresh all-time low of 0.011 percent Friday, down sharply from Monday’s levels of around 0.070 percent. The Japanese 10-year yield hit a record negative low of minus 0.13 percent.

The U.S. 10-year Treasury yield hit 1.627 percent, its lowest since Feb. 11, and was last trading near 1.64 percent. The 2-year yield was near 0.73 percent, its lowest since May 12.

Global benchmark yields YTD

The launch of the European Central Bank’s corporate bond purchase program earlier in the week was also a factor behind the decline in yields over the last few days, Jaime said.

“I think it’s not about a question on what is driving the market but how this is going to end. … What worries me about what’s going on is I think most of the policymakers are fighting secular trends with cyclical tools,” Jaime said.

The S&P 500 ended the week below the psychologically key 2,100 level, with energy falling nearly 2 percent and financials off more than 1 percent.

U.S. crude oil futures settled down $1.49, or 2.95 percent, at $49.07 a barrel. The weekly oil rig count edged higher for a second-straight week, according to Baker Hughes data.

“I think we’re back to following oil,” said Dan Veru, chief investment officer at Palisade Capital Management.

“You are at a pivotal point. I just don’t know if we pivot up or down. Again you could make the case for both directions,” he said.

Despite Friday’s decline, the major U.S. indexes held most of their recent gains, with the Dow Jones industrial average rising 0.3 percent for the week and the S&P falling just 0.15 percent for the week. Both indexes were within 2 percent of their 52-week intraday highs.

“We’re in a little bit of a seesaw environment right now where they’re trying to read the tea leaves,” said Greg Braca, head of corporate and specialty banking.

“We think the U.S. will continue to be an outlier in terms of real growth,” he said.

In economic news, the preliminary read on consumer sentiment for June was 94.3, a touch lower than May’s final read of 94.7.

DJIA Dow Industrials 17865.34
-119.85 -0.67%
S&P 500 S&P 500 Index 2096.07
-19.41 -0.92%
-64.07 -1.29%

The Dow Jones industrial average closed 119.85 points lower, or 0.67 percent, at 17,865.34, with Goldman Sachs leading decliners andVerizon leading gainers.

The index fell 0.67 percent for the week, with Goldman Sachs the worst performer and Verizon the best.

The S&P 500 closed down 19.41 points, or 0.92 percent, at 2,096.07, with energy and financials leading eight sectors lower and telecoms and consumer staples the only gainers.

The S&P lost 0.92 percent for the week, with financials the worst performer and telecoms the best.

The Nasdaq composite closed down 64.07 points, or 1.29 percent, at 4,894.55.

The index declined 1.29 percent for the week. Apple gained 0.9 percent for the week, while the iShares Nasdaq Biotechnology ETF (IBB) fell 5 percent.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose above 17 for the first time since mid-May.

About five stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 864 million and a composite volume of nearly 3.5 billion in the close.

High-frequency trading accounted for 49 percent of June’s daily trading volume of about 6.52 billion shares, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.

Gold futures for August delivery settled up $3.20 at $1,275.90 an ounce.

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