US stocks resume selloff as Brexit angst continues to weigh

Stocks took a dive on Monday, extending losses from Friday after Britain's shocking vote to leave the European Union.
Traders work on the floor of the New York Stock Exchange (NYSE) on June 27, 2016, in New York City.
Traders work on the floor of the New York Stock Exchange (NYSE) on June 27, 2016, in New York City.PHOTO: AFP

WASHINGTON (BLOOMBERG) - United States stocks fell, after equities on Friday tumbled the most in 10 months, resuming a selloff sparked by Britain's shock vote to leave the European Union.

Banks remained the focal point for selling after lenders on Friday saw the worst one-day drop in almost five years. Bank of America Corp. and JPMorgan Chase & Co. sank more than 3.1 per cent. European equities continued to bear the brunt of the selling, with the Stoxx Europe 600 Index down 3.3 per cent to its lowest since February.

The S&P 500 Index dropped 1.4 per cent to 2,009.38 as of 9:50 a.m. in New York, holding at a three-month low. The benchmark fell below its average prices during the past 100 and 200 days. The Dow Jones Industrial Average lost 229.73 points, or 1.3 per cent, to 17,171.02. The Nasdaq Composite Index decreased 1.4 per cent after its biggest retreat since 2011, putting it on track for the lowest since Feb. 29.

"It's been a very volatile market which we somewhat expected, but even the most ardent of people that could see both sides were surprised by Friday's move," said Barbara Reinhard, head of asset allocation for multi-asset strategies at Voya Investment Management. "This is the new normal - politics could add more volatility to all financial assets. This is in part because central banks have done the lion's share of lifting for stimulus."

Risk assets have been under pressure since Britons voted to secede from the EU, raising concerns that an already-fragile global economic recovery will falter as trade snarls in one of the world's biggest consumer blocs.

Friday's losses reversed a weekly advance in the S&P 500 and pushed the CBOE Volatility Index up 49 per cent. The measure on market turmoil know as the VIX fell 4.9 per cent Monday to 24.49, even as stocks continued their retreat.

The U.K.'s Brexit vote left investors around the world scrambling toward safe havens on Friday, with the S&P 500 falling 3.6 per cent to erase its advance for the year. Investors are watching for policy action by central banks worldwide to ease the turmoil and pump liquidity into financial markets.

The next days and weeks will likely be key for central banks as they seek to minimize the damage in trading from Asia to the U.S. European equities extended losses on Monday, even as U.K. Chancellor of the Exchequer George Osborne sought to reassure financial markets, saying contingency plans were in place to shore up the U.K. economy.

The European Central Bank is hosting a three-day meeting in Sintra, Portugal that will include a speech from its president, Mario Draghi. German Chancellor Angela Merkel will host EU President Donald Tusk in Berlin today to talk about the U.K.'s exit plan.