By Ellie Ismailidou and Sara Sjolin, MarketWatch
Global equities fall; BOE, BOJ leave rates unchanged
U.S. stocks fell Thursday, leaving them on track for their sixth
straight daily drop and the longest losing streak since February,
as investors worried about next week's so-called Brexit referendum
along with concerns about slowing economic growth.
Adding to the bearish sentiment was a sharp drop by oil futures,
which pushed the shares of energy companies lower.
Meanwhile, the financial sector was hit by the prospect of
interest rates staying lower for longer, after the Fed signaled
Wednesday that it will delay interest rate increases
(http://www.marketwatch.com/story/downgraded-dot-plot-hints-at-longer-term-fed-worries-on-economy-2016-06-15),
demonstrating it's not overly confident in the economy.
Overall the market was caught in risk-off mode, analysts said,
with risk assets like equities and oil selling off world-wide,
while havens like gold, the yen and government bonds rallied.
The S&P 500 shed 13 points, or 0.6%, to 2,058, led by a 1.3%
drop in energy shares and a 1% drop in financial shares. The
utilities, telecom and consumer-staples sectors, traditionally
viewed as safety plays in times of market turmoil, were the only
sectors in positive territory, up 0.6%, 0.5% and less than 0.1%
respectively.
The Dow Jones Industrial Average lost 75 points, or 0.4%, to
17,565, led by a 2.4% drop in Nike Inc. (NKE). Merck & Co. Inc.
(MRK) was leading the gains, up 1.7%.
The Nasdaq Composite slid 40 points, or 0.8%, to 4,796.
Still, despite the global flight to quality, the S&P
remained Thursday within "a sizable trading range from the last two
months," marked roughly between 2,025 and 2,100, said Frank
Cappelleri, technical analyst at Instinet.
But the question now becomes whether the index can use this
extended period of sideways movement as a "high-level launching pad
to new highs." According to Cappelleri, a positive sign for this
scenario would be if the S&P holds near 2,100 even after next
week's Brexit vote.
But investors across the world were fretting about the potential
consequences of a Brexit vote, particularly after three major
central banks--the Federal Reserve, the Bank of England and the
Bank of Japan--raised concerns about the Brexit vote.
U.K. voters head to the polls on June 23 to decide whether to
remain a member of the European Union. Economists and market
strategists say an "out" vote could instigate widespread turmoil in
global markets..
"Markets are in full risk-off mood after the Fed flagged Brexit
as a very real threat to growth. Low interest rates are here to
stay, and that could be it for the year," said Joe Rundle, head of
trading at ETX Capital, in a note.
Meanwhile, the Japanese central bank on Thursday made no changes
to its asset-purchase program or interest rates. The lack of action
was interpreted as caution ahead of the June 23 Brexit
referendum.
Read:Brexit fears lead Bank of Japan to leave rates unchanged
(http://www.marketwatch.com/story/brexit-fears-lead-bank-of-japan-to-leave-rates-unchanged-2016-06-15)
"Japan's decision to stand pat on rates has rattled markets,
prompting a further rush to safety that's sent the yen soaring to
fresh highs," Rundle said. "These central banks are being cautious
because of the hazards from overseas--the number one threat right
now is that Britain could leave the EU."
Asian markets slumped
(http://www.marketwatch.com/story/asian-markets-down-after-bank-of-japan-stays-pat-2016-06-15)
after the BOJ decision, while the yen rallied, reaching a two-year
high against the dollar.
(http://www.marketwatch.com/story/yen-soars-to-multi-month-highs-vs-dollar-euro-after-boj-holds-fire-2016-06-16)
On Thursday, the Bank of England also kept its key interest rate
unchanged
(http://www.marketwatch.com/story/bank-of-england-holds-key-rate-at-05-ahead-of-brexit-referendum-2016-06-16)
at a record low of 0.5% and made no changes to its
375-billion-pound ($530 billion) asset-purchase program. The BOE
said in a statement that a potential vote to leave the EU could
materially alter the outlook for output and inflation in the
U.K.
In another sign of safe-haven flows, gold continued to march
higher, to trade comfortably above the $1,300 level. Some analysts
say gold could rise to $1,400 an ounce
(http://www.marketwatch.com/story/watch-gold-jump-to-1400-if-uk-votes-to-brexit-2016-06-14)
if the U.K. chooses to ditch the European Union.
And sovereign yields across the world tumbled to fresh record
highs, with the yield on the 30-year Swiss bond
(http://www.marketwatch.com/story/swiss-30-year-government-bond-yield-turns-negative-2016-06-16)becoming
the longest-dated bond to ever fall into negative territory.
(http://www.marketwatch.com/story/gold-just-scored-a-ticket-to-ride-higher-from-janet-yellen-2016-06-15)"You
look at bond yields and you can't help but think 'what does the
bond market know that we don't know?'" said Karyn Cavanaugh, senior
market strategist at Voya Financial.
While the 10-year Treasury yield tumbled to a 3 1/2 -year low
Thursday, the S&P was still within striking distance from its
all time high of 2,130.82, set May 21, 2015.
According to Cavanaugh, the U.S. equity market "is still holding
up" but investors should not expect a meaningful breakthrough
unless corporate earnings improve in a substantial way.
Other economic news: On the U.S. economic front, a flurry of
fresh data offered a mixed picture of the U.S. economy.
A reading on U.S. inflation missed expectations
(http://www.marketwatch.com/story/us-inflation-climb-02-in-may-cpi-shows-2016-06-16)
on Thursday, while initial jobless claims rose
(http://www.marketwatch.com/story/jobless-claims-rise-13000-to-277000-2016-06-16).
But rent rose at the fastest monthly pace since 2007
(http://www.marketwatch.com/story/rent-rose-at-the-fastest-pace-in-more-than-9-years-in-may-2016-06-16)last
month, a reminder that one of the biggest expenses for most
Americans isn't easing up.
The Philadelphia Fed manufacturing index
(http://www.marketwatch.com/story/philly-fed-survey-shows-mild-improvement-in-june-2016-06-16)showed
mild improvement in June, logging its second positive reading in
the past 10 months. And a closely watched index of home builder
sentiment
(http://www.marketwatch.com/story/home-builder-sentiment-jumps-2-points-in-may-nahb-says-2016-06-16)
rose to its highest reading since January.
Movers & shakers: Drug store chain Rite Aid Corp.(RAD) fell
0.7% after the company reported a quarterly loss Thursday, missing
expectations
(http://www.marketwatch.com/story/rite-aid-misses-profit-sales-expectations-2016-06-16)
on profit and sales.
Gold-related assets were among biggest advancers premarket on
Thursday, with shares of Eldorado Gold Corp.(ELD.T) gaining 0.7%
and the Direxion Daily Gold Miners Index Bull 3x Shares(NUGT)
climbing 1.6%.
Jabil Circuit Inc. (JBL) inched lower by 0.3% after the Apple
Inc. (AAPL) supplier late Wednesday released a weak outlook
(http://www.marketwatch.com/story/jabil-shares-volatile-on-weak-fourth-quarter-outlook-2016-06-15)
for the fourth quarter.
Airbnb Inc. has signed a $1 billion debt facility deal
(http://www.marketwatch.com/story/airbnb-secures-1-billion-debt-deal-to-fund-new-services-2016-06-16)
with a group of large U.S. banks, Bloomberg reported Thursday,
citing people familiar with the matter. The home-rental company is
not a publicly traded company.
Other markets: European markets were awash in a sea of red
(http://www.marketwatch.com/story/european-stocks-fall-as-worries-about-growth-brexit-weigh-2016-06-16),
as traders grappled with the results of an influential Brexit poll
that showed
(http://www.marketwatch.com/story/pound-slumps-as-fresh-poll-shows-surge-in-brexit-support-2016-06-16)
a lead for the "leave" camp
(http://www.marketwatch.com/story/pound-slumps-as-fresh-poll-shows-surge-in-brexit-support-2016-06-16).
The dollar was mostly higher against other major currencies, but
slid against the yen.
(END) Dow Jones Newswires
June 16, 2016 12:29 ET (16:29 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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