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Madrid - US stocks slipped, with the S&P 500 Index falling for the sixth time in seven days, amid speculation on the outcome of a UK referendum on European Union (EU) membership.
The S&P 500 declined 0.3% to 2 072.71 at 15:55. in New York, after rising Thursday for the first time in six sessions. The Dow Jones Industrial Average lost 33.11 points to 17 699.99. The Nasdaq Composite Index sank 0.6% to approach a four-week low.
“It’s a quiet day in terms of economic reports, so people are starting to refocus on Brexit as a very real possibility amid signs that public support is mounting,” said Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer’s Investment Research. “That’s weighing on sentiment ahead of the weekend.”
Trading may be subject to unexpected swings Friday because of a quarterly event known as quadruple witching, when futures and options contracts on indexes and individual stocks expire. Some of the biggest instruments for protection against losses in equities are rolling over just a few days before the UK’s referendum on secession, an event that will force would-be hedgers to take up new positions.
Equities were whipsawed on Thursday, erasing losses that had reached 1 percent, after both sides on the Brexit issued suspended their campaigns following following the murder of Labour Party lawmaker Jo Cox, who was a “Remain” proponent.
The event shifted investor sentiment after a series of polls in recent days indicated more Britons favor leaving the EU.
Bookmakers’ odds today indicated a lower chance of the “Leave” side winning. Federal Reserve chair Janet Yellen and central banks in Britain, Japan, Canada and Switzerland have warned this week over the potential for economic damage in the event of a secession.
Meanwhile, investors have been bracing for turbulence like never before. Trading volume for securities linked to the CBOE Volatility Index, also known as the S&P 500 fear gauge, surged to a record high this week.
Concern that Britain will exit the union, and thereby weaken the global economy, has weighed on financial markets ahead of the June 23 vote, with the S&P 500 headed for its biggest weekly decline since April.
Investors were also unnerved by a mediocre growth outlook implied by Yellen’s dovishness after Wednesday’s Fed meeting, as well as a lack of action from other prominent central banks that fueled perceptions policy makers are increasingly at a loss about what to do in the face of a struggling global economy.
A report today showed new-home construction in the US was little changed in May, a sign the residential real-estate industry’s contribution to economic growth in the second quarter will be muted. The chances of a boost in borrowing costs have fallen to 6% for July, from about 16% before the Fed this week scaled back its projections for increases. Odds only rise to 40% for as late as February 2017.
“Britain leaving the eurozone has wide ramifications globally so until the vote actually goes through I don’t think markets will make too much headway,” said Nick Skiming, a fund manager at Jersey, Channel Islands-based Ashburton. His firm oversees $10bn.
“The odds for the ‘Remain’ camp are slightly ahead at the moment, but after rebounding yesterday the US market is back to waiting and seeing.”
