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US stocks stumble as Brexit jitters resurface

November 30,-0001 00:00

U.S. markets were closed on Monday in observance of Independence Day, but stock futures still traded and logged small gains. Those moves came after both the Dow average and S&P 500 index scored their best weekly performances of 2016 last week, ...and more »

The Dow Jones Industrial Average was off triple-digits as Brexit-related uncertainties spooked U.S. stock-market investors in a day marked by light trading volume following Independence Day. A sharp drop in crude-oil prices contributed to the overall slump, weighing on energy shares. “It’s a six-inch from your face type of market--very volatile,” said Tom Siomades, head of Hartford Funds’ Investment Consulting Group. The Dow

DJIA, -0.61%

skidded 120 points, or 0.7%, to 17,832, bouncing back from its intraday low of 17,785. The S&P 500 index

SPX, -0.68%

lost 18 points, or 0.8%, to 2,085. Energy and materials-sectors stocks led the losses. The Nasdaq Composite

COMP, -0.82%

fell 50 points, or 1%, to 4,812. U.S.-traded oil futures

CLQ6, -4.43%

 sank nearly 5% to below $47 a barrel to end at a one-week low. Light volume combined with nervous investors are contributing to magnifying the market’s moves, according to analysts. “It’s an emotionally-driven trade. They aren’t sure of the ramifications of Brexit so people are shooting first and then asking questions afterwards,” said Sahak Manuelian, managing director of equity trading at Wedbush Securities, referring to Britain’s vote to exit the EU, dubbed Brexit. Bob Pavlik, chief market strategist at Boston Private Wealth LLC which oversees $6.5 billion in assets, said investors are also pocketing short-term profits after the tremendous run-up. “Last Tuesday and Wednesday were about irrational exuberance but then I think there is a little bit of realization that nothing’s been resolved which is why there is so much money going into Treasurys,” said Pavlik. The yield on 10-year U.S. government bonds

TMUBMUSD10Y, -4.73%

 touched a record low at 1.36%. Treasury yields move in the opposite direction of prices. “Investors don’t buy stocks and bonds at the same time. One of these markets is telling a different story than the other,” said Art Hogan, chief market strategist at Wunderlich Securities. “Today there’s a recalibration of that thought process.” Equities were aligning with currency and bond markets after becoming dislocated during a liquidity-driven rally last week, when equities moved higher even as government-bond yields fell to record lows and a selloff in the British pound continued. The continued drop in U.S. benchmark yields is contributing to unstable market sentiment, prompting speculation of negative rates in the U.S., according to Manuelian. The Bank of England is expected to cut rates from an already record low of 0.5% when it meets next week. BOE Gov. Mark Carney said during a Tuesday press conference after the release of the bank’s Financial Stability Report that it is important any monetary policy action focuses on the domestic economy. Carney also said the risks in the aftermath of the vote have “begun to crystallize.” Stocks briefly pared losses after FBI Director James Comey said his agency would recommend to the Justice Department that no charges be brought against presumptive Democratic nominee Hillary Clinton related to classified information included in emails stored on private servers. U.S. markets were closed on Monday in observance of Independence Day, but stock futures still traded and logged small gains. Those moves came after both the Dow average and S&P 500 index scored their best weekly performances of 2016 last week, clawing back some of the steep losses logged in the wake of the U.K.’s vote to leave the European Union. Economic news: Factory orders in the U.S. fell 1% in May, snapping two straight monthly gains. Economists surveyed by MarketWatch had expected a drop of 0.8%, compared with a rise of 1.9% the previous month. The highlight of the week is the nonfarm payrolls report out on Friday. After a puny 38,000 jobs were added to the economy in May, economists polled by MarketWatch forecast 175,000 jobs were added in June. Friday’s report will attract even more attention than usual, Hogan said, as investors try to determine whether last month’s report was an aberration, or if the beginning of a shift toward a “new normal” of weaker jobs growth. Minutes from the Federal Reserve’s June meeting—held ahead of the Brexit referendum—are out Wednesday at 2 p.m. Eastern Time. Read: Goldilocks jobs report for June would be ‘just right’

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Movers and shakers: Shares of Harley-Davidson Inc.

HOG, -10.84%

 tumbled 12% after the motorcycle maker was downgraded at RW Baird. Oil companies were among biggest decliners, on the back of the slump in crude. Shares of Southwestern Energy Co.

SWN, -10.38%

 dropped 11% and Transocean Ltd.

RIG, -5.41%

 fell 6.6%. In other oil news, Chevron Corp.

CVX, -0.56%

 and Exxon Mobil Corp.

XOM, -0.87%

 on Tuesday committed to a $36.8 billion oil expansion project in Kazakhstan. Chevron shares dropped 0.9%, while Exxon shares shed 1.3%. Oppenheimer also cut the targets on Citigroup Inc.

C, -3.30%

 and Bank of America Corp.

BAC, -2.75%

with both stocks down more than 3%. Other markets: The renewed Brexit jitters sent waves through the currency market. The pound

GBPUSD, -1.9339%

 dropped to a fresh 31-year low against the dollar at $1.3106. The yen

USDJPY, -0.79%

 rallied against the dollar, with the greenback buying ¥101.63, compared with ¥102.55 on Monday. Asian markets closed mostly lower, although stocks in Shanghai

SHCOMP, +0.60%

 rose as Chinese investors became more hopeful about President Xi Jinping’s calls for reform at state-owned enterprises. European stocks

SXXP, -1.70%

 sold off again as Brexit fears gripped the market. Gold

GCQ6, +1.47%

 and silver rallied to close at their best levels since 2014. --Sara Sjolin in London contributed to this article.

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