Dow drops 610 as stocks sink globally on exit vote

NEW YORK -- Stocks plunged in the U.S. and worldwide Friday after Britain voted to leave the European Union. The referendum result stunned investors, who reacted by rushing to the safety of gold and U.S. government bonds as they wondered what's next for Britain, Europe and the global economy.

U.S. stocks gave up all their gains from earlier in the year. The Dow Jones industrial average tumbled 610.32 points, or 3.4 percent, to 17,400.75. The Standard & Poor's 500 dropped 75.91 points, or 3.6 percent, to 2,037.41. Both indexes took their biggest losses since August. The Nasdaq composite suffered its biggest loss since mid-2011, down 202.06 points, or 4.1 percent, to 4,707.98. Indexes in Europe and Asia took even larger losses.

The British vote injected uncertainty into financial markets, which investors find unsettling. Traders responded by dumping riskier assets that appeared to have the most to lose from disruptions in financial flows and trade: banks, technology companies and makers of basic materials. More shares were traded than on any day since August 2011, when Standard & Poor's downgraded the credit rating of the U.S. government during a crisis over the budget and the country's debt ceiling.

Britons voted to leave the EU over concerns including immigration and regulation. It's far from clear what that will mean for international trade or for Europe, as the EU, which was formed in the decades after World War II, has never before lost a member state.

"Market participants are right to be concerned," said Dean Maki, chief economist of investment firm Point72 Asset Management. "We're likely to see weaker growth as a result of this, and it's appropriate that markets are reacting to this. Exports are likely to be weaker and earnings are a function of exports. U.S. exporters are going to have to deal with a stronger dollar again."

Bond prices surged and yields fell. The yield on the 10-year U.S. Treasury note dropped to 1.56 percent from 1.75 percent on Thursday, a large move.

As if results of the U.K. vote weren't enough, Friday is also the date of the annual rebalancing of FTSE Russell's stock indexes, a procedure that adds to trading volume and volatility.

Companies exposed to the U.K. economy warned Friday that the decision could slow growth and prompt them to cut their investments in the country. Responses from corporate leaders underlined the global impact.

"This is a lose-lose result for both -- Britain and Europe," said Chief Executive Officer Thomas Enders of Airbus Group SE, which makes wings for its aircraft in the U.K. "We will review our U.K. investment strategy, like everybody else will."

Alcoa Inc. CEO Klaus Kleinfeld said in an email that the "outcome of the referendum is disappointing. Global integration has created security and wealth for most nations. We must all be encouraged to continue on this path and create a better future for the next generations."

Ford Motor Co., which employs 14,000 people in the U.K., said it will "take whatever action is needed to ensure that our European business remains competitive."

Banks stocks took the largest losses by far on Friday. Shares of Citigroup fell $4.16, or 9.4 percent, to $40.30 and JPMorgan Chase fell $4.45, or 6.9 percent, to $59.60. They have the most to lose in Britain's departure from the EU because they do a lot of cross-border business in Europe based from their offices in London. They also become less profitable when bond yields fall, since that lowers interest rates on mortgages and many other kinds of loans.

Microsoft shares fell $2.08, or 4 percent, to $49.83, and IBM fell $8.76, or 5.6 percent, to $146.59. DuPont fell $3.21, or 4.6 percent, to $66, and LyondelBassel Industries fell $4.14, or 5.2 percent, to $74.91.

The pound fell dramatically, to $1.3638. At one point the British currency hit a 31-year low.

Oil prices sank. Benchmark U.S. crude declined $2.47, or 4.9 percent, to close at $47.64 a barrel in New York. Brent crude, the international benchmark, fell $2.50, or 4.9 percent, to $48.41 a barrel in London.

In addition to bonds, other safety assets also soared. Gold jumped $59.30, or 4.7 percent, to $1,322.40. That's its highest price since July 2014. Silver rose 44 cents, or 2.5 percent, to $17.79 an ounce, its highest in more than a year. Gold producer Newmont Mining rose the most in the S&P 500 index. It climbed $1.80, or 5.1 percent, to $37.19 and set a three-year high.

High-dividend utility companies made tiny gains. Consolidated Edison rose $1.55, or 2 percent, to $78.41 and Duke Energy added 38 cents to $82.43.

Investors had sent stocks higher this week as they gradually grew more confident, based on polls and the changing odds in the betting market, that Britain would stay in the EU. They sent the pound to its highest price of the year and sold bonds, pushing yields higher. Those gains were rapidly undone Friday.

Britain's FTSE 100 dropped 3.1 percent. At one point it was 8 percent lower. The German DAX index sank 6.8 percent, and France's CAC 40 index tumbled 8 percent.

Japan's Nikkei 225 finished a wild day down 7.9 percent, its biggest loss since the global financial crisis in 2008. South Korea's Kospi sank 3.1 percent, its worst day in four years. Hong Kong's Hang Seng index tumbled 4.4 percent and stocks in Shanghai, Taiwan, Sydney, Mumbai and Southeast Asian countries were sharply lower.

In other currency trading, the dollar fell to 102.24 yen from 104.47 yen while the euro weakened to $1.1121 from $1.1351.

Currency-trading volumes reached record highs on Thursday night into Friday, according to Jamie Dimon, JPMorgan Chase & Co.'s chief executive officer. Markets will continue to face challenges next week as fallout from the referendum continues.

"I see the volatility continuing," said Sang Lee, an analyst at Aite Group. "It's not really clear how this is going to play out, and it's a huge issue."

Information for this article was contributed by Marley Jay, Danica Kirka, Youkyung Lee, Ken Sweet and Kelvin Chan of The Associated Press and by Dani Burger, Anna-Louise Jackson, Annie Massa, Matthew Leising, Brian Louis and Eric Pfanner of Bloomberg News.

Business on 06/25/2016