Wall Street eyes low rates, earnings after Brexit rout

Sun Jun 26, 2016 6:33pm EDT
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By Noel Randewich and Caroline Valetkevitch

(Reuters) - With markets reeling after Britain's vote to leave the European Union, some on Wall Street expect cooler heads to prevail over the next several sessions as investors focus domestically on the outlook for the U.S. economy and company earnings.

The unexpected decision by Britons to break away from the world's biggest trade bloc raised the specter of a slower global economy and sent stocks and currencies plunging by historic amounts on Friday. Globally, the $2.08 trillion in stock market value wiped out in the sell-off marked the largest daily loss ever in dollar terms, according to Standard & Poor's Dow Jones Indices.

As U.S. stock index futures opened for trading late on Sunday, they suggested that a moderate decline for Monday morning. S&P 500, Dow Jones and Nasdaq index futures ESc1 1YMc1 NQc1 were each down about 0.5 percent shortly after 6:15 p.m. New York time (22:15 GMT).

At the same time, U.S. Treasury debt futures rose, a signal that a risk-off mood is persisting among global investors in the aftermath of Britain’s vote.

In early electronic trading on the Chicago Mercantile Exchange, 10-year Treasury note futures TYv1 rose around half a point, or 0.38 percent, while 2-year note futures TUv1 gained about 0.1 percent.

Friday's 3.6 percent slump erased the S&P 500's .SPX gains for 2016. But even as the index suffered its worst one-day drop in 10 months, some U.S. investors looked for reasons to expect more upbeat trading next week.

They pointed to expectations that U.S. interest rates would remain low, that upcoming reports would show U.S. corporate earnings had recently improved and that Britain's breakup with the EU would be gradual, and not economy-wrecking.

"I don't think this is a catalyst that's going to cause a bear market in this country at all. People should not be going ‘the world is coming to an end.’ It's not," said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York.   Continued...

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 24, 2016.  REUTERS/Lucas Jackson