Stocks Hover Near Lows on Brexit Uncertainty

Stocks hover near session lows Tuesday as focus returns to the thorny issue of the Brexit.
By Keris Alison Lahiff ,

Stocks hovered near session lows on Tuesday in Wall Street's return from the long Independence Day weekend as focus returned to the thorny issue of the Brexit.

The S&P 500 was down 0.62%, the Dow Jones Industrial Average fell 0.5%, and the Nasdaq declined 0.76%.

Uncertainty over the timeline and execution of the United Kingdom's exit from the European Union left markets rattled on Tuesday. The U.K.'s central bank also sounded a dovish call, unnerving investors already unsure about the global effect of a Brexit. 

The Bank of England said Tuesday it would reduce the amount of capital banks need to hold to free up more money for lending to businesses and households following the aftermath of Great Britain's vote to leave the European Union. Bank of England Gov. Mark Carney said that the central bank has the scope to deal with Article 50, which will kick off Britain's exit, when it is invoked.

"The Bank of England is making strenuous efforts to reassure the markets that it can provide ample liquidity and relax monetary policy to counter some of the effects of the Brexit uncertainty shock on the economy," Societe Generale analysts wrote in a note.

Since news of the pro-exit vote broke on June 24, the S&P 500 has fallen 1.2%, the Dow is down 0.9%, and the Nasdaq has dropped 1.9%.

Stocks had rallied in the previous week, wiping out much of the Brexit selloff, thanks to a spike in speculation that the turmoil in Europe will delay a rate hike in the U.S. and increase the chances of monetary stimulus from global central banks. The protracted time for an exit from the EU -- likely at least two years -- also gave investors a reason to buy back in the near term.

Crude oil was in retreat after closing last week with a five-day gain of 2.8%. The commodity ended the second quarter on Thursday with gains of 26%, its best quarterly performance since 2009, thanks to disruptions to global oil production, particularly in Canada, Nigeria and Venezuela.

West Texas Intermediate crude oil was down 3.9% to $47.10 a barrel on Tuesday.

Factory orders in May declined at a faster pace than expected. Orders declined 1%, according to the Census Bureau, a wider decline than an expected 0.8%. Orders have slowed since a 1.8% increase in April. 

Harley-Davidson (HOG) - Get Report slid nearly 10%, giving back much of the gains achieved on Friday. Shares had surged on speculation of a possible takeover deal from private-equity firm KKR in the pipeline.  

Tesla (TSLA) - Get Report fell 3% after releasing a second-quarter sales update that fell well short of company estimates. The electric car company said it produced 18,345 vehicles in the second quarter of 2016, a 20% increase from the previous quarter. However, a late-quarter production increase meant deliveries reached only 14,370 vehicles, below an expected 17,000.

Netflix (NFLX) - Get Report was downgraded to hold from buy at Needham. The firm said exposure to Europe should accelerate subscriber churn or slow subscriber growth.

Nordstrom (JWN) - Get Report was upgraded to hold from sell at Miller Tabak. Analysts said the move was a valuation call based on a $39.50 price target.

Walt Disney's (DIS) - Get ReportFinding Dory topped the weekend box office for the third week in a row, generating an estimated $50.2 million in North American ticket sales over the four-day holiday weekend. The animated sequel has taken in $538.3 million globally during its three-week run. Warner Bros.' The Legend of Tarzan pulled in $38.1 million domestically in its weekend debut, a disappointing haul and just a fraction of its $180 million production cost.

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