The S&P 500 (SPX) is down over five percent in the past two trading days. However, trading today closed at 2000.54, a key psychological support level. It is difficult to predict the impact of Brexit both short- and long-term. However, the U.S. economy is in fairly good shape with seemingly low unemployment, strong consumer spending and sentiment, and housing demand remaining upbeat. Investors will be watching carefully for the effects of Brexit as new economic data is released. What is likely, however, is that volatility will continue in the financial markets over the course of the next few weeks or months. This presents an exceptional opportunity for premium sellers.
Stocks fell in volatile trading as investor sentiment continued to weaken ahead of next week’s “Brexit” vote. A clear swing in opinion polls in favor of the Leave camp put markets on edge this week. Investors also focused on commentary from central banks around the globe, which wasn’t surprising, considering the Federal Reserve, Bank of Japan, Bank of England, and Swiss National Bank all held their policy meetings. All four stood pat, keeping their key interest rates unchanged. However, all four cited growth concerns that fueled a flight to safety and a somewhat surprising aversion to stocks. Surprising, only because up until now, dovish commentary from the Federal Reserve has elicited strong rallies in recent years. The S&P surrendered nearly 1% on the week, opening Monday at 2091.75 and closing on Friday at 2071.22, down 20.53 points.
Stocks rallied during the first half of the week marking a new high for 2016. However, the rally was short-lived. The SPX came within 12 points of its historic all-time high on Wednesday, but was unable to continue the upward momentum. On Friday, the market gave in to selling pressure and the SPX closed down on the week. Investor fear has returned due in part to the World Bank lowering its global GDP forecasts. This report, along with nervousness around the looming “Brexit” vote and the FOMC meeting next week put traders into a risk-off mode before going into the weekend. The S&P 500 opened Monday at 2100.83 and closed on Friday at 2096.07, down 4.76 or 0.23% for the week.
Jobs… jobs… jobs… The market was quiet for most of the abbreviated trading week in advance of Friday’s much anticipated jobs report (or ‘lack of jobs’ report). Non-Farm Payrolls rose by just 38,000 in May, the weakest performance since September 2010, the Labor Department said Friday. This was significantly below the estimate by economists that payrolls would rise by 158,000. This sent the U.S. dollar into a tailspin against all of the major currencies. The U.S. Dollar Index futures (/DX) dropped 1.76% on Friday to its lowest point since May 17th.