The S&P 500 turned negative as Wall Street suffered its largest selloff in 10 months after Britain’s decision to leave the EU

June 23, 2016 – Reuters

In the busiest trading volume for a single session in nearly five years, financial stocks .SPSY led the decline on the S&P 500 with a 5.4 percent drop -the largest for the sector since November 2011.

The S&P 500 lost all the year’s gains and suffered its largest decline since late August last year.

Equity futures neared an 11-month high to start the overnight session as markets wrongly bet that the “Remain” camp would prevail in Britain’s referendum, but sold off sharply as the results showed otherwise – even triggering a market stop put in place to curtail volatility.

The decline during regular market hours seemed more orderly, and the S&P managed to close in the area of what analysts called significant technical support, near 2,040.

Still, many expect the next weeks to remain volatile.

The CBOE Volatility index .VIX ended up 49 percent at 25.76, its highest level since Feb. 11 – when equities hit their lows of the year.

“The market has really not fully digested the second-order impacts of this,” said Stephen Auth, chief investment officer at Federated Investors in New York.

“We are keeping our clients in dividend stocks and on a defensive strategy,” he said. “That’s the story until we reach better risk-reward levels,” which Auth said could be near the S&P 500’s February low near 1,830.

High-dividend-paying utilities .SPLRCU were the only S&P 500 sector to end the day in the black, with a meager 0.09 percent gain.

The Dow Jones industrial average .DJI fell 611.21 points, or 3.39 percent, to 17,399.86, the S&P 500 .SPX lost 76.02 points, or 3.6 percent, to 2,037.3, and the Nasdaq Composite .IXIC dropped 202.06 points, or 4.12 percent, to 4,707.98.

Many market participants, however, saw the broad-based decline as an opportunity for investors on the sidelines to gradually increase their stock holdings.

“What I see going to happen is the Federal Reserve will not raise rates in 2016, that is off the table and a market positive,” said Doug Cote, chief market strategist at Voya Investment Management in New York.

“If you have cash on the sidelines it could be a buying opportunity but I wouldn’t be changing (bonds-stocks) allocations right now,” he said, adding he expects other major central bank’s policies to also give the market support.

The weekly declines in the S&P 500 and Dow industrials, both off 1.6 percent, were the largest since February, and the Nasdaq’s 1.9 percent drop was marginally lower than the previous week’s.

The relatively less severe weekly decline points to an unraveling of trades put in place after polls last weekend showed increasing momentum for the “Remain” camp in the British referendum.

Traders were closely following moves in currencies, calling them the contagion mechanism between markets. The pound GBP= tumbled to near $1.32, its lowest level since 1985, before bouncing back to a loss of 8 percent at $1.3678.