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Stocks Decline on Brexit Vote as Pound Slumps: Markets Wrap

Rita Nazareth and Sarah Ponczek
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Stocks Decline on Brexit Vote as Pound Slumps: Markets Wrap

(Bloomberg) -- Stocks fell as uncertainty over Brexit sank the pound after U.K. Prime Minister Boris Johnson lost a key vote to fast-track legislation. Traders also parsed a flurry of corporate earnings.

The S&P 500 Index erased gains as a slide in tech shares outweighed a rally in energy companies. A sell-off in Facebook Inc. and Netflix Inc. helped push the Nasdaq-100 Index down. Boeing Co. climbed on the eve of its results, despite a cut in outlook by S&P Global Ratings. Treasuries and the U.S. dollar rose.

In a very volatile session, the pound slid as Johnson’s mission to take the U.K. out of the European Union in nine days’ time was thrown off course. Members of Parliament blocked his plan to rush the Brexit deal into law. Sterling could “see a 2% or so sell-off in a longer-delay scenario,” said Brendan McKenna, a currency strategist at Wells Fargo in New York.

“The U.K. is not as large a trading partner as China, but at the same time it does create some additional instability in the trading landscape,” said Peter Jankovskis, Oakbrook Investments LLC’s co-chief investment officer. “The whole Brexit situation entails all of Europe. That’s really where you’re seeing it. It goes beyond just the U.K. to be another potential drag on all of Europe.”

In earnings news:

After the close of regular trading, Texas Instruments Inc. tumbled on a weaker-than-expected forecast for the current quarter. Snap Inc. reported revenue and user growth that beat analysts’ estimates. Chipotle Mexican Grill Inc.’s sales outpaced expectations, but wage and commodity costs increased.Procter & Gamble Co. climbed on Tuesday after raising the high end of its full-year sales forecast.United Technologies Corp. boosted its profit outlook, lifting shares.Harley-Davidson Inc. jumped as earnings beat estimates.McDonald’s Corp.’s home market lost momentum in the latest quarter amid fierce competition. Shares fell.United Parcel Service Inc.’s profit margin expanded, but shares slid on the retirement of Chief Operating Officer Jim Barber.Hasbro Inc. tumbled on weaker-than expected earnings as tariffs weighed on sales growth.Travelers Cos. sank as profit missed estimates.

It’s a huge week for earnings, with around one-fifth of S&P 500 members due to report their results. So far the numbers have generally surprised to the upside, reassuring investors that companies are weathering slowing growth and the trade war. All the same, analysts are cutting estimates for next year as the dispute between the world’s biggest economies continues to take a toll.

“Earnings are coming in OK,” said Jeff Mills, chief investment officer at Bryn Mawr Trust Co., which manages $15 billion. “But my point of view quiet honestly is that we’re still going to end up trading in this tight-ish range that we’ve been in at least through the end of the year.”

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Netflix sank as Verizon Communications Inc. announced a partnership with Walt Disney Co. Facebook’s antitrust woes widened as dozens more states joined New York’s probe into whether its business practices have stifled competition or put users at risk. Biogen Inc. surged on news it will ask U.S. regulators to approve an experimental Alzheimer’s therapy. Lyft Inc. jumped after executives said the company would turn a profit by the end of 2021.

Elsewhere, the Canadian dollar was little changed after lower-than-expected retail sales. The currency rose earlier Tuesday after Prime Minister Justin Trudeau won a second term in a federal election that pointed to more fiscal stimulus. Oil jumped after a report that OPEC and allied crude producers will discuss deepening supply cuts next month.

Here are some key events coming up this week:

Earnings season is in full swing with companies reporting including: Microsoft, Caterpillar, Amazon.com, Daimler and Kia Motors.Thursday brings monetary policy decisions from the European Central Bank and Bank Indonesia.U.S. factory orders for business equipment will provide a look into the strength of capital investment in September. The figures will show to what extent the latest tranche of tariffs on China and others is impacting investment decisions.

These are some of the main moves in markets:

Stocks

The S&P 500 lost 0.4% to 2,995.99 as of 4 p.m. New York time.The Stoxx Europe 600 Index rose 0.1%.The MSCI Asia Pacific Index advanced 0.2%.

Currencies

The Bloomberg Dollar Spot Index increased 0.1%.The euro fell 0.2% to $1.113.The British pound decreased 0.5% to $1.2896.The Japanese yen strengthened 0.1% to 108.47 per dollar.

Bonds

The yield on 10-year Treasuries sank three basis points to 1.77%.Germany’s 10-year yield slid two basis points to -0.37%.Britain’s 10-year yield declined four basis points to 0.711%.

Commodities

The Bloomberg Commodity Index gained 0.3%.West Texas Intermediate crude jumped 1.6% to $54.16 a barrel.Gold rose 0.2% to $1,490.80 an ounce.

--With assistance from Justina Vasquez, Andreea Papuc, Todd White, Samuel Potter, Nancy Moran and Sophie Caronello.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth

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