U.S. equities moved lower on Wednesday in quiet trading, with safe havens bid and volatility protection on the rise ahead of Thursday’s eagerly awaited “Brexit” vote on whether British voters want to stay in the European Union.
In the end, the Dow Jones Industrial Average pared off early gains to close down 0.3%, the S&P 500 Index lost 0.2%, the Nasdaq Composite fell 0.2% and the Russell 2000 ended the day 0.4% lower. Elsewhere, Treasury bonds were stronger, the dollar was weaker, gold dropped 0.2% and oil lost 1.4% on inventory data.
Healthcare and telecom stocks were the day’s leaders, gaining 0.3% and 0.2%, respectively. Energy was the laggard, down 0.6%.
SolarCity Corp (NASDAQ:SCTY) gained 3.3% after Tesla Motors Inc (NASDAQ:TSLA), which lost 10.5%, offered to acquire the company in an all-stock deal worth as much as $2.8 billion. This is upward of a 35% premium for a deal that looks like empire building by TSLA CEO Elon Musk, who is connected by family relations and financial holdings to SCTY.
Leisure stocks were on the move. La-Z-Boy Incorporated (NYSE:LZB) gained 6.5% on better-than-expected earnings driven by margins and a near 26% gain in revenues. Winnebago Industries, Inc. (NYSE:WGO) gained 6.2% on an earnings beat helped by a 12% rise in motorhome deliveries and a 62% rise in towables.
Adobe Systems Incorporated (NASDAQ:ADBE) lost 5.7% despite better-than-expected earnings as key metrics missed estimates. HP Inc (NYSE:HPQ) lost 5.4% on weak guidance. And FedEx Corporation (FDX) lost 4.5% on a disappointing outlook.
All eyes are on tomorrow’s Brexit vote as polls remain too close to call. The latest numbers show a slight advantage for the “leave” camp while the polls over the past 10 days have largely seen a shift towards the “remain” camp. Betting markets continue to heavily favor a remain outcome by more than 2-to-1 odds.
As a sign of just how ridiculous the analysis has become, many are watching a “yellow rain” forecast as potentially suppressing the remain vote.
Watch for a breakout of volatility no matter the result, as stocks are vulnerable to a surge of volatility after a tight three-month consolidation range, amid narrowing breadth and a steady bid in the CBOE Volatility Index (INDEXCBOE:VIX) — which boosted the VelocityShares 2x VIX (NYSEARCA:TVIX) to a near 7% gain for Edge subscribers today.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
