Stocks close lower as Street counts down to Brexit vote

U.S. stocks closed lower Wednesday, weighed by declines in energy stocks, as investors remained on edge ahead of the U.K. vote on whether to leave the European Union.

Shares of McDonald's closed more than 1.5 percent lower for the greatest negative impact on the Dow Jones industrial average as most constituents declined. Nomura downgraded the stock to "neutral" from "buy" on expectations of weaker sales. The blue-chips index traded near the flatline in midday trade.

Energy closed more than half a percent lower to lead S&P 500 sectors lower, with oil settling below $50 a barrel.

The major indexes came off session highs in afternoon trade as the pound briefly erased earlier gains against the U.S. dollar.

A poll released Wednesday from TNS indicated support for "leave" holding over "remain," Reuters reported. Pound sterling struggled to hold gains against the U.S. dollar and was last near $1.470 after on Tuesday touching its highest against the greenback since early January.

"I expect the news to change and the story to change 10 more times between today and tomorrow," said John Caruso, senior market strategist at RJO Futures.

The EU referendum is scheduled for Thursday and the results are not expected until after the U.S. market close that day.

"Obviously the market's tentative ahead of the whole Brexit thing," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

The iShares Nasdaq Biotechnology ETF (IBB) reversed earlier losses to close about two-thirds of a percent higher. Health care closed well off session highs but remained the top S&P performer.

Analysts generally attributed the biotech gains to a U.S. Treasury press release that did not mention the trigger of the Independent Payment Advisory Board, whose role would be limiting Medicare spending. Concerns of a catalyst to creating the board weighed on biotech stocks Tuesday.

Tesla closed nearly 10.5 percent lower for the greatest negative impact on the Nasdaq 100. Late Tuesday, Elon Musk's electric car manufacturer proposed to buy SolarCity for about $2.8 billion. Musk CEO of Tesla and the controlling shareholder of the solar company, whose shares gained more than 3 percent Wednesday.

U.S. crude oil futures for August delivery settled down 72 cents, or 1.44 percent, at $49.13 a barrel, off session lows. On a continuous basis, oil gained 0.57 percent from Tuesday's settle of $48.85 on the July contract, which then rolled to August.

WTI came off highs to briefly trade more than 2.5 percent lower after the EIA said U.S. crude oil stocks declined a smaller-than-expected 917,000 barrels.

U.S. Federal Reserve Chair Janet Yellen said she believes the recent weakness in job creation is "transitory" and was optimistic on overall growth. She was speaking before the House Financial Services Committee as she concluded her two-day congressional testimony.

In economic news Wednesday, existing home sales rose 1.8 percent in May to an annual rate of 5.53 million units, the highest level since February 2007.

The FHFA House Price Index rose 0.2 percent on a seasonally adjusted bases in April from the previous month, while March's figure was upwardly revised to a 0.8 percent increase.

European stocks ended off highs, with the German DAX up about half a percent.

The U.S. dollar index pared losses to trade about 0.25 percent lower, with the euro around $1.129 and the yen near 104.4 yen versus the dollar.

Treasury yields were lower, with the 2-year yield near 0.75 percent and the 10-year yield around 1.68 percent. The German 10-year bund yield held higher in positive territory.

S&P 500

In Asia, the Shanghai composite closed up about 0.9 percent while the Nikkei 225 ended off 0.6 percent.

As of Wednesday's close, the major U.S. stock indexes were on pace for weekly gains of about two-thirds of a percent.

Katie Stockton, chief technical strategist at BTIG, said in a Wednesday morning note that S&P futures and European stocks benefited from "an impressive oversold bounce."

"Our short-term indicators are presently neutral, but we think the bounce will be fleeting given strong overhead resistance," she said. "Short-term momentum has improved, but does not appear strong enough to generate widespread breakouts. Nonetheless, if the Brexit vote generates a positive market response it will be important to judge not only this Friday's close, but also next Friday's close to determine whether breakouts are decisive."

The Dow Jones industrial average closed down 48.90 points, or 0.27 percent, at 17,780.83, with McDonald's leading decliners and Merck the greatest advancer.

The S&P 500 closed down 3.45 points, or 0.17 percent, at 2,085.45, with energy leading seven sectors lower and health care the top advancer.

The Nasdaq composite closed down 10.44 points, or 0.22 percent, at 4,833.32.

The CBOE Volatility index (VIX), widely considered the best fear gauge in markets, topped 21 for the first time in nearly a week.

Gold futures for August delivery settled down $2.50 at $1,270.00 an ounce.

On tap this week:


Earnings: BlackBerry, Accenture, Commercial Metals, Sonic

8:30 a.m. Initial jobless claims

9:45 a.m. Manufacturing PMI

10 a.m. New home sales


Earnings: Finish Line

8:30 a.m. Durable goods

10 a.m. Consumer sentiment

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