Stocks and oil prices plunge after shock of British EU vote

NEW YORK — Bank shares tumbled on Friday to lead Wall Street's biggest selloff in 10 months after Britain's decision to leave the European Union caught traders wrong-footed.

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

"We're seeing some selling pressure today primarily because a lot of investors and market participants were not anticipating this outcome," said David Lefkowitz, senior equity strategist at U.S. Bank Wealth Management Americas in New York.

Oil prices, which are sensitive to changes in the economic outlook, dropped about 4.8 percent, the biggest fall since early February.

"I would characterize this as an unwinding of some of the gains that we saw over the last few days."

[British vote to leave EU; Prime Minister Cameron to resign]

Global financial markets plunged and sterling sank to its lowest since 1985 after Britons voted by about 52-48 percent to break away from the world's biggest trading bloc.

At 12:12 p.m. ET the Dow Jones industrial average was down 503.62 points, or 2.8 percent, at 17,507.45, the S&P 500 index was down 61.02 points, or 2.89 percent, at 2,052.3 and the Nasdaq Composite index was down 166.27 points, or 3.39 percent, at 4,743.77.

Investors worried about the outlook for the world economy sought refuge in the dollar and other traditional safe-harbor assets such as gold and U.S. Treasury bonds, while dumping riskier shares. The yield on the U.S. 10-year T-bond hit its lowest since 2012.

Banks stocks, which had risen strongly this week in anticipation that Britain would stay in the EU, were among the biggest losers. U.S. banks have big London operations.

Nine of the 10 major S&P 500 sectors were lower at midday. Only the utilities sector managed to eke out a gain. Utilities are traditionally seen as a safe investment.

Shares of the biggest U.S. tobacco companies also rose, as investors sought stocks offering high yields. Altria Group , the largest U.S. cigarette maker, was up 2 percent at $67.67 at midday after hitting a record high of $67.97.

The CBOE VIX volatility index – known as Wall Street's fear gauge – was up 30.20 percent at 22.44 in midday trading. The index had earlier surged as much as 52.11 percent to 26.24, its highest since February.

The number of S&P futures contracts traded by 9 a.m. ET had already exceeded their daily average for the past year. Trading in S&P 500 and Nasdaq futures was halted briefly overnight after they fell more than 5 percent, triggering limit thresholds.

Britain's FTSE 100 stock index closed down 3.2 percent after dropping as much as 8.7 percent. Asian stocks also tumbled.

U.S. short-term interest rate futures rose amid speculation the Federal Reserve could cut interest rates to help shield the economy from any global fallout.

Investors have been waiting for the Fed to raise borrowing costs as the economy improves.

The Federal Reserve, which had earlier said a Brexit could have "significant repercussions" on the economic outlook, sought to calm markets on Friday by saying it was ready to provide dollar liquidity.

Amid the turmoil, Prime Minister David Cameron said he would step down by October.