U.S. stock futures fell on Monday after Greeks resoundingly
rejected creditors' conditions for further financial aid, pushing
their country closer to bankruptcy and a potential exit from the
eurozone.
S&P 500 futures declined 19 points, or 0.9%, to 2050. E-mini
Dow futures dropped 167 points, or 1%, to 17482, and e-mini
Nasdaq-100 futures lost 41 points, or 0.9%, to 4388. Changes in
stock futures don't always accurately predict moves in the stock
market after the opening bell.
The declines come after more than 61% of Greek citizens voted
"no" in Sunday's referendum on the terms for a bailout that
included pension cuts, tax increases and other measures. The
referendum was on whether to accept austerity terms demanded by the
country's creditors in exchange for further aid. The "no" vote
appeared to increase the likelihood that Greece may eventually exit
the eurozone.
Entering the weekend, many investors anticipated the result of
the Greek referendum to be a "yes" vote, which European leaders had
encouraged.
"What most banks and research shops were predicting was that the
measure would pass, Greece would take some of its tough medicine
and move on," said Erik Wytenus, global investment strategist at
J.P. Morgan Private Bank. "It's not good to have this uncertainty.
It's not good to have this destabilizing force. But we would not
expect any selloff in U.S. stocks to be a substantial one or that
this will cause a correction in U.S. stocks."
Stocks and bonds in Europe fell on Monday, but the decline was
fairly muted. The Stoxx Europe 600 lost 1%, while Germany's DAX
fell 1.6% and France's CAC-40 dropped 1.9%. The euro initially
tumbled before paring losses, recently trading 0.8% lower against
the dollar at $1.1026.
Investors bought U.S. Treasurys, viewed as havens, on Monday,
pushing down the yield on the 10-year note to 2.304% from 2.393% on
Thursday. Bond yields fall as prices rise.
Earlier Monday Greece's confrontational finance minister Yanis
Varoufakis resigned, which many investors viewed as a positive sign
for negotiations with creditors. "The prospect for a deal is better
now that he's out," said Mr. Wytenus. "That's helping some of this
market reaction."
The drama surrounding the Greek debt crisis has dominated U.S.
stock trading over the past several weeks. Two weeks ago, on June
22, stocks around the globe climbed as negotiations between Greece
and its international creditors appeared to be moving closer to a
positive conclusion. However, a week later, on June 29, stocks
tumbled as talks broke down. The Greek stock market was closed for
the week ahead of the referendum on Sunday, and there aren't plans
to reopen it until Tuesday at the earliest.
Analysts have said that even with the recent tumult in global
markets, they expect stocks to hold up better than they did in 2011
and 2012 when fears of a Greece bankruptcy swelled into worry about
the financial stability of other struggling European economies,
such as Spain and Portugal.
Unlike several years ago, now little of Greece's government debt
is held by banks and private investors outside of the country,
which lessens the likelihood of a ripple effect of losses.
After the developments over the weekend, analysts said the
probability that Greece eventually exits the eurozone is now much
higher. However, they said with Europe's improving economy, they
remain bullish on the region.
Mr. Wytenus said he is telling clients to keep calm, look
through all the geopolitical noise, and buy European stocks.
"No matter what happens with Greek negotiations this week, the
economic situation on the ground is much more improved than in 2012
when people were concerned if Greece went out, it would create a
domino effect," he said. "Even if we were to see further weakness
throughout the course of the week, we'd continue to advocate for
clients to buy Europe."
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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