U.S. stocks caved as Wall Street joined global markets in a collective rush from risk assets in the wake of Britain's vote to depart the European Union.
"Europe is an important economic center. Europe matters quite a bit to the global economic picture," Jim Russell, a principal and portfolio manager at Bahl & Gaynor, told CBS MoneyWatch. "The uncertainty is what the markets are going to react to over the next few trading days."
"A lot of bets were placed on 'the remain' vote being successful, now those bets will be unwound," he added. "The reality of this vote has yet to unfold."
As market watchers struggled to assess the impact of Britain's historic Brexit from the EU, reactions to the unexpected result ranged from predictions that the move assures the U.K. will tumble into recession to projections of a limited fallout for the U.S.
In the immediate aftermath of the vote, the reaction by investors was severe. The British pound fell to its lowest level in more than three decades, and European bank stocks tallied their sharpest declines ever. European equities readied for their worst session since 2008 and gold rallied the most since the financial crisis.
In a statement, the Federal Reserve said it was "carefully monitoring developments in global financial markets, in cooperation with other central banks," after the referendum results. The central bank stands ready to inject "dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy."
The Dow (I:DJI) shed 611 points, or 3.4 percent, at 17,400, with banks leading blue-chip losses that extended to all 30 components.
JPMorgan and HSBC Holdings said the U.K. vote to succeed from the EU could lead to them transferring thousands of jobs from London.
A day after coming within 1 percent of its record high, the S&P 500 (SPX) dropped 76 points, or 3.6 percent, to 2,037, with financials hardest hit among its major industry groups, all 10 of which lost ground.
The Nasdaq Composite (comp) fell 202 points, or 4.1 percent, to 4,708.
Global equities had rallied about 8 percent over the past 10 days on expectations the U.K. vote would favor staying in the EU.
U.S. economic data brought bad news for American manufacturers, with orders to U.S. factories for long-lasting goods fell 2.2 percent in May after two months of gains.
Analysts at Goldman Sachs forecast a recession for the United Kingdom, telling a conference call with investors Friday morning that the unknowns and delayed investment spending decisions would likely weigh on U.K. economic growth "to the tune of 1.5 to 2.5 percentage points over the next 18 months."
"We expect central banks to flood banks with liquidity, we had our first taste of that today," Andrew Benito, Goldman's European economist said, referring to statements by the Bank of England and the European Central Bank (ECB) that banks would receive any funding needed. "It's a very troubling outcome for U.K. banks and EU banks. From a medium-term perspective, the risks have greatly increased. How do you move your activities from country A to country B?"
Until the dust settles and the implications of the historic referendum become clearer, businesses are likely to put the brakes on capital expenditures. And what's likely to be an extended period of market volatility could curb consumer spending, despite recent evidence that long-stagnant wages are picking up. "Those alone tend to lower economic growth forecasts for the second half of this year at the very least," Russell said.