Stocks falter as Street waits for 'Brexit' vote

U.S. stocks lost steam Wednesday as traders treaded cautiously a day ahead of the still too-close-to-call vote in Britain on whether to stay in the European Union.

After opening higher, the three major indexes ducked a little below break-even in the afternoon. The Dow Jones industrial average ended down about 49 points, or 0.3% lower. The broader Standard & Poor's 500 stock index and the Nasdaq composite lost 0.2% apiece.

The so-called "Brexit" risk — or Britain exiting the 28-nation E.U. — is still hanging over global financial markets ahead of Thursday's closely watched referendum. From an investment perspective, a vote to stay in the E.U. is viewed as the far more bullish outcome. A "leave" vote is the bearish outcome that global investors are bracing for, as a Brexit would cause economic harm to the U.K. and E.U., boost investor uncertainty and spark financial market tumult and volatility.

'Brexit': The future of Europe hinges on this vote

"Brexit is the only issue that matters," to markets at the moment, Peter Rosenstreich, head of market strategy at Swissquote Bank, told USA TODAY via e-mail. "All eyes are on Britain's E.U. referendum. Financial markets have become singularly focused on Brexit, ignoring just about everything else."

For the past few weeks, financial markets have been moving with the polls. When the so-called "remain" vote is trending higher, so do risk assets, like stocks, oil and the British pound. When the "leave" camp gains an edge, risk assets sell off and safe havens, such as government bonds and gold rise in value.

For now, global markets are caught in wait-and-see mode, as the polls have shown no dramatic shift overnight and markets -- at least for the moment -- are positioning for a win for the "remain" camp. But the margin of error is very small, financial pros say.

Federal Reserve chair Janet Yellen is the latest high-profile person to warn of the negative consequences of a Brexit vote. It "could have significant economic repercussions," she said Tuesday in her first day of Congressional testimony.

Stocks in Europe were trending higher once again, a sign that investors across the pond are betting on a vote that keeps Britain in the E.U. The Stoxx Europe 600 was 0.4% higher. The FTSE 100 in London was 0.7% higher. Germany's DAX was up 1% and the CAC 40 in Paris was 0.6% higher.

Similarly, the British pound was on the rise, up about 0.3% and the U.S. dollar was 0.4% weaker versus of a basket of foreign currencies.