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Wall Street rally as markets recover from Brexit aftershocks

Published 28/06/2016

Wall Street put Brexit fears to one side
Wall Street put Brexit fears to one side

US stock indexes mounted a broad comeback on Tuesday as investors set aside their anxiety over Britain's vote to leave the European Union and snapped up shares following a two-day rout.

Encouraging data on the US economy and housing market helped put traders in a buying mood. The broad rally followed even bigger gains in Europe, which also bounced back from the steep losses triggered by Britain's "leave" vote last Thursday.

Oil and gas companies led the rally as energy prices rose. Banks and other financial companies, which took the heaviest losses in the sell-off, also surged. Health care, consumer and technology stocks also notched gains. Bond prices fell, sending yields higher.

"We were due for a bounce heading into the morning; we had a couple of tough days there," said Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute. "Investors are stepping up and seeing some areas that may have been oversold the past couple of days and redeploying some of their cash."

The Dow Jones industrial average gained 269.48 points, or 1.6%, to 17,409.72. The Standard & Poor's 500 index rose 35.55 points, or 1.8%, to 2,036.09. The Nasdaq composite added 97.42 points, or 2.1%, to 4,691.87.

Despite the rebound, the three indexes remain on track to end June in the red. They're also down for the year.

European benchmarks had an even better day than US indexes. Britain's FTSE 100 and France's CAC 40 each gained 2.6%. Germany's Dax added 1.9%.

The euro and the British pound recovered somewhat, though the pound remained near the 30-year lows it plunged to immediately following the British "leave" vote.

Uncertainty and anxiety over the economic fallout from Britain's vote to leave the European Union had roiled global financial markets since Friday and prompted ratings agencies to slash their top-shelf credit rating for the UK.

Investors appeared to shake off their some of their jitters on Tuesday.

In the US, investors got a batch of encouraging economic data to consider.

The Commerce Department raised its estimate of US economic growth in the first three months of the year. Separately, a key gauge of home values showed U.S. home prices climbed in April, hitting record highs in several cities. In addition, the Conference Board said its measure of U.S. consumer confidence increased this month to the highest level since October.

"Obviously, the market isn't very receptive to uncertainty, but in some ways this uncertainty is providing the possibility and the consideration that what happened in the UK isn't necessarily reflective of, or an indicator of, a recession, especially here in the US as well as globally," said W. Janet Dougherty, a global investment specialist at J.P. Morgan Private Bank.

Pharmaceutical company Endo International surged 18.3%, the biggest gainer in the S&P 500 index. The stock added 2.50 to 16.19 US dollars.

Xencor vaulted 32.1% after the drugmaker announced a partnership with Novartis to develop two cancer drugs. The stock rose 4.02 dollars to 16.56.

Several energy companies also notched gains.

Southwestern Energy climbed 1.47 dollars, or 11.8% to 13.89 dollars, while Devon Energy added 2.24 dollars, or 6.6%, to 35.99 dollars. Cabot Oil & Gas gained 1.93 dollars, or 8%, to 25.99 dollars.

Earlier in Asia, markets bounced back from early losses as leaders signaled they were ready to step in with support policies. Japan's benchmark Nikkei 225 index climbed 0.1%, while South Korea's Kospi added 0.5%t.

Hong Kong's Hang Seng Index was a laggard, losing 0.3%. It was dragged down by companies with high exposure to Europe, such as billionaire tycoon's Li Ka-shing's CK Hutchison Holdings, which has British retail, ports and telecom investments and fell 1.7%.

In currency markets, the pound recovered to 1.3343 dollars from 1.3176 on Monday. The yen eased slightly against the dollar, though it was still hovering near its strongest level in two years. The dollar rose to 102.79 yen from 101.97 yen. The euro strengthened to 1.1049 from 1.1005 dollars.

Benchmark U.S. crude rose 1.52 dollars, or 3.3%, to close at 47.85 dollars a barrel in New York. Brent crude, used to price international oils, gained 1.42 dollars, or 3%, to close at 48.58 dollars a barrel in London.

In other energy trading, wholesale petrol rose 3 cents to 1.51 dollars a gallon. Heating oil added four cents to 1.47 dollars a gallon. Natural gas gained 20 cents, or 7.4%, to 2.92 dollars per 1,000 cubic feet.

Bond prices fell. The yield on the 10-year Treasury note rose to 1.46% from 1.44 late Monday.

In metals trading, gold fell 6.80 dollars to 1,317.90 an ounce, silver rose 10 cents to 17.89 dollars an ounce and copper added five cents to 2.18 dollars a pound.

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