Investors reversed course on some of the most popular bets over the previous two sessions, as traders described a sense of calm returning to a market shaken by the U.K.’s vote last week to leave the European Union.
Stocks rose around the globe, led by the sectors that recently have been beaten down the most, such as banks. Demand for havens eased after two sessions of heady gains. The dollar pared its rise against the British pound. The price of oil, which had posted its biggest two-day percentage decline since February, recovered slightly.
“After you see two drastic days as you did, people start saying it’s time to buy,” said Frank Ingarra, head trader at NorthCoast Asset Management.
On Tuesday, the Dow Jones Industrial Average gained 269.48 points, or 1.6%, to 17409.72. The S&P 500 added 35.55 points, or 1.8%, to 2036.09 and the Nasdaq Composite rose 97.42 points, or 2.1%, to 4691.87. It was the biggest one-day gain for all three indexes since March 1.
The pound rose 0.9% against the dollar to $1.3343, though it remained near a three-decade low after a steep selloff following the vote. The Stoxx Europe 600 rose 2.6%, having tumbled nearly 11% over the previous two sessions.
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London stocks and the pound both rebounded Tuesday for the first time since the U.K. referendum result. But markets hate uncertainty and there’s plenty more of that in store. Josie Cox explains. Photo: Bloomberg
The yield on the 10-year Treasury note rose to 1.463% from 1.461% Monday, as prices fell.
Some of the worst-performing corners of the stock market climbed the most Tuesday. The KBW Nasdaq Bank index rose 3.1%, while the Nasdaq Biotechnology index gained 3.8%.
The CBOE Volatility Index, or VIX, which measures investors’ expectations for stock swings in the coming weeks, fell for the second consecutive day. The declines nearly wiped out the so-called fear gauge’s earlier jump, when the VIX touched levels not hit since February.
“Sellers are exhausted,” said Kenny Polcari, director of equities at O’Neil Securities.
Still, some traders and money managers warned the bounceback may not persist. The rhetoric around the U.K.’s departure from the European Union is likely to create more volatility in the coming weeks and months, they said.
Energy companies in the S&P 500 rose 2.6% Tuesday, with Exxon Mobil gaining 2.3%. Shown, an Exxon gas station in Richmond, Ky. ENLARGE.
Energy companies in the S&P 500 rose 2.6% Tuesday, with Exxon Mobil gaining 2.3%. Shown, an Exxon gas station in Richmond, Ky. Photo: Luke Sharrett/Bloomberg News
Mark Dowding, a senior portfolio manager at BlueBay Asset Management, said global markets are likely to stabilize following the recent declines, and that the impact of Brexit won’t be felt as keenly in Europe and the U.S. as in the U.K.
“I’d be inclined to think we have seen most of the worst of it in the course of the last couple of days in terms of global assets, but we may not have seen the worst of it in terms of the U.K.,” he said.
Mr. Dowding cautioned against reading too much into Tuesday’s bounce in sterling, warning that the pound could fall as low as $1.20.
“You’ve got an economic crisis, a constitutional crisis, a political crisis. The outlook for the pound looks depressingly bleak,” he said.
The Stoxx Europe 600 banks index gained 2.5% Tuesday after sinking to its lowest level since 2011 Monday. The U.K.-focused FTSE 250 index climbed 3.6%, though it remains 8.7% lower versus a week ago.
The WSJ Dollar Index, which measures the dollar against 16 other currencies, declined 0.4% after rising 2.7% over the previous two trading days. Elsewhere in currencies, the euro gained 0.4% against the dollar at $1.1067.
In commodities, crude-oil prices rosehelped by a weaker U.S. dollar and the threat of union strikes in Norway. U.S. crude rose 3.3% to $47.85 a barrel, lifting shares of oil and gas companies, which in the past two trading sessions were among the biggest decliners. Energy companies in the S&P 500 rose 2.6% Tuesday, with Exxon Mobil rising $2.05, or 2.3%, to $90.91.
Traders also are awaiting weekly inventory data due Wednesday from the U.S. Energy Information Administration. Analysts surveyed by The Wall Street Journal expect the agency to report that U.S. crude supplies fell by two million barrels, while stockpiles of gasoline and distillates, including heating oil and diesel fuel, were unchanged. U.S. crude stockpiles have declined in recent weeks after hitting the highest level in more than 80 years in April.
Asian shares ended mostly higher. The Nikkei Stock Average rose 0.1%.
Japanese government bond yields hit record lows, with the yield on the 20-year note nearing negative territory for the first time. Expectations of further policy easing from the Bank of Japan have boosted these securities, which also have benefited from a flight to safety after the Brexit vote.
Content Source: http://www.wsj.com/articles/global-markets-steadier-after-brexit-related-rout-1467099488
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