US stocks surged higher on Tuesday, after calm returned to London markets post-Brexit and oil prices staged a late session rally.
The S&P500 offered its best percentage rally since March, as it gained 1.8% to 2,036.
That came despite the footprint of sportswear maker Nike (NYSE:NKE). The shares of Nike fell 6.5% to $53.09 in after-hours trading late on Tuesday after the apparel maker said a key indicator of future sales missed Wall Street estimates in its last quarter.
The Oregon-based group said worldwide futures orders, or orders that retailers make for delivery over the next few months, rose by 11% on a year-on-year basis.
But markets were in a better shape than the previous two sessions since Britain voted to quit the European Union.
The S&P Midcap 400 posted a strong 1.8% gain to 1,442 while the S&P Smallcap 600 advanced by 1.3% to 679 and the wider small-cap Russell 2000 was up 1.6% to 1,107.
Although the bourse was already higher as Brexit was brushed aside on bottom fishing opportunities, things hotted up more after oil prices gained.
The US oil benchmark, the West Texas Intermediate, gained 3.8% to $48.11. Earlier, the indicator was lower on the day.
Midsession
Wall Street shares were firmer at midsession on Tuesday, the S&P 500 putting some buffer above the 2,000 mark but still tetchy as the European Union begins talks following Britain’s “Brexit” vote.
The talks in Brussels suggested that in spite of pressure from the EU the UK government will not be rushed into triggering the Brexit talks by invoking Article 50 of the Lisbon Treaty.
The blue-chip bellwether ticker was up 1% at 2021 while the S&P Midcap 400 was up 1.5% at 1,437 and led by Adv Micro Devices (NASDAQ:AMD) up 8.3% at $5.11.
The S&P Smallcap 600 was up 1.6% at 681 and led by Pioneer Energy Services (NYSE:PES) up 10,8% at $4.21.
The stockmarket feelgood fed off gains by London’s stocks in spite of lower oil prices. The US benchmark West Texas Intermediate was down 1.1% at $48.85.
On Friday, London stocks dropped over 400 points, burrowing into 5,900 territory within 30 minutes of opening and absorbing the so-called “Brexit” vote, and then rebounded above 6,000 on Friday, while on Monday it ended below 6,000 for the first time since the June 16 close.
Some UK businesses have seen a silver lining for their outlooks following Brexit.
Next Fifteen Communications Group plc (LON:NFC) said that with 75% of revenues generated in other currencies, mostly the US dollar, it stood to benefit from a weaker pound caused by the UK’s vote to leave the EU.
The impact of any slowdown in the UK and EU would be relatively modest, it said.
Open
Wall Street stocks went higher at the open as Brexit fears appeared to ease on global markets and as the oil price firmed in support of equities.
West Texas Intermediate - the US benchmark- is up almost 3% at the time of writing at US$47.69.
The Dow Jones is up 180 points or 17,321 as FTSE100 is up 2.7% in London, while European indices are also recouping losses.
The broader based S&P500 added 1.09%, or 22 points at 2,022, while the Nasdaq is ahead 61 points, or 1.35% to 4,656.
The calm comes after the largest two-day plunge on global shares saw an eye-watering, and scarcely comprehensible US$3trillion wiped out.
Investors are reeling from the UK's decision to Brexit after a referendum, which saw the leave campaign win 52% against remain- 48%, but the reality of how the leave will play out is anyone's guess. DavidCameron, the PM, is currently in a summit in Brussels, where the issue will certainly be a hot topic.
The political situation in the UK has been left in utter flux, with the Tory party looking for a new leader and Jeremy Corbyn, the Labour leader, under increasing pressure, as MPs are voting on a no-confidence measure against him.
Berenberg, the German investment bank, said: "Some eight months ago, we identified a potential Brexit as the risk of the year for 2016.
"This risk has now materialised. The resulting uncertainty will weigh on business confidence, investment and – to a lesser extent – private consumption in the western world. Of course, the UK will be hit much more than its European neighbours and the US."
It forecasts US GDP at quarter-on-quarter annualised growth of 2.2% instead of 2.4% for Q3, lowering its call for 2016 as a whole marginally to 1.9% from 2.0%.
"The cautious Fed will likely delay the next 25bp rate hike from July to December 2016," it adds.
In US corporate news, a notable riser was digital services firm ReachLocal (NASDAQ:RLOC) whose shares soared 170% to US$4.55 as Canadian media giant Gannett is set to buy the group and branch away from newspaper publishing.
Preview
Wall Street shares are poised to go higher on Tuesday taking the cue from Europe, where stocks are rising, as the repercussions of the UK referendum vote are still reverberating around global markets.
The political state in the UK is still anything but settled and there is unclarity in who will be the next leader of the Conservative Party, which called the vote, and who will lead the beleaguered Labour opposition.
This has all led to financial unease in global markets.
Current UK PM David Cameron is travelling to Brussels today for an EU summit, where the vote will be top talking point, but he says any triggering of Article 50 will be done by the next Prime Minister. But, in contrast, some EU leaders want to get on with the process to help ease European contagion.
FTSE100 has recouped some of the sharp losses seen over the last two sessions and is over 2.4% higher, at 6,125 having dropped below the 6,000 level yesterday.
The French CAC is up 2.72%, while the German DAX is 2.26% ahead at 9,478.
Yesterday, on Wall Street, the S&P500 managed to hold the 2,000 level – just – down 1.8% at 2,000.
The S&P Midcap 400 closed down 2.8% at 1,416 on Monday, and the S&P Smallcap 600 finished sharply lower by 3.1% at 670.
The Dow Jones Industrial Index finished over 260 points lower, at 17,140,while the tech heavy Nasdaq exchange shed 113, at 4,594.
However, in futures trading today, the S&P500 is up 22 points, while the Nasdaq is 47.5 ahead and the Dow Jones futures are 200 points higher.
On the agenda today for US investors are also macro matters such as the third estimate of first quarter. GDP followed by consumer confidence data at 10am.
On the corporate front, Carnival (NYSE: CCL) earnings are due to sail into view before the bell and analysts are hoping for strong results, due to the lower cost of fuel.
In pre-market, shares are up over 1% to stand at US$44.10.