U.S. stocks rebound as worries ease after two-day Brexit selloff

NEW YORK – U.S. stocks rose for the first time since Britain voted to leave the European Union, rebounding amid optimism that policymakers are committed to limit the fallout from the U.K.’s exit.

Tuesday’s recovery was bolstered by equities that were among the biggest drags during the selloff. Citigroup Inc. and Bank of America Corp. advanced at least 2.2 percent, with lenders recovering from the worst two days in almost five years. Facebook Inc. and Visa Inc. rose more than 2.1 percent to boost the tech group, while energy producers rallied with crude. Amazon.com Inc. rebounded to help lift consumer shares after its biggest back-to-back drop in four months.

The S&P 500 Index gained 1.1 percent to 2,022.84 at 12:51 p.m. in New York, rebounding from its steepest two-day drop since August and the lowest close since March 10. The Dow Jones Industrial Average added 157.68 points, or 0.9 percent, to 17,297.92. The Nasdaq Composite Index increased 1.6 percent. Trading volume in S&P 500 shares was 25 percent above the 30-day average for this time of the day.

“People are calming down and looking at it more rationally,” said John Conlon, chief equity strategist at People’s United Wealth Management, which oversees $5.5 billion. “It’s a combination of that plus the fact that by now you’ve seen the investors that were betting that Brexit wasn’t going to happen finally unwinding those bets.”

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The U.K.’s decision last week triggered a rush toward safe havens as global equities lost about $3.6 trillion in market value and the S&P 500 tumbled 5.3 percent to erase its 2016 advance. The CBOE Volatility Index fell for a second day, sliding 17 percent to 19.81, though the measure of market turbulence known as the VIX is still on the way to its biggest monthly climb since a record jump last August.

European Central Bank President Mario Draghi added to speculation of a more coordinated effort by policy makers to mitigate the Brexit repercussions, calling for global policy alignment in a speech at the ECB Forum in Sintra, Portugal. Draghi said there is a “common responsibility” to address the world’s economic weaknesses. U.K. Prime Minister David Cameron will face EU leaders at a dinner in Brussels on Tuesday, after both the Bank of England and European Central Bank pledged to increase liquidity.

The rally Tuesday brings a measure of relief after two days of sharp declines spurred by concerns that Britain’s EU exit would drag on an already sluggish global economy. Investors have pushed back bets on Federal Reserve interest-rate increases, pricing in just a 10 percent chance for higher borrowing costs by February 2017, down from 52 percent before the vote outcome. Odds for a rate cut by November are nearly 16 percent.

EU leaders are gathering for a two-day European Council summit to discuss Britain’s exit. Germany, France and Italy prodded the U.K. government to start the process, saying they want to move forward and limit market risks. Britain’s Chancellor of the Exchequer George Osborne sought to reassure investors on Monday, saying that contingency plans were in place to shore up the economy amid ongoing volatility, but that Brexit won’t be “plain sailing” — something that Cameron reiterated in Parliament.

Aside from the Brexit drama, a report today showed the U.S. economy expanded more than previously projected in the first quarter as improved performance in trade and business investment more than made up for weaker consumer spending. Separate data showed consumer confidence rose for the first time in three months to the highest since October, according to a report from the New York-based Conference Board.

Energy and health-care shares were the strongest in Tuesday’s trading among the S&P 500’s 10 main industries, increasing at least 1.5 percent. Technology, consumer discretionary and financial companies added more than 1.3 percent. Utilities, raw materials and consumer staples were little changed.

Biotechnology shares led the rally in health-care, with Gilead Sciences Inc. jumping 4 percent, the most in almost five months. Regulators approved Gilead’s hepatitis C drug for all forms of the viral disease. Celgene Crop. rose 2.5 percent, while Regeneron Pharmaceuticals Inc. and Biogen Inc. climbed at least 1.5 percent. The Nasdaq Biotechnology Index jumped 3.4 percent, the most in 11 weeks.

In the broader health-care group, Johnson & Johnson rose 1 percent toward an all-time high in its fourth gain in five days. Allergan Plc and Medtronic Plc rose at least 2.2 percent.

Microsoft Corp. rose 1.7 percent to boost tech companies in the benchmark, clawing back a portion of a 6.7 percent drop in the prior two sessions as the software giant bounced from an eight-month low. Seagate Technology Plc and Micron Technology Inc. posted the strongest advances, rising at least 4.8 percent.

Banks in the S&P 500 increased 1.7 percent after falling 10 percent in two sessions. JPMorgan Chase & Co. and Wells Fargo & Co. added more than 1.4 percent. Comerica Inc. and Regions Financial Corp. were among the biggest gainers in the group, climbing at least 2.3 percent after back-to-back losses of more than 16 percent.

Dow Chemical Co. sank 2.9 percent and merger partner DuPont Co. lost 3.3 percent, weighing on raw materials, after Dow said it plans to eliminate about 2,500 jobs and shut plants in North Carolina and Japan as it slims down after taking full control of its Dow Corning Corp. silicone venture. The company announced the Corning deal in December at the same time it unveiled an agreement to merge with DuPont, a $56.4 billion combination that’s under antitrust scrutiny.

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