U.S. stocks rallied on the heels of broad-based advances in Asia and Europe, with global risk aversion pulling back amid eased U.K. Brexit concerns following new polls over the weekend ahead of Thursday's vote. Financials and technology issues saw solid gains, while a jump in crude oil prices powered the energy sector. Treasuries, gold and the U.S. dollar were lower, while the domestic economic front was quiet today.
The Dow Jones Industrial Average (DJIA) rallied 130 points (0.7%) to 17,805, the S&P 500 Index jumped 12 points (0.6%) to 2,083, and the Nasdaq Composite finished 37 points (0.8%) higher at 4,837. In moderately-heavy volume, 892 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil increased $1.40 to $49.96 per barrel and wholesale gasoline added $0.07 to $1.58 per gallon, while the Bloomberg gold spot price decreased $8.98 to $1,289.67 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% lower at 93.67.
Dow member Wal-Mart Stores Inc. (NYSE:WMT $71) announced a strategic alliance with JD.com (NASDAQ:JD $22), China's largest e-commerce company by revenue. The companies said the agreement includes a wide range of business initiatives, covering both online and offline retail. Shares of both companies traded higher.
Cigna Corp. (NYSE:CI $128) and Anthem Inc. (NYSE:ANTM $133) are in focus following a report from the Wall Street Journal suggesting their $44 billion merger agreement is raising antitrust concerns among U.S. regulators, per people familiar with the matter. None of the entities has commented on the report, while the companies have more meetings this week with top Justice Department officials. CI closed lower, while ANTM gained modest ground.
Economic calendar dormant today
Treasuries were lower, while the U.S. economic calendar was void of any major releases today. The yield on the 2-year note rose 4 basis points (bps) to 0.73%, while the yields on the 10-year note and the 30-year bond gained 6 bps to 1.67% and 2.48%, respectively. Bond yields rebounded somewhat from their recent fall as the Fed suggested that it is still in a "wait-and-see" mode, remaining data dependent in the wake of May's severely disappointing labor report, while growth concerns and uncertainty regarding a U.K. exit from the European Union (EU), known as a Brexit, have also applied pressure.
Recent pressure on global bond yields has amplified the uneasy sentiment, with rates in Germany, Japan and the U.K. hitting record lows, while the U.S. 10-year Treasury yield touched to a four-year low.
This week's economic front will start slow but pick up steam tomorrow as Federal Reserve Chairwoman Janet Yellen will begin her two-day semiannual monetary policy report to Congress. Yellen's testimony will be accompanied by some key reads later this week on housing in the form of existing and new home sales reports, as well as manufacturing, with preliminary releases of durable goods orders and Markit's Manufacturing PMI Index. Other notable domestic reports due out this week include: the Leading Index and the final June University of Michigan Consumer Sentiment Index.
However, the focus of the global markets will likely be the looming June 23 U.K. Brexit vote and no matter the outcome, the issue of a Brexit may not be put to rest entirely as EU member parliaments must also agree to the changes being proposed. Nevertheless, the British understand the key role trade has always played in their economy. The British may resent bailed-out banks and bureaucrats in Brussels, but we believe economic considerations will favor the U.K. remaining within the EU.
Europe and Asia gain ground as Brexit fears recede
European equities moved broadly higher, with global sentiment being soothed by eased concerns about a U.K. Brexit on the heels of new polls over the weekend suggesting the "remain" camp gained ground ahead of Thursday's vote. Financials rallied to lead the advance and higher crude oil prices lifted the energy sector, while the British pound surged versus the U.S. dollar. The euro rose versus the U.S. dollar and bond yields in the region were mixed. In economic news, eurozone construction output declined in April.
Stocks in Asia finished broadly higher with global risk aversion waning as recent polls are easing concerns about a U.K. Brexit ahead of Thursday's vote. The yen gave back some of its recent rally to boost Japanese equities, despite a report showing the nation's exports fell more than expected in May. Chinese stocks battled back from some early weakness to finish higher, aided by an upbeat read on the country's May property prices. Australian securities advanced, led by strong gains in the heavy weight oil and gas, basic materials and financial sectors, while South Korean listings also rose. Indian stocks moved higher, with the announcement that Reserve Bank of India's Governor Rajan will step down at the end of his term in September being overshadowed by the eased Brexit concerns and the announcement that India's government relaxed foreign direct investment rules.
Tomorrow, the international economic docket will be light, offering CPI from Hong Kong, the Zew Economic Sentiment Survey from Germany and public sector net borrowing from the U.K.