Wall Street set to rebound as post Brexit bargain hunt begins

June 28, 2016 08:55 AM

Wall Street was set to open sharply higher on Tuesday as investors saw an opportunity to buy stocks beaten down by uncertainty surrounding Britain's vote to leave the European Union. 

Banks, which were the worst hit since the referendum on Thursday, were among the most attractive stocks for bargain hunters. 

Morgan Stanley, Bank of America and Citigroup rose about 2% in premarket trading, while JPMorgan and Goldman Sachs were up about 1.4%.

Global equities went into a free fall on Friday, losing more than $2 trillion in market capitalization, as investors scrambled to safe havens such as gold and the Japanese yen. 

A rebound in oil prices on Tuesday signaled an appetite for riskier assets, while gold lost its two-day shine and fell 1.1%

The yield on 10-year U.S. Treasury bonds  turned positive on Tuesday after two days. 

Battered European shares rose 2.4% after having dropped more than 10% on Friday. 

However, uncertainty over when and on what terms Britain will end its membership is expected to fuel volatility in the next few weeks.

"I think this is a short-lived rally," said Paul Nolte, portfolio manager as Kingsview Asset Management. "There is an awful lot of questions over Brexit that haven't been answered and markets are going to be reacting to that." 

Dow e-minis were up 201 points, or 1.18% at 8:31 a.m. ET (1232 GMT), with 45,758 contracts changing hands.

S&P 500 e-minis were up 22.25 points, or 1.12%, with 313,212 contracts traded.

Nasdaq 100 e-minis were up 47.75 points, or 1.14%, on volume of 35,075 contracts.

Technology stocks, which were also hard hit by Brexit, fought back on Tuesday. Apple and Amazon.com were both up nearly 1%. Micron rose 3%.

"The U.S. markets are still very expensive without a lot of economic and earnings momentum in the future and are unlikely to move significantly higher in the near term." 

Wall Street closed lower on Monday with all three indexes lower for the year. 

While investors do not expect the U.S. Federal Reserve to raise short-term interest rates anytime this year, they will keep an eye on economic data that can steer the Fed's sentiment. 

U.S. economic growth slowed in the first quarter but not as sharply as previously estimated, with gains in exports and investment in software partially offsetting weak consumer spending.

Gross domestic product increased at a 1.1% annual rate, rather than the 0.8% pace reported last month, the Commerce Department said on Tuesday.

Consumer confidence is expected to have risen to 93.3 in June from 92.6 in May. The data is expected at 10:00 a.m. ET (1400 GMT).

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