Stocks rebound after Brexit sell-off; Dow closes up more than 250 points

U.S. stocks closed more than 1.5 percent higher Tuesday, lifted by gains in oil prices, as investors looked for bargains after the Brexit sell-off.

Analysts also noted improved sentiment after initial fears of significant negative spillover from the U.K. vote to leave the European Union.

The major averages extended gains into the close to post their best day since March 1, with the Dow Jones industrial average closing about 269 points higher and the Nasdaq composite up 2.1 percent. The S&P 500 closed nearly 1.8 percent higher.

"I think it was just a market that got a little ahead of itself to the downside," said Robert Pavlik, chief market strategist at Boston Private Wealth.

"A little bit of 'cooler heads are prevailing' and seeing this as an opportunity to get in. How long it lasts is going to be the big question," he said.

Over the last five days, the major indexes are still more than 2 percent lower.

U.S. crude oil futures settled up $1.52, or 3.28 percent, at $47.85 a barrel. Energy gained more than 2.6 percent and financials closed nearly 2.5 percent higher to lead all S&P sectors higher. Travelers Cos. had the greatest positive impact on the Dow as all constituents except DuPont advanced.

Facebook, Apple, Microsoft and Amazon.com had the greatest positive impact on the Nasdaq 100, while Monster Beverage, Illumina and Dollar Tree were the only negative index components.

"It's up but everyone's waiting for the shoe to drop," said JJ Kinahan, chief strategist at TD Ameritrade. "What's confusing everyone is the strength in the bond market."

The "toughest point for traders the last few days is we're going through a repricing process, especially for financials so the relationships aren't where they should be," he said.

Treasury yields held slightly above recent lows, with the around 0.61 percent and the 10-year yield around 1.46 percent.

"A little easing of some of the initial panic has at least prevented us from testing all-time lows," said Craig Bishop, lead strategist, U.S. Fixed Income Strategies Group at RBC Wealth Management. "The ultimate move to Brexit is a little less likely or will play out over a very long time."

In Europe, stocks rose sharply with the FTSE 100 up 2.6 percent, the German DAX about 2 percent higher. Asian stocks ended mostly higher, with the Nikkei 225 eking out a 0.09 percent gain.

"We're still very much in reaction mode right now for U.S. equities," said Jeremy Klein, chief market strategist at FBN Securities. "It's mostly taking its cues from elsewhere."

Pound sterling held slightly above lows not seen in more than 30 years to trade near $1.336.

The U.S. dollar index traded more than half a percent lower after its recent surge, while the euro was near $1.109 and the yen around 102.7 yen versus the greenback.

"This is going to take a long time to play out and I think the initial shock is being a little reversed right now," said Doug Cote, chief market strategist at Voya Investment Management. "This is not 2008. It's more like 2011."

In August 2011, Standard & Poor's downgraded the U.S. long-term sovereign credit rating to 'AA+' from 'AAA' as Congress struggled with debt ceiling negotiations.

On Monday, both Standard & Poor's and Fitch downgraded the United Kingdom's credit rating following last Thursday's surprise British vote to leave the EU.

U.S. stocks extended Friday's post-Brexit plunge on Monday with a decline of 1.5 percent or more that took the Dow and S&P 500 to close at their lowest since March 10. The Nasdaq composite closed at its lowest since late February.

In the last two trading days, global markets have lost a record $3.0 trillion, according to Howard Silverblatt of S&P Dow Jones Indices.

In his first comments on the referendum results, European Central Bank President Mario , "Sadness is the best word for what we feel when we witness changes of this magnitude."

He also said central banks around the world need to coordinate on monetary policy in order to combat shared challenges but they also need to act to prevent "monetary policy spillovers."

A panel discussion with the heads of the European Central Bank, the Bank of England and the Federal Reserve, scheduled for Wednesday in Portugal, has since been canceled.

In U.S. economic news, the final revision to first-quarter GDP edged up to 1.1 percent.

The Conference Board's June consumer confidence index came in at 98.0, its highest since October, versus 92.4 in May.

Lynn Franco, director of economic indicators at The Conference Board, noted the results did not reflect post-Brexit sentiment.

Going forward, she said "it depends on how heavy the impact is on financial markets. Usually these sort of events have a temporary impact on confidence. ... It depends more on what is happening with jobs and income growth. I think the consumer remains cautiously optimistic."

Many analysts have said the relative strength in the U.S. economy and stock market will likely attract flows from the rest of the world.

The Dow Jones industrial average closed up 269.48 points, or 1.57 percent, at 17,409.72, with Travelers Cos. leading advancers and DuPont the only decliner.

The closed up 35.55 points, or 1.78 percent, at 2,036.09, with energy leading all 10 sectors higher.

The Nasdaq composite closed up 97.42 points, or 2.12 percent, at 4,691.87. The iShares Nasdaq Biotechnology ETF (IBB) closed 3.8 percent higher.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell more than 20 percent in its largest one-day percentage loss since 2011 to trade below 19.

About six stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of nearly 1.1 billion and a composite volume of almost 4.3 billion in the close.

Gold futures for August delivery settled down $6.80 at $1,317.90 an ounce.

—Reuters contributed to this report.

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