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.
"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.
"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.