Modest rally as Q2 comes to a close

We are approaching the end of the quarter. While the S&P 500 is down only 1 to 2 percent in the second quarter, broad swaths of the market have seen significant declines, including banks, restaurants, airlines, retailers and many big-cap tech stocks.

Sectors in Q2:

  • Airlines: down 12.9 percent
  • Retail: down 11.9 percent
  • Tech: down 5.8 percent
  • Banks: down 4.1 percent

With many stocks down double digits, and many underperforming the markets because they were on the wrong side of the Brexit trade, history would indicate a likelihood of at least modest buying in the most beaten-up sectors heading into the close of the quarter on Thursday.

That is what we are seeing. Once again, restaurants, banks, retailers and airlines lead the advancers. That's a good sign that there is at least short-term, end-of-the-quarter buying interest.

Traders were cheered yesterday when New York Stock Exchange volume closed on the heavy side, with advancers leading decliners by 6 to 1. That is a sign that buying interest, in addition to seller exhaustion, was driving prices.

Indeed, the markets have made a remarkable turnaround in the last 24 hours. U.S. stocks have posted a modest bounce. The dollar has stopped rising. Gold and copper are firmer.

The CBOE Volatility Index is at 17, nearly back to where it was when the Brexit fears first surfaced in the middle of June.

Gold, at roughly $1,324, is elevated. And the best that can be said of the U.S. 10-year Treasury yield is that it has at least stopped dropping and is finding some support near 1.46 percent.

It's true that all this is very much hostage to Brexit headlines. But even fairly tough words from European Commission President Jean-Claude Juncker that there could be "no negotiation without notification" has not spoiled the buying mood.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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