Stocks close higher on first day of 3rd qtr., nearly wipe out Brexit losses
The U.S. stock market kicked off the first day of the third quarter with modest gains, extending its post-Brexit rally to four days but falling just short of wiping out all of its Brexit-driven losses.
The Dow Jones industrial average, which rose 1.4% in the second-quarter, rose 19 points, or 0.1%, to 17,949.37 Friday, the first day of the new quarter. The Standard & Poor's 500 gained 0.2% to 2102.95 and the Nasdaq composite rose 0.4% to 4862.57.
Friday's gains weredriven by a strong June manufacturing report in the U.S. and the belief among investors that global central bankers will take steps to offset Brexit-driven headwinds.
Wall Street ended the week on an upnote. Friday's gains follow a wild five days in the stock market, which started with a 5.3% swoon last Friday and Monday after Britain shocked markets by voting to leave the European Union, and which ended with a big rally in the final three days of the third quarter. While the four-day surge didn't wipe out all of the Brexit-related losses, it did drive the Dow Jones industrial average and Standard & Poor's 500 stock index back into the black for the year.
What's next for stocks in post-Brexit world?
Ahead of the long three-day weekend, the Dow was up 19 points and within 62 points of wiping out its big Brexit-driven losses. Both the S&P 500 and Nasdaq also closed a tad below where they were trading before the Brexit vote.
It was a "slow day heading into the long holiday weekend, after three straight sessions of triple-digit gains" for the Dow, said Kirra Fedyszyn of Schaeffer's Investment Research.
Stocks in Europe also finished the week with a rally. The FTSE 100 in London was 1.1% higher, and the broad Stoxx Europe 600 index was up 0.7%. The British pound, however, was down about 0.25%. The pound is stil trading near 31-year lows after the Brexit shock, and the British currency is coming under pressure amid signs that interest rates will be cut further by the nation's central bank.
Global investors are pricing in more stimulus from central bankers. On Thursday, Bank of England governor Mark Carney drove investor sentiment higher when he hinted that the BOE would cut interest rates this summer to help offset Brexit-related economic headwinds. The prospect of rate cuts has driven long-term government bond yields in the U.S., Germany, United Kingdom and Japan.
In the U.S., the yield on the 10-year Treasury note is down to 1.443, close to the record low of 1.401% back in July 2012. Earlier in the session it touched a record low of 1.388%.
The incredibly shrinking Brexit losses
The blue-chip Dow posted a gain of 1.4% in the second quarter, stretching its year-to-date gain to 2.9%. The large-cap S&P 500 rallied 1.9% in the April-thru- June quarter and is up 2.7% in 2016. The Nasdaq composite, however, was a laggard last quarter, sliding 0.6%, which increased its year-to-date loss to 3.3%.
The broad S&P 500 has risen more than 1% in the past three trading sessions, the second "three-peat" this year. The last time the broad market gauge enjoyed back-to-back-to-back 1% jumps was at the start of February, according to Bespoke Investment Group.
A fresh start to the quarter brings new things for Wall Street to analyze. In addition to keeping abreast of Brexit news, Wall Street will also begin to monitor incoming economic data, such as the June jobs report set for release next Friday, to see if the U.S. economy can shrug off the economic and political crisis in Europe.
The second-quarter earnings season will also kick in to high gear in mid-July, which also should set light on whether a second-half profit rebound is still on track.
Investors will also be eyeing the presidential campaign. The big events in the pipeline are the coming Republican and Democratic conventions when each party will nominate its presidential hopeful.