U.S. Stocks Follow Europe Higher, but Give Back Half of Gains by Mid-Session

U.S. equity markets surged on Tuesday, following the tone set by Asian and European stock markets. Bargain hunters and profit-takers helped support prices after a sharp two-day sell-off on the surprise U.K. vote to leave the European Union. However, by mid-session, the Dow had given back half of its gains as the opening rally lost steam.

The Dow Jones Industrial Average was up more than 200 points early in the session. The S&P 500 Index gained 23 points, or 1.19 percent, to 2,024. The NASDAQ composite added 76 points, or 1.67 percent, to 4,671.

The U.S. Dollar Index traded slightly lower after its recent rally. Profit-taking and stronger foreign currencies helped put a lid on the rally. The GBP/USD inched higher off lows not seen since 1985 to trade near 1.3333. Short-covering also helped boost the EUR/USD to 1.1111 before the market retreated to 1.1073.

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

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

The first EU summit since the vote is expected to be held on Tuesday, which British Prime Minister David Cameron will attend. He will be excluded from the second day of talks as the other 27 leaders discuss the fallout from Brexit. Traders and analysts said the tone from the summit would give an idea of how difficult Britain’s negotiations will be once Article 50 of the EU’s Lisbon treaty, which governs the procedure for a country to leave, is triggered.

Rising stocks also encouraged gold speculators to take profits, leading to a more than 1 percent drop in prices on Tuesday. Crude oil prices also rose on Tuesday as investors took advantage of low prices. Traders also shifted their focus to potential outages and drawdowns in crude.

The crude market found support from a looming strike at several Norwegian oil and gas fields that threatened to cut output in western Europe’s biggest producer. Investors are also looking for a sizable and sixth weekly drop in U.S. crude stockpiles, with oil market analysts polled by Reuters forecasting a 2.4 million-barrel drawdown.

In economic news, the final revision to U.S. first-quarter GDP edged up to 1.1 percent. June consumer confidence came in at 98.0, its highest since October, versus 92.4 in May.