US: Stocks rise with global markets amid UK referendum on EU

[ZURICH] US stocks rose, mirroring equities around the world and sending the S&P 500 Index to the strongest gain in a month, amid a UK referendum on its European Union membership.

Bank stocks capped the best day in five weeks, with JPMorgan Chase & Co and Citigroup Inc rising more than 2.1 per cent. Raw-materials producers advanced for the sixth time in seven sessions while energy companies rebounded with crude oil after slipping Wednesday for the first time in four days.

Caterpillar Inc and Boeing Co increased more than 1.3 per cent, while Microsoft Corp gained 1.8 per cent.

The S&P 500 added 1.3 per cent to 2,113.32 at 4 pm in New York, after two opinion polls conducted before Thursday showed a lead for the campaign to keep Britain in the EU.

The index moved within 1 per cent of an all-time high. The Dow Jones Industrial Average rallied 230.24 points, or 1.3 per cent, to 18,011.07, the biggest gain since March 1.

The Nasdaq Composite Index added 1.6 per cent, the most in a month. About 6.4 billion shares traded hands on US exchanges, 7 per cent below the three-month average.

"The markets have remained relatively quiet for the most part because ahead of any vote, it's just a waiting game," said Michael Antonelli, an institutional equity sales trader and managing director at Robert W Baird & Co in Milwaukee.

"Traders have set their stance either way and will wait and see what the result is."

Investors worldwide have been glued to Britain's debate on its EU membership in recent weeks, and past polls have indicated a close race. The first voting results are expected around 7 pm New York time, with the final ones due at about 2 am on Friday.

Among the information investors will digest tonight, the Federal Reserve released results of its bank stress tests. Announced after the close of trading Thursday, the tests found the 33 biggest banks all have enough capital to weather a severe economic shock.

The examination runs through hypothetical scenarios, as regulators push lenders to build up capital buffers to prevent a repeat of the 2008 financial crisis. The banks included Well Fargo & Co, JPMorgan & Chase Co and Morgan Stanley, which trailed the rest of Wall Street in a key measure of leverage.

The S&P 500's rally Thursday followed the index's first retreat in three days, and a 15 per cent jump in the CBOE Volatility Index amid fragile sentiment before the UK vote.

The gauge of market turbulence known as the VIX reversed today, tumbling nearly 19 per cent, the most since October 2013. A Goldman Sachs Group Inc basket of the most shorted shares in the Russell 3000 Index rose the most in two months.

Among the stocks providing the biggest lift today, Visa Inc., Amazon.com Inc and General Electric Co advanced at least 1.3 per cent, with GE reaching a two-month high. Chevron Corp and Intel Corp rose more than 2.1 per cent.

"People have already taken positions ahead of the vote," said Patrick Spencer, equities vice chairman at Robert W Baird & Co in London. His firm manages US$151 billion.

"Markets hate uncertainty and tomorrow we'll finally have certainty - we'll know which way we're going. In the US, we're back to that Goldilocks scenario. You've got reasonable growth, but not so strong so as to raise rates."

The main US equity benchmark has struggled to top an all-time high reached 13 months ago, after closing within 0.6 per cent of the mark earlier in June. The S&P 500 surged as much as 16 per cent from a 22-month low in February amid rebounding oil prices and improving economic data, though its momentum has been challenged by successive quarters of declining corporate profits, recent signs of slowing job gains and concerns that central-bank efforts to bolster growth are losing their efficacy.

Those worries were roused last week after the Federal Reserve signaled less optimism on the economic outlook, scaling back its projections for the pace of future interest-rate increases amid concerns about slower job growth and the UK's potential EU exit. In testimony to lawmakers this week, Fed Chair Janet Yellen indicated a cautious and uncertain view of the economy.

Traders are now pricing in even odds for a rate increase by December, up from 34 per cent a week ago in the wake of the Fed meeting. Chances for higher borrowing costs in September have jumped to 33 per cent from 16 per cent last Thursday.

As investors and policy makers assess incoming data to judge the path for rates, a report today showed fewer Americans than forecast filed for unemployment benefits last week, adding to evidence that the labour market is healthy and stable.

Separate data showed purchases of new homes declined in May from an eight-year high as the housing market continued to display the choppy progress that's been a hallmark of the recovery.

All of the S&P 500's 10 main industries rose in Thursday's trading, with financials climbing 2.1 per cent, the most in two months. Raw-materials, technology and energy shares added at least 1.5 per cent. Utilities were the laggards, rising 0.3 per cent.

Leucadia National Corp and Charles Schwab Corp were the strongest performers among financials in the benchmark, with gains of more than 4.7 per cent. Comerica Inc and Citigroup rose at least 4.1 per cent. The KBW Bank Index increased 2.9 per cent, the most since May 18.

Leading the rally in the tech group, Micron Technology Inc jumped 10 per cent to a five-month high after Nomura Securities upgraded the shares to buy from the equivalent of sell, highlighting memory supply shortages and "firmer" prices.

Western Digital Corp gained 5.1 per cent to the highest since March 22, and Qorvo Inc increased 4.7 per cent to its strongest level in six months.

The consumer staples group climbed to a fresh record and approached a sixth monthly increase in the last seven. Archer-Daniel-Midlands Co, Mondelez International Inc and Walgreens Boots Alliance Inc added more than 1.5 per cent. Whole Foods Market Inc increased 1 per cent, snapping an 11-day losing streak, the longest since 1998.

Airlines slipped for a second day, led lower by Southwest Airlines Co's 1.7 per cent slide. The carrier will postpone delivery of 67 Boeing Co 737 Max 8 aircraft by as many as six years, pushing US$1.9 billion of spending on the planes into the next decade as it focuses on near-term technology and operational improvements. Delta Air Lines Co lost 0.6 per cent.

BLOOMBERG