U.S. stocks charged higher at the start of trading Tuesday as Wall Street maintained momentum from the previous session’s rally.
The benchmark S&P 500 surged 1.6% early into the session, while the Dow Jones Industrial Average jumped roughly 380 points, or 1.3%. The technology-heavy Nasdaq Composite was up 2.2%.
Equity markets kicked the month off on a high note Monday after an ugly September for the major averages. During the previous session, the S&P 500 soared 2.6% in its best day since July, the Dow rose 2.7% to mark its largest one-day gain since June, and the technology-heavy Nasdaq Composite gained 2.3%.
Nicholas Colas of DataTrek Research points out that the S&P 500 rarely rallies by over 2% in non-stressed market conditions, suggesting that Monday’s bounce was a sign of “fragility, not strength.” Between 2013 and 2019, for example, there were fewer than four such days in every year, while 2022 has had 14 so far.
“History strongly suggests that Monday’s 2.6% S&P rally is neither healthy nor a sign that the index has troughed,” Cola said, adding that reducing outsized volatility of the sort we have been seeing this year requires a shift by policymakers. “Markets have been trying to predict a turning point for Fed policy for months now, with as-yet little success given the ongoing strength in U.S. labor markets and still-high inflation.”
A gauge of U.S. manufacturing from the Institute for Supply Management (ISM) on Monday showed activity declined to the lowest since May 2020 – a contraction that stoked some optimism around a dovish Federal Reserve pivot. And adding to hopes central bankers may back off aggressive monetary intervention was a warning from a United Nations agency that policymakers may induce a global recession and a period of prolonged stagnation if they proceed with aggressive rate increases.
“Excessive monetary tightening could usher in a period of stagnation and economic instability,” the United Nations Conference on Trade and Development (UNCTAD) said in a statement.
NEW YORK, NEW YORK – OCTOBER 03: Traders work on the floor of the New York Stock Exchange during afternoon trading on October 03, 2022 in New York City. Stocks closed up on the first day of trading in October, starting the fourth quarter of the year on a positive note. (Photo by Michael M. Santiago/Getty Images)
Bonds rallied alongside stocks on Tuesday, with Treasury yields falling for a second straight day. The benchmark U.S. 10-year note tumbled to around 3.5% after topping a 2008 high of 4% last week. The U.S. dollar index also fell lower.
On the corporate side, shares of Rivian (RIVN) rallied more than 7% after the company reiterated it was still on track to produce 25,000 electric vehicles this year, affirming its previous guidance.
Oil also extended Monday’s gains after a report OPEC+ is mulling a hefty production cut. West Texas Intermediate (WTI) and Brent crude oil futures each crept up roughly 1% to $84.42 and $89.83 per barrel, respectively.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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