U.S. stock markets closed sharply higher on Monday to start October and the last quarter of a terrible 2022. A significant drop in the U.S. government bond yields followed by weak economic data has strengthened market participants’ confidence on equities. Moreover, oil prices have gained on expectation of a supply cut by the OPEC+. All the three major stock indexes ended in positive zone.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) jumped 2.7% or 765.38 points to close at 29,490.89. The blue-chip index has recorded its biggest single-day gain since Jun 24. Notably, 29 components of the 30-stock index ended in positive territory while 1 in red.  

The tech-heavy Nasdaq Composite finished at 10,815.43, advancing 2.3% or 239.82 points  due to impressive performance of large-cap technology stocks, especially semiconductor companies.

The S&P 500 dropped 2.6% to end at 3,678.43. All 11 broad sectors of the benchmark index closed in positive territory. The Energy Select Sector SPDR (XLE), the Industrials Select Sector SPDR (XLI), the Materials Select Sector SPDR (XLB) and the Technology Select Sector SPDR (XLK) plunged 5.7%, 3%, 3.3% and 3.1%, respectively.  

The fear-gauge CBOE Volatility Index (VIX) was down 4.8% to 30.10. A total of 11.61 billion shares were traded on Monday, higher than the last 20-session average of 11.54 billion. Advancers outnumbered decliners on the NYSE by a 5.04-to-1 ratio. On Nasdaq, a 2.70-to-1 ratio favored advancing issues.

Wall Street Rebounds to Start Fourth Quarter

Wall Street rebounded in the first trading day of the fourth-quarter 2022 after incurring losses in the three consecutive quarters. The yield on the benchmark 10-Year U.S. Treasury Note dropped sharply by 15.2 basis points to 3.65%. The yield was more than 4% in the last week, marking its highest in more than a decade.  

Some weak economic data have helped the yield to come down as market participants are thinking that this may be the sign that the U.S. economy is cooling. Crude oil prices have climbed following news that the Organization of the Petroleum Exporting Countries and their allies (OPEC+) will cut production from this week. Crude oil prices plunged 20% in the third quarter owing to the expectation of lack of demand buoyed by a possible global recession.

Following OPEC+ decision, the rice of the U.S. benchmark – the WTI crude - rose 5.2% for November delivery to settle at $83.63 barrel on the New York Mercantile Exchange. Consequently, shares of oil behemoths like Exxon Mobil Corp. (XOM Quick QuoteXOM - Free Report) and Chevron Corp. (CVX Quick QuoteCVX - Free Report) appreciated 5.3% and 5.6%, respectively. Both stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, after the World Bank and the IMF, the UNCTAD – a United Nation agency – has warned major central banks, especially the Fed, that the rigorous interest rate hike and continuation of tighter monetary control will lead to a devastating global economic recession in 2023.

Economic Data

The Institute of Supply Management reported that the U.S. manufacturing for the month of September fell to 50.9%, marking its lowest in 28 months. The consensus estimate was 52.3%. The metric for August was 52.8%. However, any reading above 50% indicates expansion of manufacturing activities.

The index of new orders dropped 4.2 points to 47.1%, its lowest reading since May 2020. The employment index fell 5.5 points to 48.7%. The prices index, a measure of inflation, declined to 51.7% in September from 52.5% in August, marking its lowest level since Jun 2020.

Construction spending dropped 0.7% in August compared with the consensus estimate of a decline of 0.2%. The data for July was revised downward to a decline of 0.6% from a drop of 0.4% reported earlier.