S&P 500 Rallies as Grim Economic Data Fuels Bets on Fed Pause

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S&P 500 Rallies as Grim Economic Data Fuels Bets on Fed Pause

By Yasin Ebrahim

Investing.com -- The S&P 500 jumped Monday, starting the final quarter of the year on the front foot, led by tech and energy on hopes that signs of slowing growth will force the Federal Reserve to slow the pace of rate hikes.

The S&P 500 rose 3%, the Dow Jones Industrial Average gained 3%, or 869 points, and the Nasdaq was up 2.6%.

A duo of weaker-than-expected economic reports showing manufacturing activity unexpectedly slipped into contraction, and construction activity was worse than feared, stoked optimism somewhat that the Fed may be forced to consider a pivot to avoid pushing the economy into a deep recession.

ISM manufacturing data  for September showed a drop to 50.9 from 52.8, well below economists’ forecasts for a drop to 52.2. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12% of the U.S. economy.

The odds of the Fed delivering its fourth-consecutive 75-basis-point rate hike fell 59% from 72% a week ago, according to Investing.com’s Fed Rate Monitor Tool .

Treasury yields fell sharply as investors priced in the prospect of a less hawkish path of monetary policy tightening.

The 10-year Treasury yield fell from more-than-a-decade highs, with further easing likely ahead as it “remains very overbought on a short-term basis,” Janney Montgomery Scott said in a note.  

Apple (NASDAQ: AAPL ), Microsoft (NASDAQ: MSFT ) and Alphabet (NASDAQ: GOOGL ) rallied sharply, with the latter up about 3%.

Peloton Interactive (NASDAQ: PTON ), meanwhile, announced an agreement to supply Hilton-branded hotels in the U.S with its fitness bikes, as CEO Barry McCarthy ramps up efforts to turn around the fortunes of the connected fitness-equipment company. Its shares were up about 6%.

Energy, up about 4%, also did some of the heavy lifting in the broader market melt-up on media reports that OPEC and its allies, known as OPEC+, are mulling slashing output by more than 1 million barrels per day ahead of Wednesday’s meeting.

Marathon Oil (NYSE: MRO ) was up more than 9%, while Devon Energy Corporation (NYSE: DVN ) and APA Corporation (NASDAQ: APA ) were up more than 7%

Tesla (NASDAQ: TSLA ), meanwhile, slumped more than 8% after reporting that it delivered 343,000 vehicles in the third quarter, missing Wall Street estimates of between 358,000 and 371,000 vehicles.

Following the announcement, JPMorgan said it remained wary of Tesla’s valuation and continued to “see large downside to our price target [of $153],” suggesting about 37% downside from Tesla's current price. 

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