Stocks up, yields retreat as investors eye slower manufacturing

  • US stocks rose after heavy selling in September
  • Oil rises as supply expectations decline

WASHINGTON (Reuters) - U.S. stocks and oil prices jumped on Monday as investors began the fourth quarter of the year with a close eye on any potential economic slowdown.

All three major US stock indexes rose midday, with the Dow Jones Industrial Average (.DJI) up 2.09%. The S&P 500 (.SPX) is up 1.88%, while the Nasdaq Composite (.IXIC) is up 1.44%.

The MSCI World Stock Index (.MIWD00000PUS), which measures stocks in 45 countries, rose 1.485%.

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Stocks rose after the third quarter of sharp declines. New data showed that US manufacturing activity grew at the slowest pace in nearly two and a half years, injecting some life into equities on the idea that economic weakness could slow inflation and subsequent efforts by the Federal Reserve to continue raising interest rates. Read more

“Traders are taking the view that bad news for the economy is good news for the stock market,” said David Madden, market analyst at Equiti Capital. “High inflation is the reason the Fed is tightening monetary policy and considering lower rates paid, we may see further indications that we are past the inflation peak.”

Investors will have a slew of new economic data to deal with this week, culminating in the monthly US jobs report due on Friday. As with manufacturing, signs of a downturn in that data could show that the rate hike is having an intentional effect on slowing the economy and inflation, although Fed officials stress that they will not change course until rate increases are under control.

“With the labor market still weak and wages growing aggressively, it will take more than these weak monthly indicators to get the Fed out of the anti-inflation war,” said Bill Adams, chief economist at Bank of Comica.

oil climber

Crude prices jumped after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, said they would consider cutting production. A lower supply outlook helped push Brent crude up 3.51% to $88.13 a barrel. US crude rose 4% to $82.70 a barrel. Read more

News of the British government’s decision to abandon plans for tax cuts helped lower the benchmark 10-year US Treasury yield, which was last at 3.6406%. Read more

Sterling jumped against the dollar on Monday after Britain’s tax cuts were reversed, reversing a brutal decline and rising nearly 1% in afternoon trading. The safe-haven dollar also fell on Monday, with the dollar index, which measures the greenback against a basket of six currencies, down 0.23%.

Drops in Treasury yields and the dollar also helped push gold prices higher, with spot gold prices up 1.91% to $1,691.30 an ounce.

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(Reporting by Pete Schroeder) Editing by Hugh Lawson, David Evans, Jonathan Otis and David Gregorio

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