By Ankika Biswas and Bansari Mayur Kamdar
(Reuters) - U.S. stock indexes rose on Monday at the start of the final quarter of a tumultuous year in which investors fretted about aggressive interest rate hikes against the backdrop of historically hot inflation and fears of slowing economic growth.
Ten of the 11 major S&P 500 sectors advanced in mid-day trading, with the energy sector heading for its best day in more than three months.
Oil majors Exxon Mobil (NYSE:XOM) and Chevron Corp (NYSE:CVX) rose more than 4%, tracking a jump in crude prices as sources said the Organization of the Petroleum Exporting Countries and its allies are considering their biggest output cut since the start of the COVID-19 pandemic. [O/R]
Data showed manufacturing activity grew at its slowest pace in nearly 2-1/2 years in September as new orders contracted, likely as rising interest rates to tame inflation cooled demand for goods.
The Institute for Supply Management said its manufacturing PMI dropped to 50.9 this month, missing estimates but still above 50 indicating an expansion in manufacturing. "U.S. stocks are driving higher due to the weaker-than-expected manufacturing data as 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.
"In some pockets of the markets, there is speculation the Fed might 'pivot', meaning the bank might look to hike interest rates at a slower pace."
Further supporting rate-sensitive growth stocks, the benchmark U.S. 10-year Treasury yield fell after British Prime Minister Liz Truss was forced to reverse course on a tax cut for the highest rate. [US/]
All three major indexes ended a volatile third quarter lower on Friday on growing fears that the Federal Reserve's aggressive monetary policy will tip the economy into recession. [.N] Tesla (NASDAQ:TSLA) Inc fell 8.4% after it sold fewer-than-expected vehicles in the third quarter as deliveries lagged way behind production due to logistic hurdles. Peers Lucid Group slid 2% and Rivian Automotive 4%.
Major automakers are expected to report modest declines in U.S. new vehicle sales, but analysts and investors are concerned that a darkening economic picture, not inventory shortages, will lead to a drop in future car sales.
Citigroup (NYSE:C) and Credit Suisse became the latest brokerages to bring down their 2022 year-end targets for the S&P 500 index, as U.S. equity markets bear the heat of aggressive central bank actions to tamp down inflation.
Credit Suisse also set a 2023 year-end price target for the benchmark index at 4,050 points, adding that 2023 would be a "year of weak, non-recessionary growth and falling inflation." Advancing issues outnumbered decliners by a 5.48-to-1 ratio on the NYSE and a 2.24-to-1 ratio on the Nasdaq. The S&P index recorded one new 52-week highs and 23 new lows, while the Nasdaq recorded 45 new highs and 225 new lows.