Stocks surge to kick off October and a new quarter as bond yields tumble, Dow closes up 760 points

The major averages retained their gains throughout the day Monday to end their first trading day of October and of the fourth quarter of the year on a high note.

The Dow Jones Industrial Average ended the day 764.52 points, or 2.7%, higher at 29,490.03. The S&P 500 rose 2.6% to 3,678.43, after falling Friday to its lowest level since November 2020. The Nasdaq Composite advanced 2.3% to end at 10,815.44.

— Tanaya Macheel

Utility stocks are helping to lead the broader market higher, alongside energy and materials shares Monday. The Utilities Select Sector SPDR Fund rose as much as 3.5%. NextEra — accounting for one sixth of the ETF — gained 3.7%, while Southern Co. added as much as 3.4%, and Duke Energy climbed 3.2%.

Utilities carry so much debt and have such demanding refinancing needs that they often get a lift from falling bond yields. Utilities' above-average dividend yields also face less competition when Treasury yields weaken. The 10-year Treasury yield got as low as 3.58% Monday, down from 3.83% Friday.

Meanwhile, near month Henry Hub natural gas futures are falling 4% — the only contract in the energy complex that's weaker.

Utility investors also saw Monday deal flow: Con Ed agreed to sell its Con Edison Clean Energy Businesses to Germany's RWE for an enterprise value of $6.8 billion, while Algonquin Power will sell stakes in U.S. and Canadian wind farms to InfraRed Capital Partners.

Finally, Credit Suisse began research coverage on five utilities Monday: Dominion Energy, Exelon and Constellation Energy were rated outperform while Alliant Energy and Edison International were rated neutral.

Con Ed is ahead 3.5%, Algonquin is rising almost 5%, Dominion is higher by 3.1% Exelon by 2.8% and Constellation by 3.8%.

— Scott Schnipper, with reporting by CNBC's Michael Bloom

The bond market has been a poor predictor in the past of when the Federal Reserve is ready to start cutting interest rates, according to research from Joseph LaVorgna, chief economist at SMBC Nikko Securities.

Looking at the past three tightening cycles — 1999-2000, 2004-06 and 2015-18 — investors expected the Fed to hold rates higher for longer, only to miss the mark when the central bank was forced into cutting much sooner than expected.

"Historically, the bond market does not anticipate a Fed pivot," LaVorgna said in a client note. "While there is a small pivot priced into the Eurodollar curve next year, the recent past suggests that a shift in policy could be dramatic Hence, interest rates could be on the cusp of a big rally if the Fed pivots sooner than many investors expect."

In May 2000, the benchmark fed funds rate topped at 6.5%, with investors expecting 7.25%. The Fed started cutting later that year amid a pop in the dotcom bubble. Again in 2006, investors priced in a Fed leaving rates around 5.25%, but the financial crisis forced the central bank's hand. Finally, in late 2018, markets were pricing in a funds rate of 3% by the end of 2019, but the Fed had to cut that year due to economic weakness.

Traders currently are pricing in 1 percentage point, or 100 points, of rate increases through the end of this year, then the Fed leaving rates at that level into early 2024. However, LaVorgna's research indicates the market may be too hawkish.

—Jeff Cox

On Monday, JPMorgan released its favorite stock ideas for October.

The list includes spans across sectors and includes both value and growth names its analysts like.

Amazon, which has taken a beating this year, was among those that made the cut. JPMorgan's $185 price target implies almost 64% upside from Friday's close.

To read the full CNBC Pro story, and see more names on JPMorgan's list, click here.

— Michelle Fox

Semiconductor stocks are one of the group's leading Monday's broad rally, helping to cut into some of the sector's big losses for the year.

The PHLX Semiconductor Sector Index was up more than 4% in afternoon trading. Among individual names, shares of Intel were up 5.4%, while Advanced Micro Devices climbed 4.8%. Chip giant Nvidia also added more than 3%.

Semiconductor stocks are often seen cyclical names, and have struggled as investors have soured on the global economic outlook. The PHLX Index is still down 39% year to date.

– Jesse Pound

Consumers should see lower prices within manufacturing as the surging U.S. dollars helps bat down inflation, one economist said.

Manufacturers are reporting a growth in order books for the first time in four months in September while experiencing lower costs, according to Chris Williamson, chief business economist at S&P Global Market Intelligence. Input costs rose at a slower pace in September and providers raised prices at a slower rate than earlier in the year.

"While the strong dollar is curbing exports, a beneficial effect from the greenback's strength is being seen via lower import costs," Williamson said. "With supply chain delays also easing substantially again in September and shipping costs falling, upwards pressure on firms' costs has moderated sharply, which will feed through to lower goods prices to consumers."

But manufacturing will still drag on the broader economy, he said, with even more demand needed to make the industry positively contribute to gross domestic product. Despite seeing more stability in the supply chain, the industry ran through pre-production inventories for the first time since February 2021.

— Alex Harring

It's too early to call an end to the Federal Reserve's aggressive tightening cycle but Wall Street is growing increasingly confident that an end could come later this year, according to Oanda's Ed Moya.

"It is premature to say that the Fed is almost done with tightening, but it seems Wall Street is growing confident that they could be done in December," he said in a note to clients Monday. "Investors are starting to doubt central banks globally will remain aggressive with fighting inflation as financial stability risks are growing."

Bond yields fell on Monday after topping multi-year highs in September. Moya called the move in the Treasury markets a potential sign of rising optimism among traders.

"It is too early to call for a Fed pivot, but it seems the action in Treasury markets suggests traders are growing confident that the global growth slowdown is starting to drag down pricing pressures," he said.

— Samantha Subin

It's been a rough 2022 for Wall Street as the S&P 500 finished its third consecutive down quarter in a row on Friday for the first time since 2009 and its worst month since March 2020.

It's difficult for investors to stay hopeful in an environment consumed by surging inflation, a war in Ukraine and a Federal Reserve that shows few signs it will slow its tightening pace, but some safe havens do exist in this period of volatility.

CNBC Pro conducted a screen to locate some of those names, which included a popular energy stock and semiconductor company.

Subscribers to CNBC pro can check out the full list of stocks that made the cut here.

— Samantha Subin

The market is likely to see a near-term bounce, but a contrarian indicator that signals an upswing hasn't been hit yet, said two investment strategists.

A bear market needs to see internal pressures cool while a handful of stocks continue going lower before a bounce usually occurs, according to Todd Sohn, a director at Strategas, and Ross Mayfield, an investment strategy analyst at Baird Private Wealth Management.

The pair also pointed to the Chicago Board Options Exchange's CBOE Volatility Index, known as the "fear gauge," which remains around 30. It would typically be around 40 to signal the type of panic typically seen at major lows.

"We're just surprised that there's a lack of major panic despite stocks being in a long bear market," Sohn and Mayfield said. "Ultimately, I think you need to stay patient here."

— Alex Harring

Brazilian stocks rallied Monday after President Jair Bolsonaro forced a run-off vote in this year's election against former President Luiz Inacio Lula da Silva.

The iShares MSCI Brazil ETF (EWZ) popped more than 9%, led by a 21% pop in water and waste management company Companhia de Saneamento Basico. Oil giant Petrobras also popped more than 11%. The EWZ was on pace for its biggest one-day gain since March 24, 2020 — when it popped 12.1%.

Bovespa, Brazil's benchmark stock index, also rose more than 4% and was headed for its best day since May 2020.

Lula, a leftist, beat out Bolsonaro by 5 percentage points in the first round of voting, which was held Sunday. However, that margin was slimmer than many expected. Bolsonaro is seen as a more market friendly candidate in Brazil, promising reform and privatizations across several sectors of the economy.

— Fred Imbert

These are some of the stocks making the biggest moves during midday trading on Monday.

• Credit Suisse — Shares of Credit Suisse rose 1.7%, reversing an earlier slump that sent the stock to a record low, after the bank over the weekend made a series of calls to calm investor fears about its financial health.
• Tesla — Tesla shares dropped 8.2% after the electric vehicle maker said it delivered 343,000 vehicles in the third quarter, less than analysts expected. Wall Street analysts were divided over the report, however.
• Peloton — Peloton shares rose more than 6% after the exercise-equipment company announced it will put bikes in all 5,400 Hilton-branded hotels in the U.S. as it tries to engineer a turnaround.

Read the full list of stocks moving midday here.

— Tanaya Macheel

Twenty-five stocks in the S&P 500 breached new 52-week lows during midday trading. They've since nearly all turned positive on the session.

Meanwhile, Nielsen was the only stock that hit a new 52-week high, trading at levels not seen since May 2021.

Here are some of the other names.

• Carnival trading at lows not seen since Oct, 1992 (but now dipping in and out of positive territory on session)
• Southwest trading at lows not seen since May, 2020 (but currently up over 1% on session)
• Colgate-Palmolive trading at lows not seen since May, 2020 (but now positive on session)
• DENTSPLY trading at lows not seen since Aug, 2010 (but now up over 2% on session)
• Tyson Foods trading at levels not seen since Feb, 2021 (but now positive on session)
• BlackRock trading at lows not seen since Sep, 2020 (but now up almost 2% on session)
• Invesco trading at lows not seen since Nov, 2020 (but now up over 5% on session)
• Fidelity National Information Services trading at lows not seen since Feb, 2017 (but now up more than 1.2% on session)
• Nike trading at lows not seen since Apr, 2020 (but currently up over 1% on session)
• Aptiv trading at lows not seen since Aug, 2020 (but currently up over 4% on session)
• UPS trading at lows not seen since Mar, 2021 (but now up almost 1% on session)

— Gina Francolla, Sarah Min

Credit Suisse is among the Wall Street firms cutting its end-of-year target on the S&P 500.

The firm lowered its target to 3,850 from 4,300. The new figure still implies upside of 7.4% through the end of the year. It also initiated its 2023 target at 4,050. These forecasts are based on updated EPS estimates of $227, $230, and $240 for 2022, 2023 and 2024, respectively.

Citi also slashed its year-end target on the stock index on Sunday.

— Tanaya Macheel

Shares of Viasat jumped 39% on Monday morning after defense contractor L3 Harris announced a deal to acquire the communications company's tactical data links business. The deal is for just under $2 billion, the companies announced.

Viasat said it would use the cash to reduce its leverage and increase liquidity. At the end of June, the company reported having about $222 million in cash and cash equivalents versus more than $2.5 billion in senior notes and other long-term debt.

Prior to the announcement, Viasat's stock was down 32% for the year.

Shares of L3Harris rose 3.7% on Monday.

—Jesse Pound