Dow rallies more than 200 points, Nasdaq posts best day in a month

U.S. stocks rose sharply on Monday as tech shares outperformed while investors monitored stimulus negotiations in Washington.

The Dow Jones Industrial Average rose 250.62 points, or 0.9%, to close at 28,837.52. The S&P 500 gained 1.6% to end the day at 3,534.22 and the Nasdaq Composite advanced 2.6% to 11,876.26. It was the Nasdaq's best day since Sept. 9, when it rallied 2.7%.

Apple jumped 6.4% — the stock's biggest one day gain since July 31 — as investors looked ahead to a key event for the company. On Tuesday, Apple is expected to unveil its first 5G iPhone. History shows Apple shares usually outperform the broader market after an iPhone launch.

Facebook and Amazon advanced 4.3% and 4.8%, respectively. Alphabet popped 3.6% and Microsoft gained 2.6%.

The iShares Russell 1000 Growth ETF (IWF) rallied 2.2% and outperformed its value counterpart, the iShares Russell 1000 Value ETF (IWD). The latter rose just 0.8%.

The market is "exhibiting a very strong pro-growth/momentum bias," said Adam Crisafulli, founder of Vital Knowledge, in a note. "The pivot away from cyclicals (which had been leading for the last two weeks) could reflect reduced near-term odds for fiscal stimulus and spiking COVID cases, but the core macro narrative in the US is still intensely focused on the possibility for a 'Blue Wave.'"

Monday's rally came even as chances for another round of stimulus before the election appeared to dim over the weekend. Both House Speaker Nancy Pelosi, D-Calif., and Senate Republicans pushed back on a $1.8 trillion offer from the White House.

In a letter to colleagues, Pelosi highlighted what she said were insufficient offers on healthcare issues.

"The news is filled with the numbers in terms of dollars. The heart of the matter is: can we allow the virus to rage on and ignore science as the Administration proposes, or will they accept the scientific strategic plan in the Heroes Act to crush the virus," Pelosi said, referring to a bill that Democrats already passed in the House.

Meanwhile, Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows called for a separate vote on the Paycheck Protection Program in their own letter to Congress on Sunday.

The apparent impasse follows a whirlwind week in Washington that saw President Donald Trump at one point call off negotiations, saying that Congressional Republicans should focus on confirming Amy Coney Barrett to the vacant Supreme Court seat. Trump then reversed his position and said to "go big" in negotiations.

But Mike Wilson, chief U.S. equity strategist at Morgan Stanley, told CNBC's "Squawk on the Street" he thinks "there's enough stimulus in the pipeline for now to kind of get us through year-end without causing a risk of a double-dip recession, and ultimately, no matter who wins the election, by the first quarter we'll have an additional stimulus that's probably still required to make sure that the recovery continues."

Wall Street was coming off a strong performance last week. The Dow posted its biggest one-week gain since August, while the S&P 500 and Nasdaq Composite had their best week since July.

"Markets last week appeared to price perceived election clarity, and with it, a growing likelihood of additional fiscal stimulus – at least in the pipeline. This was reflected from small cap outperformance to rising Treasury yields," Julian Emanuel, BTIG's chief equity and derivatives strategist, said in a note to clients Sunday.

Investors are also bracing for the third-quarter earnings season. Several major banks and airlines are slated to report their results this week, including JPMorgan Chase and Delta Air Lines on Tuesday.

While results for the period are expected to decline significantly, traders believe the results could come in much better than expected.

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