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Image source: Bankrate

A new month often opens new doors and opportunities, and October has started on a good note with positive news for stocks.

Despite the growing concerns about the financial health of European banking giant Credit Suisse and weak economic data, the stock market rallied to kick off the fourth quarter.

Stock

The Dow made a significant leap and rose 765 points (2.7%) – the largest gain since mid-July.

Meanwhile, the Nasdaq and S&P 500 gained 2.3% and 2.6%, respectively.

The third quarter and stocks ended in September on Friday, with stocks making a low finish.

However, on Monday, all but one of the 30 Dow stocks ended higher – a sign of how volatile the market is.

Johnson & Johnson (JNJ) was the only stock not to reach the same heights as the others.

Investor concerns

The continued inflation has investors worried about the Federal Reserve’s aggressive rate hikes.

Many fear that the attempts to control surging prices could possibly tip the economy into a recession.

Throughout 2022, stocks have been sharply down.

The CNN Business Fear & Greed Index, CNN’s way of gauging stock market movements, continues to show Extreme Fear levels.

However, the market rebound on Monday may indicate a perverse “bad news is good news” rally.

Meanwhile, fears of the rising stress at Credit Suisse (CS) could lead the Fed to ease the aggressive rate hikes.

Bond market investors are betting on the stress.

Treasury bond and inflation

In recent days, the yield on the benchmark 10-year US Treasury bond slid.

While it briefly topped 4% last week, it fell again on Monday to 3.66%.

Inflation also remains a concern.

However, if the Fed and other central banks have fears how a distressed European bank could lead to more financial contagion, then it is not the appropriate time to boost rates by historic amounts.

Last week, traders were pricing in more than 70% odds that the Fed would raise interest rates by three-quarters of a percentage point for the fourth straight time during its November 2 meeting.

Today, the chances of a rate hike of that volume are down to 50% with the probability of a more modest half-point increase growing.

The latest manufacturing data in the US could also influence the Fed to reconsider how it should raise interest rates.

Progress of the economy

Non-profit economic association, the Institute for Supply Management, reported that its influential manufactucturing index fell from August.

The index was also below Wall Street’s forecasts.

Both can be perceived as a sign that the Fed’s rate hikes to slow the economy and reduce inflation are hitting the desired effect.

Jim Baird, the chief investment officer with Plante Moran Financial Advisors, released a report on monday, saying:

“The economy is slowing – a reality that is increasingly apparent in the manufacturing sector.”

“The good news is that there are welcome signs that prices are stabilizing.”

Oil prices and other stocks

On Monday, a spike in oil prices lifted energy stocks, but it provided grim news to consumers.

Chevron (CVX) was the top Dow stock while the energy sector performed the best in the S&P 500.

Oil stocks got a boost after reports suggested that the OPEC+ block of petroleum producers are considering a cut in production.

The cut would attempt to reduce the recent big slide in crude prices.

Investors will also be relieved that the British pound, which recently tumbled to record lows against the US dollar, rebounded after the new UK government abandoned plans to cut taxes for the wealthiest Brits.

However, a stronger pound could bring out fears of surging bond yields and rising credit costs in the UK.

Meanwhile, Tesla (TSLA) was among the stocks that didn’t participate in the Monday rally.

The company’s shares fell nearly 9%, making it one of the worst performers in the S&P 500.

Over the weekend, it also reported disappointing third quarter delivery and production numbers.

On the other end of the court, Tesla rival GM (GM) rallied after reporting positive third quarter sales.