Stocks Rise as Traders Question 2015 Rate Hike

Wall Street made a strong push higher on Monday as traders parsed the latest reading on service-sector growth after a disappointing September jobs report on Friday.

The Dow Jones Industrial Average rose 304 points, or 1.85% to 16776. The S&P 500 gained 35 points, or 1.83% to 1987, while the Nasdaq Composite climbed 73 points, or 1.56% to 4781.

Health care inched into positive territory by mid-afternoon trading, while energy and industrials were the top performers, rising 2.8% and 3%, respectively.

Today's Markets 

Wall Street sentiment was positive to kick off the week as a rate hike this year looked less and less likely. Equity markets were solidly higher after a volatile end to last week's session in which the September jobs report came in well under expectations. The Monday rally helped push the major U.S. averages out of correction territory – less than 10% below recent highs.

Following the disappointing non-farm payrolls data, Fed funds futures slid the probability of the first interest-rate hike out to March 2016, rather than December of this year.

The Federal Reserve, which held off on raising short-term rates at its September meeting, has insisted it will remain dependent on economic data that shows full employment and price stability before hiking rates.

“It will be interesting to see if the September employment report has changed [the Fed’s] tune with respect to the potential 2015 liftoff,” Deutsche Bank economists wrote in a note on Monday morning. “Whatever the case may be, the latest labor market data render the September FOMC meeting minutes somewhat stale, even if it was a ‘close call’ with respect to interest rate liftoff, as some policymakers have indicated.”

The minutes from that meeting are due out on Thursday afternoon.

In recent action, the yield on the 10-year U.S. Treasury bond was up 0.067 percentage point to 2.06%. Yields move in the opposite direction of prices.

On the data calendar Monday was service-sector growth figures from the Institute for Supply Management, which came in under Wall Street expectations. The gauge hit its lowest level since June, falling to 56.9 from 59 in August. Economists had largely expected a smaller decline to 57.5 for the month. Readings above 50 point to expansion, while those below indicate contraction.

Services data elsewhere in the world came in below expectations Monday.

"The UK was the lowest since June 2013 and Spain was the lowest since December 2014.  But there’s not much else to say.  France actually beat consensus but remains the tortoise here. Nothing shocking. But of course… this relative weakness has everyone screaming for more QE," Michael Block, chief strategist at Rhino Trading Partners, said in a note.

European markets were broadly higher. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, jumped 3.14%. The German Dax rose 2.74%, while the French CAC 40 surged 3.54% higher, and the UK’s FTSE 100 gained 2.76%.

Looking ahead to the remainder of the week, a few key pieces of data are expected in the U.S. including international trade on Tuesday, and import, export prices on Friday.

Elsewhere in the markets, commodity prices were mostly higher to kick off the week. Global oil prices were solidly higher after Russia said it would meet with other of the world’s producers to discuss the current landscape. U.S. crude prices settled about 1.6% higher at $46.26 a barrel. Brent, the international benchmark, was up 2.5% to $50.03 a barrel.

Gold ticked 0.1% higher to $1,137 a troy ounce. Silver climbed 2.9% to $15.71 an ounce, while copper traded up 1.4% to $2.36 a pound.

On the corporate news front, social media giant Twitter (NYSE:TWTR) said interim CEO Jack Dorsey will become the company’s permanent chief executive. Dorsey will also continue in his role at the helm of payments-platform Square. The appointment ends months of speculation after former CEO Dick Costolo stepped down from his post on July 1.

Embattled retailer American Apparel (NYSE:AAP) filed for chapter 11 bankruptcy after it reached a restructuring support agreement with its lenders. The company’s retail stores will remain open through the process, as well as its wholesale and manufacturing operations.