Dow climbs 600 points as strong bank earnings help fuel relief rally

A look under the surface shows market breadth is strong Monday, as stocks rally.

Roughly 2,647 New York Stock Exchange-listed names traded higher, while only 392 were down. In other words, more than six stocks advanced for every decliner.

— Fred Imbert

BP announced a $3.3 billion cash deal to buy Archaea Energy, a company that turns landfill emissions into a natural gas substitute. Shares of Archaea jumped more than 50% on Monday, and the deal appeared to buoy its rivals as well. Montauk Renewables jumped more than 13%, for example.

These renewable gas companies could be a simpler way for oil giants to lower their carbon footprint than some other riskier bets, said Adam Karpf, a portfolio manager for CIBC Private Wealth Management’s Energy Infrastructure strategy.

“This is not a bet on new technology that requires adoption. This is not making a bet on the next car, truck, plane, whatever,” Karpf said. “And RNG can be easily integrated into existing pipeline infrastructure for both utilities and the transportation industry.”

The U.S.-traded shares of BP were last up 1.5% for the day. The energy giant said the deal does not impact its guidance for dividends and buybacks.

— Jesse Pound

A string of positive earnings reports from U.S. banks could be helping fuel a relief rally for stocks on Monday.

“Despite the fact that secular trend seems to be down in terms of earnings … there haven’t been any real negative surprises in bank reporting. Now that we are going to start getting into negative reporting over the next couple of weeks, that will tell us whether this rally can be sustained for awhile,” said Wayne Wicker, chief investment officer at MissionSquare retirement.

Bank of America and Bank of New York Mellon both reported stronger-than-expected quarters on Monday, as did brokerage firm Charles Schwab. Bank of America CEO Brian Moynihan even had optimistic things to say about the state of the economy.

“Given the fact that people are so pessimistic right now, having companies hit their numbers and not lower [guidance] dramatically could be all that’s needed for markets to rally for awhile,” Wicker added.

Wicker said he would be watching consumer discretionary reports in particular to get a better sense of the underlying economy.

— Jesse Pound

UBS and Barclays are still not calling the bottom even after 2022’s steep losses and extreme volatility.

“Despite the increased risks to growth and the rise in volatility, equity markets have neither become cheaper relative to bonds, nor yet priced in a material slowdown in growth and earnings,” UBS’ chief investment officer Mark Haefele said.

Barclays sees the market sell-off extend well into 2023 as it believes stock valuations, while much lower now, are still not reflecting the risk of a recession.

Barclays said its mostly likely scenario for the S&P 500 is to end 2022 at 3,200, which is about 12% below where the benchmark traded on Monday. In the case of a recession, the Wall Street firm sees the S&P 500 hitting 2,982 by the year end, nearly 19% lower from here.

— Yun Li

Some of the more speculative stocks on the market are leading the Nasdaq 100 on Monday.

South American e-commerce stock Mercadolibre surged more than 12%, while Chinese tech stock Pinduoduo jumped more than 8%.

Among U.S.-based companies, software names Okta and Zscaler popped 8.4% and 7.5%, respectively.

Even the pandemic-era darlings are having good days, with DocuSign and Zoom Video adding 7% each.

— Jesse Pound

Cryptocurrencies were higher to start the week after recovering from a sharp drop in the previous week that followed Thursday’s inflation data release. Bitcoin rose 1% to $19,481.00, according to Coin Metrics, while ether traded 2% higher at $1,326.70.

Crypto prices have struggled to break meaningfully above the $20,000 level for about a month. The low volatility in the asset class has been somewhat of a relief for many investors, particularly amid wild volatility in the equities market. However, many are hoping a return to crypto’s famously large price swings will help push prices to higher levels.

— Tanaya Macheel

Shares of Roblox shot up nearly 20% after the online gaming company reported September metrics that showed more engagement than last year.

The company said Monday that the number of daily active users was at 57.8 million, an increase of 23% compared to the same month last year. Total hours of engagement were up 16% to 4 billion.

Estimated bookings came between $212 million and $219 million, an increase of about 11% to 15% compared to last September.

September’s metrics in all categories show a slide from August, though some credit that at least partially to school-aged children – one of the company’s main demographics – returning to classrooms from summer break.

The stock, which was listed in March 2021 as part of a wave of companies that went public during the pandemic, is down about 60% this year. That means the stock is performing worse than the tech-heavy Nasdaq, which is down nearly 32%.

— Alex Harring, Ashley Capoot

Earnings season is giving a boost to the beaten-down bank sector.

The SPDR S&P Bank ETF (KBE) is up 2.9% for the day, led by Signature Bank, Bank of New York Mellon and Bank of America. All three are up more than 6%.

The ETF is up 6.8% in October and on track for its first positive month in three.

— Jesse Pound, Gina Francolla

Stocks opened sharply higher on Monday and built on those gains in the opening minutes of trading, with the Dow extending its gain to more than 600 points and the Nasdaq Composite added more than 3%.

Tech stocks were strong in early trading, with Match Group and Nvidia among the top performers in the S&P 500. Bank stocks also rose sharply on the back of strong earnings, with Bank of New York Mellon gaining more than 5%.

— Jesse Pound

Stocks are set for a solid open on Monday, and the action in the bond market is probably helping investor sentiment.

Yields are easing across the board. The 2-year Treasury yield has fallen nearly 10 basis points, while the 10-year Treasury yield is back below the 4% level.

Bond yields move opposite of price, and a basis point is equal to 0.01 percentage points.

— Jesse Pound

The Federal Reserve is in danger of overtightening fiscal policy and sending the U.S. into a deeper recession than necessary, Jeremy Siegel,  professor emeritus of finance at the Wharton School of the University of Pennsylvania.

“I think that the Fed has to rethink using current data, and they’ll see that their policy has worked and inflation is down and those core statistics are not giving an accurate representation,” he said on CNBC’s “Squawk Box” on Monday.

He also added that the Fed tightening rates up to 4% or 5% is “far too high,” and that doing so will risk a much stronger slowdown than is needed. Instead of hiking another 0.75 percentage point at the next meeting and continuing hikes into next year, he’d recommend stopping sooner, he said.

“I’d call for 50 now and then a stop,” he said, referring to a 50 basis point rate hike.

Even with the market’s volatility, Siegel thinks that stocks are currently undervalued and poised to rally over the next few years.

“I think we’re 20% undervalued from where we should be,” he said, adding that his view doesn’t mean that a rally is imminent and he sees the potentially for further downside.

“My feeling is the long-term prospects look excellent,” he said. Markets have been relatively stable given all the bad news, and earnings have held up, he added.

—Carmen Reinicke

The struggling shares of Tesla could be on the verge of an even bigger breakdown, according to Wolfe Research.

Technical analyst Rob Ginsberg pointed out in a note to clients over the weekend that the stock is trading near the bottom of its trading range over the past two years. The next major level of support could be its 200-day moving average, but that is roughly 50% below where the stock closed Friday.

“TSLA could be cut in half. Bulls need to provide some serious oversold momentum as support starts to wobble,” Ginsberg said.

— Jesse Pound, Michael Bloom

Oppenheimer strategist John Stoltzfus cut his target for the S&P 500 again on Monday. The strategist now sees the major market index finishing 2022 and 4,000, down from 4,800 previously.

Even that reduced outlook may seem a bit too bullish for investors who have experienced sharp declines in recent weeks. The new target is almost 12% above where the index closed on Friday.

Stoltzfus also kept his earnings projection for the S&P 500 the same, saying that the reduced target was due to a lower multiple.

“We believe US economic fundamentals remain remarkably resilient though challenged in a highly transitional environment by persistent high levels of inflation, increasingly restrictive monetary policy to address the inflation, and supply chain problems that remain as well,” Stoltzfus said.

—Jesse Pound, Michael Bloom

Shares of Bank of America rose more than 2% after the banking giant posted quarterly results that beat analyst expectations.

The company earned 81 cents per share on revenue of $24.61 billion. Analysts polled by Refinitiv expected a profit of 77 cents per share on revenue of $23.57 billion.

Bank of America’s strong quarter was boosted by strong bond trading revenue and higher interest rates.

Read more here.

— Hugh Son, Fred Imbert

U.K. Finance Minister Jeremy Hunt on Monday announced that almost all proposed tax cuts in the country would be scrapped.

“A central responsibility for any government is to do what is necessary for economic stability,” Hunt said in a statement.

“No government can control markets, but every government can give certainty about the sustainability of public finances. That is one of the many factors that influence how markets behave. For that reason, although the prime minister and I are both committed to cutting corporation tax, on Friday she listened to concerns about the mini budget.”

Hunt said a full statement with questions would come in parliament later Monday, but because the details were market sensitive he wanted to give a brief summary in an effort to instil “confidence and stability.”

Previously proposed tax cuts sent rates in the United Kingdom soaring and the pound tumbling against the U.S. dollar.

— Jenni Reid

Bank of America technical strategist Stephen Suttmeier said he’s watching the 4,126 level on the S&P 500, noting that regaining that level is “critical for the SPX to maintain its secular bull market and avoid a shift into to a secular bear market.”

“The failure to reclaim the 40-week MA after correcting to or below the 200-week MA is a secular bear market pattern. The exception was the 1980-1982 cyclical bear market, which saw three rallies fail at the 40-week MA prior to a low that preceded a breakout for the SPX above both its 40-week and 200-week MAs in August 1982.”

The S&P 500 entered the week at 3,583.

— Fred Imbert, Michael Bloom

Fox shares dipped slightly after Credit Suisse downgraded the media giant to neutral from outperform, citing concern over the company’s potential merger with News Corp.

“The pivot seems a tacit admission of challenges for Fox,” Credit Suisse said in a note to clients. “Even if this merger does not ultimately come to fruition, the investment backdrop for Fox has been altered.”

CNBC Pro subscribers can read more here.

— Alex Harring

Sterling rose on Monday morning in Asia following more policy reversals by the U.K. government late last week. The pound was last 0.56% higher at $1.1233.

Stocks worldwide have taken a beating this year, and major indexes remain deep in negative territory.

As investors weigh whether to sell or stay invested, CNBC Pro screened almost 1,500 large and mid-cap global stocks and found a number of major companies with sell or underweight ratings.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Despite the volatility in markets, asset managers say it’s important to remain invested if you’re nearing retirement.

But how should one allocate funds, bearing in mind unsettled markets, a shorter investing horizon and the need for retirees to have some liquidity?

CNBC Pro asks the experts for their views.

Pro subscribers can read more here.

— Weizhen Tan

Morgan Stanley’s U.S. equity team, led by Michelle Weaver and Mike Wilson, says there’s a key risk to earnings on the horizon.

The investment bank named several stocks it believes will be most impacted in the next 3-6 months, and which could see downside to their share prices in the same period.

Pro subscribers can read more here.

— Zavier Ong

Last Thursday, the market pulled off a historic intraday reversal that saw the S&P 500 end the day up 2.6% after losing more than 2% earlier. It marked the fifth largest intraday reversal from a low in the history of the S&P 500, and it was the fourth largest for the Nasdaq Composite, according to SentimenTrader.

The dramatic rebound gave some investors confidence that a more lasting comeback could be on the horizon.

“Markets have attempted a rally several times in recent weeks with no success, though the impressive reversal on Thursday is an indication that a relief rally may be near given the excess degree of pessimism priced into markets,” said Mark Hackett, Nationwide’s chief of investment research.

Hackett noted that institutional investors have remained on the sidelines, while retail investors continued to be in buy-the-dip mode, with positive fund flows in seven-consecutive weeks.