Wall Street closes with sharp gains as final quarter begins - Reuters

• Summary
• Companies

• U.S. factory activity slowest in ~2.5 years in Sept -ISM
• Credit Suisse, Citi cut 2022 year-end target for S&P 500
• Dow, S&P 500, Nasdaq up

Oct 3 (Reuters) - Wall Street stocks ended with sharp gains on Monday at the start of the final quarter of a tumultuous year with interest rate hikes amid historically hot inflation and fears of slowing economic growth.

All 11 major S&P 500 (.SPX) sectors advanced to positive territory, with energy (.SPNY) being the biggest gainer.

Data showed manufacturing activity increased at its slowest pace in nearly 2-1/2 years in September as new orders contracted, likely as rising interest rates to tame inflation cooled demand for goods. read more

The Institute for Supply Management said its manufacturing PMI dropped to 50.9 this month, missing estimates but still above 50, indicating growth.

"The economic data stream actually came in worse than expected. In a very counterintuitive fashion that likely represents good news for equity markets," said Art Hogan, chief market strategist at B. Riley Wealth in Boston.

"(While) good economic data, strong readings had been a catalyst for selling, this is the first time we've actually seen some negative news be a catalyst."

Further supporting rate-sensitive growth stocks, the benchmark U.S. 10-year Treasury yield fell after British Prime Minister Liz Truss was forced to reverse course on a tax cut for the highest rate.

"The U.S. yield markets (are) pulling back - that's been a positive ... and that connotes a more risk-on environment," said Hogan.

All three major indexes ended a volatile third quarter lower on Friday on growing fears that the Federal Reserve's aggressive monetary policy will tip the economy into recession.

According to preliminary data, the S&P 500 (.SPX) gained 92.81 points, or 2.54%, to end at 3,678.43 points, while the Nasdaq Composite (.IXIC) gained 235.42 points, or 2.23%, to 10,811.04. The Dow Jones Industrial Average (.DJI) rose 764.52 points, or 2.63%, to 29,480.41.

Citigroup and Credit Suisse became the latest brokerages to lower their 2022 year-end targets for the S&P 500, as U.S. equity markets bear the heat of aggressive central bank actions to tamp down inflation. read more

Credit Suisse also set a 2023 year-end price target for the benchmark index at 4,050 points, adding that 2023 would be a "year of weak, non-recessionary growth and falling inflation."

Reporting by Echo Wang in New York; Additional reporting by Ankika Biswas and Bansari Mayur Kamdar in Bengaluru; Editing by Anil D'Silva, Arun Koyyur and Richard Chang

Our Standards: The Thomson Reuters Trust Principles.

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