US stocks gain ground; pound rallies after UK tax retreat

NEW YORK (AP) — U.S. stocks rose broadly in morning trading on Monday and Treasury yields eased off their multiyear highs as Wall Street leaves behind the worst month since the virus pandemic crashed global markets.

The S&P 500 rose 1.8% as of 10:23 a.m. Eastern. The Dow Jones Industrial Average rose 576 points, or 2%, to 29,305 and the Nasdaq rose 1.3%.

Energy stocks made the biggest gains as U.S. crude oil prices jumped 5.4%. Exxon Mobil rose 4%. The oil cartel OPEC is expected to announce production cuts this week. Technology stocks also made strong gains. Microsoft rose 1.5%.

Treasury yields fell significantly and relieved pressure on stocks. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.63% from 3.83% late Friday. The two-year yield, which more closely tracks expectations for Federal Reserve action on interest rates, fell to 4.08% from 4.27%.

The British pound strengthened and borrowing costs for the U.K. government fell after the new, embattled government of Prime Minister Liz Truss abandoned plans to cut income tax rates for top earners, part of a package of unfunded cuts that had set off turmoil in financial markets and sent the pound to record lows.

The gains to kick off October follow a dismal September for the broader market, when stocks put in their worst monthly performance since March 2020. Every major index is in a bear market, which is a drop of 20% or more from its latest record high. The benchmark S&P 500 is down more than 23% for the year.

Wall Street is still focused on the hottest inflation in four decades and the Fed's aggressive rates hikes aimed at slowing the economy and easing high prices on everything from food to clothing. Investors are worried that the central bank could hit the brakes too hard and cause a recession.

On Friday, the Fed's preferred measure of inflation showed it was worse last month than economists expected. That should keep the Fed on track to keep hiking rates and hold them at high levels a while.

Investors are awaiting the latest round of corporate earnings to get a better sense of how companies are performing amid stubborn inflation. It will also give Wall Street another glimpse into how consumers have been holding up with a tighter squeeze on their wallets.

Consumer spending has been one of the stronger areas of the economy, along with the employment market. Wall Street will get several updates on the latter in the coming week. On Tuesday, the government will release its August report for job openings and turnover. It will release its closely watched employment report, for September, on Friday.