The Dow racked up gains Monday as a sea of green swept across cyclicals and value corners of the market amid a rebound in risk appetite following last week's rout.
The Dow Jones Industrial Average jumped 1.8%, or 586 points, the S&P 500 rose 1.4%, the and the Nasdaq Composite was up 0.79%.
Energy led the broader market higher, up 4% as investors continued to bet on higher oil demand, while the prospect of the return of Iranian supply was pushed out further after Ebrahim Raisi won the country’s presidential election.
Raisi told reporters that Iran wouldn't “negotiate for the sake of negotiations” and ruled out any meeting with President Joe Biden.
Banking stocks were also among the top gainers, underpinning an advance in the broader financials after a slump last week as U.S. yields rebounded from lows. The United States 10-Year traded near 1.5% after falling as low as 1.35% intraday.
Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM) were up more than 1%, while Wells Fargo (NYSE:WFC) jumped nearly 4%.
The move higher in value stocks didn't serve up the rotation away from growth as technology also participated in the broader market melt up.
Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT, Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) were above the flatline, while Amazon.com (NASDAQ:AMZN) was in the red.
The positive swing in investor sentiment on stocks followed the worst week for the broader market since October as the Federal Reserve's hawkish tilt spooked investors. Remarks on Monday, however, continued to show the divide on how soon the Fed should start tightening policy.
New York Federal Reserve official John Williams (NYSE:WMB), a Fed dove, said Monday it was too soon for the central bank to start tightening policy despite the stronger recovery. "[T]he data and conditions have not progressed enough for the Federal Open Market Committee to shift its monetary policy stance of strong support for the economic recovery," he added.
That paled in comparison to St. Louis Federal Reserve President James Bullard's remarks Friday. “I put us starting in late 2022,” St. Louis Federal Reserve President James Bullard said Friday during a TV interview on CNBC. "[M]y forecast said 3% inflation in 2021 -- core PCE inflation -- and 2.5% core PCE inflation in 2022."
But while the expectations for tighter monetary policy measures will weigh on valuations in 2022, companies are expected to generate sufficient earnings to drive the broader market higher.
"We expect earnings to drive returns in 2022. We estimate that earnings per share in the S&P 500 Index will increase to $220 in 2022, though rising interest rates could put downward pressure on price/earnings ratios in 2022," Wells Fargo said in a note.
"Our year-end median price target for the S&P 500 Index is 4,900," it added. That estimated price target represents about 14% upside from current levels.
In other news, DoorDash (NYSE:DASH) climbed more than 3% after teaming up with Albertsons to offer same-day grocery delivery from nearly 2,000 stores.