By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

But strategist says watch for 'Bearmageddon'

U.S. stocks opened sharply higher on Monday, as solid gains in European and Asian markets helped extend a rally on Wall Street begun late Friday.

The S&P 500 gained 22 points, or 1.2%, to 1,974 with all 10 main sectors trading higher. Telecommunications and industrials led the gainers, while about 95% of the stocks on the index were trading higher.

The Dow Jones Industrial Average added 184 points, or 1.1%, to 16,657, with only two stocks--Apple Inc. (AAPL), off nearly 1% and Boeing Co. (BA)0.1% lower--not in positive territory. General Electric Co.(GE) was the top gainer, surging 4.1%.

The Nasdaq Composite advanced 41 points, or 0.9%, at 4,749, while Russell 2000 gained 13 points or 1.2%, to 1,127.

Stocks had trimmed some of their gains after a the Institute for Supply Management's nonmanufacturing index for September showed a weaker-than-expected reading of 56.9%--the lowest readings since June. But stocks bounced back quickly.

"Market expectation is for continuation of zero interest rates and monetary stimulus from other central banks, which usually benefits equities," Kate Warne, investment strategist at Edward Jones.

Warne said stocks are likely to end the year in positive territory but said investors should scale down their expectations. "Investors should not expect big gains this year and the next few months will be volatile," Warne said.

Meanwhile, a Federal Reserve official said an interest-rate increase could still happen this year even as the labor-market weakness spurred speculation the U.S. central bank won't hike until 2016.

Asian markets (http://www.marketwatch.com/story/china-stimulus-hopes-push-hong-kong-shares-higher-2015-10-05) picked up the baton from Wall Street. On Monday, the Nikkei 225 index gained 1.6%, while the Hong Kong Hang Seng Index surged 1.6%. In Europe, the Stoxx Europe 600 jumped 2.7%.

A downgrade from the World Bank for China helped fueled some stimulus hopes for that country (http://www.marketwatch.com/story/china-stimulus-hopes-push-hong-kong-shares-higher-2015-10-05).

Investors were also eyeing a sweeping Trans-Pacific Partnership trade agreement, which was announced Monday morning (http://www.marketwatch.com/story/us-reaches-trade-deal-with-11-pacific-nations-2015-10-05-81032225). The trade deal between the U.S. and 11 countries around the Pacific is expected to lower barriers to goods and services (http://www.marketwatch.com/story/trans-pacific-partnership-trade-deal-nears-agreement-2015-10-05).

Read: U.S. reaches trade deal with 11 Pacific nations (http://www.marketwatch.com/story/us-reaches-trade-deal-with-11-pacific-nations-2015-10-05-81032225)

'Bearamageddon' fears: Some strategists doubt U.S. stocks can keep making gains. Michael O'Rourke, chief market strategist at JonesTrading, said in a note that momentum and short covering were likely the only reasons the market rallied on Friday.

"The problem is that absent a change in the fundamental drivers behind the weekend, momentum and short covering only takes the market so far," he wrote. And when the S&P 500 is rallying alongside the dollar index, continued O'Rourke, investors should "question the validity of the move."

Jones said any further deterioration of economic data should put investors on "Bearmageddon watch--looking for indications the economy is rolling over while Fed policy is trapped at the zero bound."

Rosengren says a hike still in play: In an interview with MarketWatch (http://www.marketwatch.com/story/embargoed-until-1201-am-monday-2015-10-05) published Monday, Boston Fed President Eric Rosengren said the September employment report was "weak," but by itself doesn't preclude a rate increase. The central bank will need to see if it was a one-off, or more of a "broader pattern," he said.

"If this is an anomalous report, then, if the data came in sufficiently, I would be comfortable possibly raising rates by the end of the year," said Rosengren.

Read: Poor jobs report puts dark cloud over U.S. economy (http://www.marketwatch.com/story/poor-jobs-report-puts-dark-cloud-over-us-economy-2015-10-04)

Stocks to watch:Tenet Healthcare Corp.(THC) shares rallied 7.1%after an article in Barron's indicated the company may be on the road to recovery.

Among big gainers on the S&P 500 were oil companies, which benefited from rising oil prices.

Marathon Oil Corp. (MRO) climbed 4.8%, Murphy Oil Corp gained (MUR) 4.5%.

American Apparel Inc.(APP) filed for bankruptcy protection on Monday (http://www.marketwatch.com/story/american-apparel-could-file-for-bankruptcy-as-soon-as-monday-2015-10-05). The struggling clothing retailer plans to restructure debt, but wouldn't say whether stores would close.

Activist shareholder Nelson Peltz's Trian Fund Management LP said it has accumulated a $2.5 billion stake (http://www.marketwatch.com/story/activist-firm-trian-takes-25-billion-stake-in-general-electric-2015-10-05) in General Electric Co.(GE), making it one of the company's top shareholders, with around a 1% stake. GE shares jumped 4.1%.

Twitter Inc.(TWTR) has named Jack Dorsey chief executive officer (http://www.marketwatch.com/story/twitter-names-jack-dorsey-ceo-bain-coo-2015-10-05), but says he won't be chairman. Twitter shares rose 0.9%.

Shares of mining and commodities giant Glencore(GLEN.LN) (GLEN.LN) surged as much as 71% in Asia, then added another 14% in Europe amid asset-sale speculation (http://www.marketwatch.com/story/glencore-jumps-ftse-100-gains-for-fourth-day-2015-10-05).

Also read: Glencore oil deals could bite banks (http://www.marketwatch.com/story/glencore-oil-deals-could-bite-banks-2015-10-05)

Alcoa Inc.(AA) will unofficially kick off third-quarter earnings season on Thursday (http://www.marketwatch.com/story/pepsi-alcoa-shift-focus-to-results-as-corporate-earnings-season-begins-2015-10-04). Ahead of that, PepsiCo. Inc.(PEP) will report on Tuesday.

Other markets: The dollar slipped back, which allowed oil prices to rise 46 cents to $46.01. Gold fell. Chinese markets were closed for a holiday.

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(END) Dow Jones Newswires

October 05, 2015 10:15 ET (14:15 GMT)

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