US close: Stocks close sharply higher as investors look to the Fed

US stocks recorded some solid gains on Monday as major indices attempted to reclaim some of their recent losses, with expectations that the Federal Reserve will again cut rates driving the rally.

At the close, the Dow Jones Industrial Average was up 5.09% at 26,703.32, while the S&P 500 was 4.60% firmer at 3,090.23 and the Nasdaq Composite saw out the session 4.49% stronger at 8,952.16.

The Dow Jones closed 1,293.96 points higher on Monday as indices attempted to recover some of the losses seen in what was the worst week on the Street since the Global Financial Crisis in 2008. The Dow, S&P 500 and Nasdaq Composite all entered correction territory last week, down more than 10% from the all-time highs notched earlier in February.

Last week's losses were fuelled by a sharp increase in cases of the Wuhan coronavirus outside of China and as of Sunday, over 85,000 cases of the virus had been confirmed across the globe, along with more than 2,900 related deaths. Australia, Thailand and the US reported their first coronavirus-related casualties over the weekend.

Weighing on sentiment at the open was a survey on Chinese manufacturing activity. The Caixin Manufacturing Purchasing Managers' Index came in at 40.3 for February - far below expectations of a reading of 45.7 and its weakest level ever.

However, sentiment was given a boost after the bell as many analysts said they now expect that the Federal Reserve will lower its Fed funds rate target by 25 basis points to 1.25%-1.5% at its scheduled March 17-18 meeting as a result of the coronavirus-related sharp correction in the stock market.

In terms of election news, Joe Biden easily won the South Carolina primary, setting him up for a potentially key Super Tuesday vote, while challenger Pete Buttigieg pulled out from the race for the Democratic Party nomination.

On the macro front, IHS Markit's US manufacturing purchasing managers' index rose to 50.7 in February, up from 51.9 in January and slightly below the 50.8 flash reading.

Elsewhere, factory sector activity in the States slipped last month as the Chinese coronavirus left its mark on businesses, wreaking havoc among electronics firms and triggering layoffs among makers of transportation equipment.

The Institute of Supply Management's manufacturing sector Purchasing Managers' Index retreated from the 50.9 level in January to 50.1 for February. Economists had pencilled-in a reading of 50.5.

While no major corporate earnings were scheduled for release on Monday, Gilead Sciences entered into a definitive agreement to acquire clinical-stage immuno-oncology company Forty Seven for approximately $4.9bn.