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* March U.S. manufacturing data beats estimates
* Chipmakers rally on positive China data
* Lyft drops below IPO price on second day of trading
* Banks rally as U.S. yields hit 1-week high
* Indexes up: Dow 1 pct, S&P 0.88 pct, Nasdaq 0.98 pct (Updates to early afternoon)
By Sruthi Shankar and Shreyashi Sanyal
April 1 (Reuters) - U.S. stocks rallied on Monday, starting off the new quarter on a strong note, as upbeat manufacturing numbers from the United States and China eased worries about slowing global growth.
The S&P 500 ended the first quarter on Friday with its best performance since 2009, driven by hopes that Beijing and Washington will strike a deal to end their trade war, which had marred financial markets last year.
The benchmark index, which is trading 2.5 percent away from its record closing high hit in September, triggered a "golden cross" pattern, in which the 50-day moving average crosses above the 200-day moving average. Many believe the technical signal could portend more gains for stocks in the short term.
Spurring gains in global equities, China's manufacturing sector unexpectedly returned to growth for the first time in four months in March.
U.S. manufacturing numbers also came in better-than-expected in March, helping investors overlook soft retail sales data for February.
"Investors are looking past the global economic slowdown and in a low interest rate environment, equities start to look more attractive," said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York.
Concerns about global slowdown came to the fore after the Federal Reserve abruptly ended its monetary tightening policy cycle two weeks earlier, driving the 10-year U.S. bond yields below 3-month T-bill rates for the first time in more than a decade.
Rate-sensitive financial shares provided the biggest boost to the S&P 500. Bank stocks added more than 2 percent as the U.S. yield curve steepened on the back of encouraging economic data.
Following trade talks which concluded in Beijing on Friday, China's State Council said over the weekend it would continue to suspend additional tariffs on U.S. vehicles and auto parts after April 1.
General Motors Co rose 1.5 percent and Ford Motor Co was up 1.9 percent. The S&P auto parts & equipment index jumped 3.7 percent.
Chipmakers, which get a large part of revenue from China, also rose. The Philadelphia Semiconductor index was up more than 2 percent.
With the first-quarter earnings season about two weeks away, investors are bracing for what may be the first U.S. profit decline since 2016. Analysts expect quarterly earnings to fall 2 percent, according to Refinitiv data.
At 12:42 p.m. ET the Dow Jones Industrial Average was up 258.04 points, or 1.00 percent, at 26,186.72, the S&P 500 was up 25.01 points, or 0.88 percent, at 2,859.41 and the Nasdaq Composite was up 75.97 points, or 0.98 percent, at 7,805.29.
Wynn Resorts Ltd jumped 7.3 percent, the most among S&P companies, as March gambling revenue from the Chinese territory of Macau was higher than the previous month.
Lyft Inc shares tumbled 10.6 percent as brokerage Guggenheim Securities started coverage of the ride-hailing startup's shares with a 'neutral' rating. The company debuted on the Nasdaq on Friday.
Advancing issues outnumbered decliners for a 2.62-to-1 ratio on the NYSE and a 1.96-to-1 ratio on the Nasdaq.
The S&P index recorded 59 new 52-week highs and no new low, while the Nasdaq recorded 61 new highs and 22 new lows. (Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta)