By Caroline Valetkevitch

NEW YORK (Reuters) -Global stock indexes rose on Monday as Federal Reserve policymakers said last week's large interest rate cut was warranted, while the euro fell against the dollar as business activity readings of the euro zone economy disappointed.

U.S. Treasury yields rose as bond investors continued to price out a near-term recession in the world's largest economy.

U.S. policymakers' comments were in focus after the Fed last week began an easing policy with a half-point rate cut. Three Fed policymakers said Monday that the cut was meant to try to sustain what they see as an emerging and healthy balance in the economy.

Minneapolis Fed President Neel Kashkari called the cut the "right decision" while Bank of Chicago President Austan Goolsbee said he expected "many more rate cuts over the next year."

Atlanta Federal Reserve President Raphael Bostic said the U.S. economy is close to normal rates of inflation and unemployment and the Fed needs monetary policy to "normalize" as well.

Investors want to see that "the 50 basis point rate cut was not triggered by an emergency mindset at the FOMC, but rather that inflation is in fact easing," said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

"Data releases become increasingly important because the (stock) valuations have climbed higher," she said.

The Dow Jones Industrial Average rose 61.29 points, or 0.15%, to 42,124.65, the S&P 500 rose 16.02 points, or 0.28%, to 5,718.57 and the Nasdaq Composite rose 25.95 points, or 0.14%, to 17,974.27.

U.S. stocks registered gains last week.

MSCI's gauge of stocks across the globe rose 2.68 points, or 0.32%, to 840.05. The STOXX 600 index rose 0.4%.

The U.S. rate futures market has priced in a 54% chance of a smaller 25-bp cut at the November meeting with a 46% probability of the bigger 50-bp easing, according to LSEG data. For 2024, the futures market is implying cuts of around 78 bps.

On the data front, a survey compiled by S&P Global showed euro zone business activity sharply contracted this month as the bloc's dominant services industry flat-lined, while a downturn in manufacturing accelerated.

In contrast, U.S. business activity was steady in September, but average prices charged for goods and services rose at the fastest pace in six months, possibly pointing to an acceleration in inflation in coming months.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.14% to 100.92, with the euro down 0.45% at $1.1112. Against the Japanese yen, the dollar weakened 0.21% to 143.61.