March 6 (Reuters) – The S&P 500 made little progress on Monday, closing slightly lower than its session high as U.S. Treasury yields pulled higher with investors braced for this week’s testimony from Federal Reserve Chairman Jerome Powell and the February jobs report.
Earlier in the session, indices looked much stronger with the Nasdaq (.IXIC) up more than 1% at one point before gradually losing its gains. The biggest boost had come from iPhone maker Apple Inc ( AAPL.O ), after Goldman Sachs initiated coverage with a “buy” rating.
But stocks gave up earlier gains as yields on the U.S. 10-year Treasury note and the 2-year Treasury note recovered from early declines after data showed new orders for U.S. manufactured goods fell less than expected in January.
Rising bond yields tend to weigh on stock valuations, particularly the value of growth and technology stocks, as higher interest rates reduce the value of future cash flows.
“The market is in a holding pattern because this week will be key to shed light on what’s happening to the US economy,” said Irene Tunkel, chief US equity strategist for
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BCA Research in New York, which will keep a close eye on February’s US non-farm payrolls report due out on Friday.
“People are worried about the jobs numbers and the economic data because they’re worried about what the Fed is going to do. At the end of the day, all roads lead to the Fed.”
And with potential Fed rate hikes their top concern, Monday’s data had already dampened investor enthusiasm, said Shawn Cruz, chief trading strategist at TD Ameritrade in Chicago.
“The pullback in the market was because there’s still a lot of work to be done on inflation,” Cruz said. “We’re not seeing the type of slowdown in demand that we need to see. The whole point of Fed rate hikes is to slow the economy.”
According to preliminary data, the S&P 500 (.SPX) rose 2.72 points, or 0.07%, to 4,048.36, while the Nasdaq Composite (.IXIC) lost 12.59 points, or 0.11%, to 11,676.41. The Dow Jones Industrial Average (.DJI) rose 38.69 points, or 0.12%, to 33,429.66.
The commodities-related materials (.SPLRCM) sector was weak on Monday after China set a lower-than-expected target for economic growth this year of around 5%.
The three main US stock indexes were up on Friday, posting weekly gains, after comments from Fed policymakers calmed jitters about aggressive rate hikes.
But San Francisco Federal Reserve Bank President Mary Daly said Saturday that if inflation and labor market data continue to come in warmer than expected, interest rates would have to go higher and stay there longer than Fed policymakers had forecast in December.
Investors will be looking for clues about the Fed’s future rate hike when Powell testifies before Congress on Tuesday and Wednesday. Since Powell last spoke, strong economic data and warmer-than-expected inflation have raised concerns that the Fed will raise interest rates higher than expected or keep them higher for longer.
Traders expect at least three more 25 basis point hikes this year and see rates peaking at 5.44% in September from 4.67% now.
Shares in cryptocurrency-related companies were volatile after Silvergate Capital Corp ( SI.N ) pulled the plug on its crypto payment network, raising doubts about the company’s ability to stay in business.
(This story has been corrected to say the S&P closed slightly lower than its session high, not lower)
Reporting by Sinéad Carew, Sruthi Shankar, Bansari Mayur Kamdar and Shristi Achar A in Bengaluru; Editing by Vinay Dwivedi, Anil D’Silva and Richard Chang
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