March 6 (Reuters) – The S&P 500 rose little on Monday, closing slightly below its session high as U.S. Treasury yields rose as investors braced for testimony this week from Federal Reserve Chairman Jerome Powell, and the February jobs report.
Earlier in the session, the indices looked much stronger with the Nasdaq (.IXIC) up more than 1% at one point before gradually losing its gains. The biggest boost came from iPhone maker Apple Inc (AAPL.O) after Goldman Sachs launched a hedge with a “buy” rating.
But stocks gave up earlier gains as yields on 10-year U.S. Treasuries and 2-year Treasuries rebounded from an early decline after data showed new orders for U.S. manufactured goods fell less than expected in January.
Rising bond yields tend to weigh on equity valuations, especially those of growth and technology stocks, as higher rates reduce the value of future cash flows.
“The market is on hold because this week will be critical in shedding light on what is happening with the US economy,” said Irene Tunkel, chief US equity strategist for
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BCA Research in New York will be closely monitoring February’s U.S. nonfarm payrolls report, due out on Friday.
“People worry about job numbers and economic data because they worry about what the Fed will do. Ultimately, all roads lead to the Fed.”
And with potential Fed rate hikes a primary concern, Monday’s data had already dampened investor enthusiasm, said Shawn Cruz, chief strategist at TD Ameritrade in Chicago.
“The market pullback is because there’s still a lot of work to do on inflation,” Cruz said. “We’re not seeing the type of slowdown in demand that we need to see. The purpose of the Fed’s rate hikes is to slow the economy.”
According to preliminary data, the S&P 500 (.SPX) gained 2.72 points, or 0.07%, to end at 4,048.36 points, 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 commodity-related materials sector (.SPLRCM) was weak on Monday after China set a lower-than-expected economic growth target this year at around 5%.
All three major U.S. stock indexes rallied on Friday and posted weekly gains after comments from Fed policymakers eased jitters around aggressive rate hikes.
But San Francisco Federal Reserve Chair Mary Daly said on Saturday that if inflation and labor market data continue to be warmer than expected, interest rates are likely to rise and stay there longer. longer than Fed policymakers expected in December.
Investors will be looking for clues about the Fed’s future rate hike path when Powell testifies before Congress on Tuesday and Wednesday. Since Powell last spoke, strong economic data and higher-than-expected inflation have raised concerns that the Fed will raise rates higher than expected or hold them longer.
Traders expect at least three more 25 basis point hikes this year and see interest rates peak at 5.44% in September from 4.67% currently.
Shares of cryptocurrency-related companies have been volatile after Silvergate Capital Corp (SI.N) unplugged its crypto payments network and raised doubts about the company’s ability to stay in business.
(This story has been corrected to say that 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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