March 6 (Reuters) – The S&P 500 edged up slightly on Monday, ending its session slightly lower as investors on U.S. Treasury yields supported this week’s testimony from Federal Reserve Chairman Jerome Powell and the February jobs report.
In the previous session, the indices looked much stronger with the Nasdaq (.IXIC) up more than 1% at one point before gradually shedding its gains. The biggest boost came from iPhone maker Apple Inc ( AAPL.O ), after Goldman Sachs initiated coverage with a “buy” rating.
But equities gave up earlier gains as data showed the yield on US 10-year Treasury notes and the yield on 2-year Treasuries were lower than expected in January and new orders for US manufactured goods were lower.
As higher rates reduce the value of future cash flows, rising bond yields weigh on equity valuations, particularly growth and technology stocks.
“The market is in a holding pattern because this week will be key to shed light on what’s going on in the US economy,” said Irene Dunkel, chief strategist at US equities.
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PCA Research in New York will release its US non-farm payrolls report for February on Friday.
“People worry about jobs numbers and economic data because they worry about what the Fed will do. All roads lead to the Fed in the end.”
And with possible Fed rate hikes their main concern, Monday’s data has already dampened investor enthusiasm, said Shawn Cruz, chief trading strategist at TD Ameritrade in Chicago.
“There’s still a lot of work to be done on inflation,” Cruz said. “We don’t see the demand slowdown we need to see. The whole point of the Fed raising rates is to slow the economy.”
According to preliminary data, the S&P 500 (.SPX) rose 2.72 points, or 0.07%, to end at 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 commodity-linked commodities sector ( .SPLRCM ) was weaker on Monday after China set a lower-than-expected target for economic growth of around 5% this year.
Three major U.S. stock indexes rallied on Friday and posted weekly gains after comments from Fed policymakers eased jitters surrounding an aggressive rate hike.
But San Francisco Federal Reserve Bank President Mary Daly said on Saturday that if inflation and labor market data were warmer than expected, interest rates should be higher in December than Fed policymakers predicted.
Investors will be looking for clues about the Fed’s future rate hike path when Powell testifies before Congress on Tuesday and Wednesday. Powell’s last talk of strong economic data and warmer-than-expected inflation has raised concerns that the Fed will raise rates more than expected or keep them higher for longer.
Traders expect at least three 25-basis-point hikes this year and interest rates to 5.44% by September from 4.67% now.
Shares of cryptocurrency-related companies were volatile after Silvergate Capital Corp ( SI.N ) shut down its crypto payment network.
(This story has been corrected to say the S&P closed slightly lower than its session high, not lower)
Reporting by Sinead Carew, Shruti Shankar, Bansari Mayur Kamdar and Sristi Achar A in Bangalore; Editing by Vinay Dwivedi, Anil de Silva and Richard Chang
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