The S&P 500 and Dow Jones closed slightly higher on Monday ahead of testimony from Federal Reserve chairman Jerome Powell.
The S&P 500 gained 0.069 percent or 2.78 points to 4,048.42. Meanwhile, the Dow rose by 0.12 percent or 40.47 points to 33,431.44.
Within the S&P 500, the materials sector was one of the worst performers after China projected a lower-than-anticipated target for economic growth this year at five percent. The sector previously rallied with the expectation of significantly higher commodity demand from China after reopening.
Nasdaq was the only major index to close lower at 11,675.74, losing 0.11 percent or 13.27 points.
Earlier in the trading session, all three benchmark indexes performed much stronger, with Nasdaq gaining over one percent before gradually losing steam.
Apple Inc was the major contributor to Nasdaq and the S&P 500's gains after Goldman Sachs changed its stock rating to "buy." The tech company shares closed at 153.83, rising by 1.85 percent.
These major indexes gave up their earlier gains as yields of the two-year and 10-year Treasury notes rose after declining slightly. The 10-year notes were up one basis point on Monday after rising above its four percent threshold last week.
Experts said rising government bond yields usually weigh on stock valuations, especially growth and technology stocks. It is because the surge in bond yields is related to expectations of higher interest rates, and higher rates will lower the value of future cash flows.
"The market is in a holding pattern because this week will be key to shedding light on what's going on with the U.S. economy," Irene Tunkel, chief U.S. equity strategist at BCA Research, said.
"People are worried about the jobs number and the economic data because they're worried about what the Fed will do. Ultimately all roads lead to the Fed."
Irene Tunkel, Chief U.S. Equity Strategist at BCA Research
Powell will testify in front of Congress on Tuesday and Wednesday. The central bank leader should be able to persuade Congress members about the Fed's ability to bring down inflation without triggering a recession, said analysts.
Democratic leaders have voiced concerns that the Fed's hawkish monetary policy hurts lower-income people.
Experts have criticized the Fed for taking action too slowly in its fight against inflation, especially at the beginning of its monetary tightening cycle. Analysts said it was "virtually" impossible for the Fed to avoid a recession at this point.
Santa Monica-based Sri-Kumar Global Strategies president Komal Sri-Kumar said the Fed should have raised the benchmark rate by 1.25 percentage points last September when the annual inflation rate was at 8.2 percent.
He added that he did not believe in a "no-landing scenario" — a condition where the economy continues growing despite the central bank's tight monetary policy.
The central bank has raised the interest rate eight times since March 2022, with the latest increase being a 25-basis-point hike. The latest hike brought the federal funds rate to the range of 4.5 to 4.75 percent. The market expects the federal funds rate to peak over 5.4 percent by September and the interest rate cut to start happening next year.
New inflation data
The U.S. Department of Labor will publish the job report for February this Friday. The data for January showed that the U.S. job market was resilient, with over 500,000 additional payrolls. Unemployment claims also unexpectedly went down last week, indicating that the job market remained strong.
Analysts said a strong job market could cause wage inflation and drive prices further up despite the Fed's effort to lower price increases.
San Francisco Fed president Mary Daly said Saturday that if the labor market remained tight in February, the Fed would need to increase the interest rate again and maintain that higher rate for longer than policymakers had predicted last December.