U.S. Stocks Give Up Much of Early Gains


U.S. stocks treaded water Monday, with investors awaiting Fed Chair

Jerome Powell’s

congressional testimony on Tuesday and important labor market data at the end of the week.

The S&P 500 inched up 2.78 points, or less than 0.1%, to 4048.42, and the Dow Jones Industrial Average added 40.47 points, or 0.1%, to 33431.44. The Nasdaq Composite slipped 13.27 points, or 0.1%, to 11675.74. Stocks opened the session modestly higher before paring their advance in afternoon trading.

All three major indexes climbed last week, with the Dow breaking a four-week losing streak. The indexes, however, are still down from their recent highs in February, when a string of economic reports suggested that the economy is stronger, and inflation is hotter, than many investors had previously believed.

As a result of those reports, many investors are less confident now that the U.S. will enter a recession this year. But they also have become more concerned that the Fed will leave interest rates higher for longer. That has hurt stocks by in part increasing the relative attractiveness of ultrasafe assets such as U.S. Treasury bills.

It has also raised anxieties that a ramped-up effort by the Fed to bring down inflation might ultimately cause a more painful recession down the road, crimping corporate earnings when a downturn finally does arrive.

“Markets have been, and today are still, in a tug of war between hope and dread as to what the Fed might say or do,” said

Brian Jacobsen,

senior investment strategist at Allspring Global Investments.

Investors are eagerly anticipating Mr. Powell’s testimony before Congress on Tuesday and Wednesday because they will be his first public remarks since government agencies reported higher-than-expected inflation data last month. In recent appearances, Mr. Powell has struck relatively optimistic notes that inflation—while still too high and coming down only slowly—is finally in the process of easing toward the Fed’s 2% annual target.

Investors will be watching to see whether last month’s data has significantly altered Mr. Powell’s view. Then on Friday, employment data will provide the most important look yet at how the economy developed in February, with investors counting on a slowdown from the torrid pace of job gains that were reported for January.

“It’s the calm before the storm,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Shares of some technology giants, such as

Apple

and

Microsoft,

were a bright spot Monday.

Apple’s stock climbed $2.80, or 1.9%, to $153.83. On Sunday, Goldman Sachs analysts started coverage of the shares with a buy rating and a $199 price target over the next 12 months.

Mining stocks were among the worst performers after China set an economic growth target for this year at 5%, the lowest in more than a quarter-century. Shares in copper and gold mining company Freeport-McMoRan fell $1, or 2.3%, to $42.73, while oil services giant Halliburton slipped 3 cents, or 0.1%, to $38.86.

“I think some were surprised by the growth target not being punchier,” said Arun Sai, multiasset strategist at Pictet Asset Management. “China wants to focus on stability and sustainable growth rather than growth at any cost.”

In the bond market, the yield on the benchmark 10-year U.S. Treasury note edged higher. It settled at 3.981%, according to Tradeweb, compared with 3.962% Friday and 4.072% Thursday, its highest close since early November. Many stock fund managers view the 10-year Treasury note as a benchmark risk-free investment. That causes them to re-evaluate the prices of stocks when its yield stages major gains or losses, or crosses key thresholds. Yields fall when bond prices rise.

In Europe, the Stoxx Europe 600 fell less than 0.1% after two sessions of gains.

In Asia, major stock benchmarks were mixed. The Shanghai Composite Index lost 0.2%, Hong Kong’s Hang Seng Index climbed 0.2%, and Japan’s Nikkei 225 rose 1.1%. 

The Bank of Japan’s

next policy decision is due Friday. There is a higher chance of a policy change because it will be Gov.

Haruhiko Kuroda’s

last meeting, some investors said. 

“This meeting is significant, he may do something before he leaves,” said Mr. Kamal at Kleinwort Hambros. 

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Sam Goldfarb at sam.goldfarb@wsj.com

U.S. stock indexes ended last week with solid weekly gains.



Photo:

Spencer Platt/Getty Images

We want to hear from you