Wall Street gains ground with Powell’s testimony, upcoming data in focus

(Reuters) – Wall Street’s major indexes pared early gains on Monday and US Treasury yields rose as investors prepared for this week’s testimony from Federal Reserve Chairman Jerome Powell and economic data including the jobs report.

Shares of Apple Inc (AAPL.O), the iPhone maker, latest up 2%, were the biggest boost to the S&P 500 (.SPX) after Goldman Sachs initiated coverage with a “buy” rating.

But stocks gave back earlier gains as the 10-year US Treasury yield rebounded from an early decline after data showed that new orders for US-manufactured goods fell less-than-expected in January. Higher orders for machinery and a range of other products signaled manufacturing was back on its feet, although bookings for civilian aircraft were down.

Higher bond yields tend to affect equity valuations, particularly those of growth and technology stocks, as higher rates reduce the value of future cash flows.

Sean Cruz, chief trading analyst at TD Ameritrade in Chicago, said Monday’s data is likely to dampen investor enthusiasm.

“The market’s decline was because there is still a lot of work to be done on inflation,” Cruz said. “We’re not seeing the kind of slowdown in demand that we need to see. The whole point of the Fed’s rate hike is to slow the economy.”

The Dow Jones Industrial Average rose 45.24 points, or 0.14%, to 33,436.21. The S&P 500 (.SPX) rose 10.67 points, or 0.26%, to 4,056.31. The Nasdaq Composite Index (.IXIC) rose 31.23 points, or 0.27%, to 11,720.23.

Six of the 11 major sectors of the S&P 500 rose. But commodity-related materials (.SPLRCM) led the losers after China set a lower-than-expected target for economic growth this year at around 5%.

The Technology (.SPLRCT) sector was the biggest gainer, with the biggest boost from Apple followed by Microsoft Corp (MSFT.O) and Google subsidiary Alphabet Inc (GOOGL.O).

The three major US stock indices rebounded on Friday, posting weekly gains after comments from Federal Reserve policymakers eased concerns about aggressive rate hikes.

But San Francisco Fed President Mary Daley said Saturday that if inflation and labor market data continue to rise more than expected, interest rates will need to rise and stay there longer than federal policymakers expected in December.

Investors will be looking for clues about the future path of the Fed’s rate hikes when Powell testifies before Congress on Tuesday and Wednesday. Since Powell last spoke of strong economic data and higher-than-expected inflation raised concerns that the Fed may raise interest rates higher than expected or keep them higher for longer.

Traders expect at least three additional 25 basis point hikes this year and see interest rates peak at 5.44% by September from 4.67% now.

Shares of cryptocurrency-related companies fell after Silvergate Capital Corp (SI.N) pulled its crypto payments network, casting doubts about the company’s ability to stay in business. The California-based bank, last up 1% at $5.84, was down to $5.11. Signature Analog Bank (SBNY.O) fell nearly 2%.

Declining issues outnumbered advancers on the NYSE by a ratio of 1.46 to 1; On the Nasdaq, the ratio was 1.79 to 1 in favor of declining stocks.

The S&P 500 posted 20 new 52-week highs and 20 new lows. The Nasdaq index posted 74 new highs and 71 new lows.

Additional reporting by Sinad Karo, Sruthi Shankar, Pansari Mayur Kamdar and Shristi Achar A in Bengaluru; Editing by Vinay Dwivedi, Anil D’Silva, and Richard Chang

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