Equity indexes advanced slightly on Monday as oil prices retreated after a recent rally while U.S. bond yields hit their highest since late November and investors continued to rein in bets on Federal Reserve interest rate cuts.
The dollar index slipped in thin trading as investors focused on U.S. inflation data later this week, while the yen slipped to near 34-year lows versus the greenback as traders remained alert for any potential action from Japanese authorities to support the weakening currency.
Oil prices fell on Monday as geopolitical tensions eased somewhat after Israel withdrew more soldiers from southern Gaza. Talks on a truce began on Sunday and continued on Monday although a Hamas official said no progress had been made, despite Egyptian sources saying headway had been achieved.
"There's a cautious break in the action. After a fairly strong first quarter and questions about Treasury yields and energy prices, investors are taking a break from buying stocks," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
While Pavlik said that recent economic data had been encouraging he said investors were questioning "whether it supports this level of stock price."
On Monday at 10:43 a.m. on Wall Street, the Dow Jones Industrial Average was up 55.33 points, or 0.14%, to 38,958.58, the S&P 500 gained 10.48 points, or 0.20%, to 5,214.86 and the Nasdaq Composite gained 50.83 points, or 0.31%, to 16,299.54.
MSCI's gauge of stocks across the globe rose 2.52 points, or 0.32%, to 779.03. Europe's STOXX 600 index rose 0.44%.
Stock markets had made a slow start to the second quarter as the risk of a broader conflict in the Middle East had pushed up oil prices to their highest level since October.
A much stronger-than-expected U.S. jobs report on Friday, which followed solid manufacturing data at the start of the week, caused investors to temper bets on a Federal Reserve rate cut in June.
U.S. Treasury yields moved higher on Monday as fixed income investors lowered their expectations for how deeply the Fed will be able to cut interest rates this year after the jobs report.
The yield on benchmark U.S. 10-year notes rose 4.2 basis points to 4.42%, from 4.378% late on Friday while the
30-year bond yield rose 1.9 basis points to 4.5509%.
The 2-year note yield, which typically moves in step with interest rate expectations, rose 4.8 basis points to 4.7802%, from 4.732% late on Friday.
In currencies, the dollar index fell 0.15% to 104.20, with the euro up 0.12% at $1.0848. Against the Japanese yen, the dollar strengthened 0.15% to 151.83.
Market pricing on Monday showed traders see a roughly 48% chance of a Fed cut in June, down from around 59% a week ago.
Investor focus this week will be on the U.S. consumer price index (CPI) report on Wednesday, which is expected to show core inflation, which strips out volatile energy and food prices, slowing to 3.7% in March from 3.8% the prior month.
In energy markets, U.S. crude lost 1.09% to $85.96 a barrel and Brent fell to $90 per barrel, down 1.28% on the day.
Meanwhile, gold prices hit a record high for a seventh straight session on Monday, fuelled by central bank purchases and geopolitical tensions, while strong economic data failed to dull bullion's allure.
Spot gold was last 0.2% lower at $2,324.85 an ounce, having hit a high of $2,353.79 earlier in the session. U.S. gold futures were 0.03% firmer at $2,326.40 an ounce.
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