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US stocks make cautious advance before Yellen

U.S. stocks stepped tentatively higher on Monday after Wall Street's best weekly performance this year, as investors waited to hear from Federal Reserve Chair Janet Yellen, who makes her first monetary policy report to lawmakers on Tuesday.

The most important event for Wall Street this week should be Yellen's testimony before the U.S. House of Representatives on Tuesday, followed by the Senate on Thursday, said Phil Orlando,chief equity strategist at Federated Investors. "From my perspective, I would like to see a continuation of the taper, if that is the policy that is support by their analysis of the economy," he added.

"Yellen is likely to let it (tapering) be as she explains Fed policy to Congress," Paul Nolte, a portfolio manager at Kingsview Asset Management, wrote in emailed comments.

"Many are on the sidelines as they await Janet Yellen's testimony tomorrow before the House. I expected it to be one of these 'we will continue to taper but on the other hand it is data dependent.' What the markets reaction to that is anybody's guess and I'm not going to," offered Elliot Spar, market strategist at Stifel, Nicolaus, in afternoon commentary.

McDonald's reported better-than-expected global sales at established restaurants in January, but U.S. same-store sales declined more than estimated. Hasbro fell after the toy maker posted fourth-quarter earnings short of estimates. Yelp surged after The Wall Street Journal reported Yahoo would include Yelp's ratings of local businesses in its search results, citing a person familiar with the deal.

Shares of Apple rose after Carl Icahn said he doesn't see any reason to continue pushing the tech giant to repurchase more of its shares.

(Read more: activist investor voices support for Apple's buyback efforts)

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The Dow Jones Industrial Average rose 7.71 points, or 0.1 percent, to 15,801.79.

The S&P 500 added 2.82 points, or 0.2 percent, to 1,799.84, with energy falling the most and health care performing best among its 10 major industry groups.

The Nasdaq gained 22.31 points, or 0.5 percent, to 4,148.17.

The dollar edged lower against currency rivals and the yield on the 10-year Treasury note fell 1 basis point to 2.675 percent.

Crude-oil futures for March delivery rose 18 cents, or 0.2 percent, to $100.06 a barrel; gold futures for April delivery rose $11.80, or 0.9 percent, to $1,274.70 an ounce.

For every two stocks falling, roughly three declined on the New York Stock Exchange, where 654 million shares traded. Composite volume neared 3.3 billion.

"You don't have a lot of data this week, the only data point that really is important is retail sales on Thursday, which is the final data point on Christmas, as January retail sales will include the first look at gift card sales in January. Going into this report, our bias has been that luxury and online were pretty good, and low end and brick and mortar were not so good, with a lot of margin pressure," said Orlando.

On Friday, US stocks rallied as investors decided the nonfarm payrolls report wasn't so terrible after all.

—By CNBC's Kate Gibson

Coming Up This Week:

Tuesday: Earnings: Barclays, Marsh and McLennan, Entergy, Dean Foods, CVS Caremark, PG&E, FireEye, Ingersoll-Rand, Mosaic, LPL Financial, Intercontinental Exchange, Western Union, Trip Advisor, Seattle Genetics, Tanger Factory Outlet. NFIB survey at 7:30 a.m. Eastern, wholesale trade at 10:00 a.m. Eastern. JOLTs at 10 a.m. Eastern. Fed Chair Janet Yellen testifies before House Financial Services at 10 a.m. Eastern. Treasury auctions $30 billion 3-year notes at 1 p.m. Eastern. Richmond Fed President Jeffrey Lacker speaks at 8 p.m. Eastern. Dallas Fed President Richard Fisher speaks at 8:10 p.m. Eastern.

Wednesday: Earnings: Deere, Dr. Pepper Snapple, MetLife, Whole Foods, Cheesecake Factory, Cisco, Thomson Reuters, Rogers Communications, CBS, Angie's List, Taubman Centers, Agnico Eagle Mines, Valspar, Owens Corning, SunPower, Hospira, Kinross Gold, Equifax. Mortgage applications at 7 a.m. Eastern, St. Louis Fed President James Bullard at 8:45 a.m. Eastern. Treasury auctions $24 billion in 10-year notes at 1 p.m.

Thursday: Earnings: Pepsico, AIG, Kraft Foods, Applied Materials, Discovery Communications, Molson Coors, Generac, Avon Products, Borg Warner, Calpine, Goodyear Tire, Goldcorp, Cabela's, Sonoco Products, Trulia, Cliffs Natural, Bankrate. Jobless claims at 8:30 a.m. Eastern, retail sales at 8:30 a.m. Eastern, business inventories at 10 a.m. Eastern. Janet Yellen testifies before the Senate Banking Committee at 10:30 a.m. Eastern. The Treasury auctions $16 billion in 30-year bonds at 1 p.m. Eastern.

Friday: Earnings: Campbell Soup, Petrobras, Brookfield Asset Management, Interpublic, Red Robin Gourmet Burgers, VF Corp, Scripps Networks TRW Automotive. Import prices at 8:30 a.m. Eastern. Industrial production at 9:15 a.m. Eastern. Consumer sentiment at 9:55 a.m. Eastern.

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