June kicks off with a slew of manufacturing reports expected Wednesday.
The key read on the sector, the ISM manufacturing PMI for May, is due in the morning. Consensus estimates from Reuters expect a 50.5 print, barely in expansion territory and off slightly from the previous month's 50.8 read.
The ISM manufacturing report could be disappointing, said Bryce Doty, senior fixed income manager with Sit Investment Associates. "Then you'll get whipsawed when ADP and claims come out in the next couple of days," he said.
The highly anticipated nonfarm payrolls report and the ISM nonmanufacturing PMI are due Friday.
"The two ISM numbers are, obviously alongside the jobs report, they're going to set the tone for the environment which the Fed is making that decision in," said David Lafferty, chief market strategist at Natixis Global Asset Management.
The Federal Reserve could next raise rates at its June 14 to 15 meeting. Fed policymakers have said the June 23 U.K. vote on whether to remain in the European Union does complicate the rate hike decision.
Market expectations for a June hike moderated to a 23 percent probability Tuesday, while the chance of a July hike held around 60 percent, according to CME Group's FedWatch tool.
Also due Wednesday is the final read for May on Markit's manufacturing PMI. The flash read was 50.5, down from 50.8 in April.
Treasury yields were lower in late trade Tuesday after disappointing reads on consumer confidence, the Chicago PMI and the Dallas Fed manufacturing index. Earlier, yields rose following a 1 percent rise in personal spending in April. The yield hit 0.938 percent, its highest in a week, and the 10-year yield touched 1.89 percent, its highest since late April.
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"It seems the market is dissatisfied if 100 percent of the economy isn't improving or 100 percent isn't negative. It seems the struggle is split. It creates opportunity for traders," Doty said.
U.S stocks closed mixed Tuesday in the highest volume trade since late April. The major averages held gains for the month, with the Dow Jones industrial average closing at 17,787.13 for its first four-month gain since June 2014, while the ended at 2,096.95, for its first three-month gain since 2014. The Nasdaq composite outperformed, closing higher on the day and posting a monthly gain of 3.6 percent.
Oil will also be in focus ahead of the OPEC meeting scheduled for Thursday in Vienna. U.S. crude oil futures settled 23 cents lower at $49.10 a barrel, still holding four straight months of gains.
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The United Arab Emirates Oil Minister Suhail bin Mohammed al-Mazroui said in a Reuters report he was happy with the oil market and noted prices were correcting higher.
Due to Monday's Memorial Day holiday, the U.S. Energy Information Administration's weekly crude inventory report is set for release Thursday rather than Wednesday.
Investors will also eye the latest data on China. The country's official manufacturing and nonmanufacturing PMI are due overnight, as is the Caixin Markit manufacturing PMI.
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"I think the market will react to outliers, if it's particularly weak versus expectations. The idea that manufacturing in China is slowing I think is baked into the market," Lafferty said.
Wednesday also marks the effective date for the full inclusion of U.S.-listed Chinese firms in MSCI's global indexes. Separately, speculation around MSCI's scheduled June 14 decision on including mainland-listed A shares sent the Shanghai composite up more than 3 percent Tuesday.
Other data scheduled for release Wednesday include May auto sales, April construction spending and the Fed's Beige Book. Michael Kors, Cracker Barrel, Lands' End and Vera Bradley are among the few names due to report earnings before the bell, while Analogic, Box and Semtech are scheduled for after the close.
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"In anticipation of the Fed meeting coming up, I find it very difficult to believe any money managers are going to make any significant moves in between earnings [seasons]," said Jeff Reeves, executive editor of InvestorPlace.com.
June is historically one of the least volatile months of the year, according to analysis from S&P Global Market Intelligence U.S. Equity Strategist Sam Stovall. In a note Tuesday, he said since 1945, June is second only to December in showing the lowest monthly range of price fluctuations.
Presidential election years also tend toward less volatility in June, Stovall said in the note. Since 1952, when the incumbent was not running, the month saw the fewest number of days with a more than 1 percent decline in the S&P 500.