U.S. stocks closed near session lows on Monday as investors weighed multi-month highs in bond yields amid greater expectations of tightening following Friday's strong jobs report. (Tweet This)
The Dow Jones industrial average closed down about 80 points, posting losses of 0.32 percent year-to-date.
"I think everybody's a little unsettled about the way U.S. and European bond markets sold off in the last week," said David Kelly, chief global strategist at J.P. Morgan Funds.
Analysts noted relatively less volatility in bond and currency markets in Monday trade. The benchmark 10-year U.S. Treasury yield held slightly lower at 2.39 percent. The U.S. dollar pared recent gains, down about one percent against major world currencies with the euro rising to $1.1287. The stronger greenback has weighed on corporate earnings.
On Friday, a surge in bond yields to multi-month highs on a strong jobs report pressured equities, with U.S. stocks closing narrowly mixed.
Nonfarm payrolls for May beat expectations with the addition of 280,000 jobs. Analysts also cheered a greater-than-forecast 8 cent increase in hourly wages and a 5.5 percent unemployment rate. Signs of continued strength in the labor market strengthened the case for the Federal Reserve to begin raising short-term interest rates in September.
"I think the market's trying to figure out if (Friday's employment report) is going to move the Federal Reserve to act in September," said Robert Pavlik, chief market strategist at Boston Private Wealth. He also cited weakness in the Dow transports as weighing on stocks.
The Dow transports, led by a decline in airlines, closed down 2.06 percent for its worst day since January 6. The index posted its first positive week in four last Friday.
The major indices extended recent losses, with the S&P 500 ending at 2,079, below its 100-day moving average of 2,084. Art Cashin, director of floor operations for UBS, said that level was one of support for the S&P, which faced resistance at 2,101.
"The technicals are deteriorating, and monetary conditions are deteriorating," said Bruce Bittles, chief investment strategist at RW Baird. He is watching to see whether or not the S&P 500 can hold above 2,070.