U.S. stocks closed narrowly mixed as investors eyed recovery in bond yields and economic indicators that could shed light on the timing of a rate hike, amid continued Greece debt negotiations. (Tweet This)
"We're watching the 10-year yield as if it's a textbook, moving higher on economic data," said Quincy Krosby, market strategist at Prudential Financial.
The US 10-year Treasury note yield traded near 2.43 percent after briefly hitting 2.449 percent, the highest since Oct. 3, 2014.
"That's limiting our rally. We were a little oversold," said Peter Boockvar, chief market analyst at The Lindsey Group. "The action in the bond market has stopped the equity markets in its tracks (for the last 2 months)."
Equity gains were muted, with the Dow Jones industrial average remaining in negative territory for the year. It fell into the red on Monday.
The 3-year note yield traded near 1.10 percent after a $24 billion auction at a high yield of 1.125 percent. The German 10-year bund yield also climbed, holding near 0.95 percent in late trade.
"I think it's a continuation of U.S. Treasurys having co-movement with German bund yields and (better) U.S. data," said Eric Stein, co-director of global income at Eaton Vance Management.
The second-best performing sector in the S&P 500, financials advanced with the continued rally in yields as the sector is expected to benefit from higher interest rates. The S&P Regional Banking ETF (KRE) gained 1.08 percent. The SPDR S&P Bank ETF (KBE) hit its highest level since October 2008.
"The logic that's infused here is encouraging," said Art Hogan, chief market strategist at Wunderlich Securities. He noted how better economic data supported higher yields and gains in financials, while the rise in oil prices helped the energy sector.
Energy reversed early gains to close slightly lower despite crude settling up more than 3 percent to above $60 a barrel. raised crude oil production forecasts for 2015 while lowering those for 2016. Caterpillar was the second-best performing blue chip.
Apple closed 0.3 percent lower to weigh on the Nasdaq, which briefly fell below its 50-day moving average.
The Job Openings and Labor Turnover Survey showed 5.376 million job openings in April, the highest since December 2000.
Peter Cardillo, chief market economist at Rockwell Global Capital, said the jobs data confirms optimism in the labor market. "This is one more reason to believe yields are likely to move higher here and pressure equities."
Traders also noted investors selling government debt to hedge and make room for corporate bond issuance.
Wholesale inventories showed an increase of 0.4 percent in April, above expectations of a 0.2 percent rise.
U.S. small business confidence increased to a five-month high in May of 98.3, the best read since December, according to the National Federation of Independent Business.
Stocks struggled to hold slight gains in a mixed trading session Tuesday.
"We're a little bit still in 'good news may not necessarily be good for the market because it might bring the Fed into the picture,'" said Ben Pace, chief investment officer at HPM Partners. "I think in general the market's been handling the bump up in yields pretty well."
The S&P 500 held above a support level of 2,070 on Tuesday, after the index closed below its 100-day moving average on Monday.
"Two of our market internal measures are flashing green, suggesting the SPX will see an oversold bounce in the days ahead," BTIG Chief Techinical Strategist Katie Stockton said in a morning note. "Short-term oversold conditions are widespread."
The Dow transports remained in correction territory, closing 0.3 percent lower after attempting to reverse Monday's 2 percent decline. Airlines plunged, with Southwest Airlines and Alaska Air falling 4 and 3 percent, respectively.
Southwest reported an approximately 6 percent decline in May passenger revenue per available seat mile.
In the absence of major economic reports this week, analyst focus remained on Thursday's retail sales report ahead of the Federal Open Market Committee's meeting next week.
"The economy gives you nothing and there's no news. It gives extraneous data outsized importance," said James Meyer, chief investment officer at Tower Bridge Advisors. "It's a trading-dominated market, not a fundamentally-dominated market."
In the continuing Greek saga, the Wall Street Journal reported that Greece and its international creditors were discussing an extension of the cash-strapped country's bailout program through to March 2016.
A source told Reuters on Tuesday that Greek leaders would work to resolve differences with its creditors in order to finalize a deal on Wednesday.
German Finance Minister Wolfgang Schaeuble said in a Reuters report the two sides are still some distance apart on possible compromise.
The ATHEX Composite ended 0.6 percent higher while the German DAX fell further into correction territory as most European stocks closed lower.
Asian shares closed broadly lower, with Japan's blue-chip Nikkei down 1.76 percent as soft inflation data from China and jitters about higher U.S. interest rates weighed on sentiment.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded just below 15.
The U.S. dollar edged lower against major world currencies, with the euro above $1.12.
The closed up 0.87 points, or 0.04 percent, at 2,080.15, with consumer staples leading five sectors higher and telecommunications the greatest decliner.
The Nasdaq closed down 7.76 points, or 0.15 percent, at 5,013.87. The index has not closed below 5,000 since May 13.
About two stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 714 million and a composite volume of 3.0 billion in the close.
Crude oil futures for July delivery settled up $2.00, or 3.44 percent, at $60.14 a barrel on the New York Mercantile Exchange. Gold futures for August delivery settled up $4.00 at $1,177.60 an ounce.
Earlier, yogawear retailer Lululemon Athletica reported that its quarterly profit had more than doubled, thanks to a 6 percent rise in total comparable-store sales.
After the close, index giant MSCI announces its decision on whether or not to include Chinese A-shares in its emerging market index.
On tap this week:
Earnings: Box, Krispy Kreme, Men's Wearhouse
7 a.m.: Mortgage applications
10 a.m.: Quarterly services survey (Census Bureau)
10:30 a.m.: Oil and gasoline inventories
1 p.m.: $21 billion 10-year auction
2 p.m.: Federal budget
Earnings: Restoration Hardware, Korn Ferry, Casey's General, ExOne
8:30 a.m.: Initial jobless claims, retail sales, import prices
10 a.m.: Business inventories
10:30 a.m.: Natural gas inventories
1 p.m.: $13 billion 30-year bond auction
8:30 a.m.: PPI
10 a.m.: Consumer sentiment
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