U.S. stocks closed lower Monday in low volume trade as investors awaited further indications on the timing of the Federal Reserve's next interest rate hike.
"This is all pretty much sideways. I think the market's just looking for the next cue for the Fed in data," said John Caruso, senior market strategist at RJO Futures.
Durable goods and the second revision to first-quarter GDP are all due later in the week, in addition to several speeches from Fed policymakers. Earlier Monday, the flash Markit manufacturing PMI came in at 50.5 in May, down from 50.8 in April.
Read MoreFed has a surprise in store
The major averages gave up gains to close mildly lower, with the Dow Jones industrial average closing about 7 points lower after earlier rising nearly 50 points. That was the second-smallest spread from high to low of the year — the tightest range since mid-April. (Tweet This)
"I think the market's got the message about June," said Lee Ferridge, head of macro strategy, North America, State Street Global Markets.
"Since the April meeting there's been a consistent message," he said. "I think we need the data to justify (a June hike). The other thing is to hear Yellen justify it."
Fed Chair Janet Yellen is due to speak Friday afternoon, and again on June 6. Philadelphia Fed President Patrick Harker, an alternate member, is scheduled to speak early Monday evening.
"I think the real focus is on the Fed. With the economic numbers continuing to improve I think the chances of a Fed rate hike continue to grow," said Peter Cardillo, chief market economist at First Standard Financial.
"The market is probably just going to stay within a tight trading range here," he said.
In a seventh day of alternating losses and gains, the S&P 500 underperformed with utilities closing nearly 1 percent lower to lead 8 declining sectors. Materials closed more than 1 percent higher, helped by gains of 4.4 percent in shares of CF Industries and Monsanto.
German drug maker Bayer bid $122 per share in cash for seeds and chemicals maker Monsanto. The deal is worth a total of $62 billion, including assumed debt, and a more than 20 percent premium over Monsanto's close Friday of $101.52 a share.
On the other hand, U.S. fertilizer maker CF Industries and Dutch rival OCI NV ended their merger agreement on Monday, following the U.S. Treasury's steps to curb tax avoiding inversion deals, Reuters said.
Apple closed off session highs but still more than 1 percent higher after Taiwan's Economic Daily reported Monday that Apple asked its suppliers to make more iPhone 7s than expected. The VanEck Vectors Semiconductor ETF (SMH) closed 0.65 percent higher, led by gains in Micron Technology, Qorvo and Skyworks Solutions.
The gains were offset by declines in shares of Microsoft, Facebook, Amazon.com and Alphabet, which weighed on the Nasdaq composite in the close. The iShares Nasdaq Biotechnology ETF (IBB) closed off session highs, up 0.7 percent.
Earlier Monday, St. Louis Fed President James Bullard, a voting member of the Federal Open Market Committee, said a tight labor market may put upward pressure on U.S. inflation, supporting the case for higher rates.
Separately, non-voting member San Francisco Fed President John Williams said Monday morning that there could be two or three rate hikes this year, and maybe three or four next year.
Treasury yields held mixed, with the higher around 0.90 percent and the 10-year yield lower near 1.83 percent.
Over the weekend, voting member Boston Fed President Eric Rosengren told the Financial Times that "most of the conditions that were laid out in the minutes as of right now seem to be … on the verge of broadly being met."
His comments followed last Wednesday's Fed meeting minutes that indicated a rate hike was possible as soon as June if the data improves, and remarks Thursday from New York Fed President William Dudley that June is definitely a live meeting.
"I think they're testing the waters here to see what happens with the dollar," said Dan Veru, chief investment officer at Palisade Capital Management. He expects the earliest rate hike to come in the fall.
The U.S. dollar index was mildly lower, with the euro near $1.122 and the yen around 109.3 yen against the greenback.
"As long as the FX market stays calm, it's not going to be an issue (for stocks). Same thing with crude," said Jeremy Klein, chief market strategist at FBN Securities.
U.S. crude oil futures for July delivery settled down 33 cents, or 0.7 percent, at $48.08 a barrel. Oil came under pressure as Iran vowed to ramp up output, but pared losses after data showing a stockpile drawdown at a major U.S. delivery hub, Reuters said.
In other corporate news, Anthem and Cigna are privately bickering over details of their planned $48 billion merger, according to a Wall Street Journal report citing a series of letters. The news comes as the two health insurers work to obtain regulatory approval for their deal.
Shares of Cigna closed 3.9 percent lower, or more than 7 percent lower over the last 12 months. Anthem closed about 1.9 percent lower and is off nearly 19 percent over the last 12 months.
European stocks closed slightly lower. Asian stocks closed mixed, with the Shanghai composite 0.6 percent higher and the Nikkei 225 about half a percent lower.
The U.S. issued a fresh warning to Japan against competitive currency devaluation on Saturday, exposing a rift on exchange-rate policy that overshadowed a G-7 finance leaders gathering hosted by the Asian nation.
The closed down 4.28 points, or 0.21 percent, at 2,048.04, with utilities leading eight sectors lower and materials and consumer staples the only gainers.
The Nasdaq composite closed down 3.78 points, or 0.08 percent, at 4,765.78.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, came off highs to hold below 16.
Decliners were a touch ahead of advancers on the New York Stock Exchange, with an exchange volume of 804 million and a composite volume of nearly 3.0 billion in the close.
Gold futures for June delivery settled down $1.40 at $1,251.50 an ounce.
—CNBC's Peter Schacknow and Reuters contributed to this report.
On tap this week:
6:30 p.m. Philadelphia Fed President Patrick Harker
Earnings: AutoZone, Best Buy, Toll Brothers, Hewlett Packard Enterprise, Intuit
10 a.m. New home sales
1 p.m. $26 billion two-year note auction
Earnings: Tiffany, Express, Bank of Montreal, National Bank of Greece, HP, NetApp, PVH, Guess, Lionsgate, Popeyes Louisiana Kitchen, Pure Storage
8:30 a.m. International trade
9 a.m. Philadelphia Fed President Patrick Harker
9 a.m. FHFA HPI
9:45 a.m. Markit services PMI
11:40 a.m. Minneapolis Fed President Neel Kashkari
1 p.m. $34 billion five-year note auction
1:30 a.m. Dallas Fed President Rob Kaplan
Earnings: Dollar General, Signet Jewelers, Abercrombie & Fitch, Chico's, Toronto-Dominion Bank, Palo Alto Networks, GameStop, Splunk
6:10 a.m. St. Louis Fed President James Bullard in Singapore
8:30 a.m. Initial claims
8:30 a.m. Durable goods
10 a.m. Pending home sales
12:15 p.m. Fed Gov. Jerome Powell
1 p.m. $28 billion seven-year note auction
Earnings: JA Solar
8:30 a.m. Real GDP Q1 (second)
10 a.m. Consumer sentiment
1:15 p.m. Fed Chair Janet Yellen receives award, in Q&A at Harvard
*Planner subject to change.
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