U.S. equities ended Tuesday's session mostly flat ahead of a key meeting between President Donald Trump and Chinese President Xi Jinping.
The Dow Jones industrial average gained about 39 points with Caterpillar contributing the most gains. The S&P 500 ended the day nearly breakeven, with real estate lagging and energy outperforming. The Nasdaq composite also ended roughly flat on the day.
Xi and Trump will meet Thursday and Friday at Mar-a-Lago. Last week, Trump said via Twitter the meeting would not be easy because "we can't have massive trade deficits … and job losses."
"While the fanatical optimism over Trump's proposed fiscal policies boosting U.S. growth has fueled the phenomenal stock market rally, the rising protectionist fears and concealed concerns over the pro-growth agenda falling short of expectations could catalyze an unexpected selloff," said Lukman Otunuga, research analyst at FXTM.
Trade — specifically fair U.S. trade — was one of the Trump's campaign pillars, as he promised the U.S. would renegotiate trade deals he considered to be unfair. The administration has already moved forward to renegotiate the North American Free Trade Agreement with Mexico and Canada.
"Investors have certainly reverted to caution and that aspect of the market is going to be around for a while," said Peter Cardillo, chief market economist at First Standard Financial. "There's a lot happening this quarter and the market has already priced in all the good news."
The U.S. trade deficit narrowed in February to $43.56 billion, the Commerce Department said. Economists expected it to have narrowed to $44.8 billion from a five-year high.
Equities traded higher earlier in the session after Trump hinted at bank deregulation. Trump said his administration will make it easier for banks to lend money, adding they will do a "massive haircut" to Dodd-Frank.
"There's a lot of nervousness built into the market, but Trump's comments that we're going to get rid of 'horrible' regulations is bullish for stocks," said Adam Sarhan, CEO of 50 Park Investments.
Treasury yields — which move opposite to prices — rebounded, with the benchmark trading near 2.35 percent after touching it lowest level since late February.
Other data released Tuesday included factory orders for February, which rose 1 percent, in line with expectations.
"There has been this undercurrent in the market about whether the economy is softening," said Quincy Krosby, market strategist at Prudential Financial. She also said investors are growing wary about the timing of Trump's proposed tax reforms.
"The president said he was going to move toward tax reform, but now he's talking about health care" again, she said.
The possibility of tax reform coming from the new administration has been at the crux of the stock market's rally since the U.S. election. That said, the three major indexes have remained in a tight range recently, as Treasurys regained ground.
10-year yield in 2017
Overseas, European equities traded mostly higher, with the Stoxx 600 index rising 0.2 percent. In Asia, stocks closed mostly lower, with the Nikkei 225 sliding 0.91 percent and the Kospi falling 0.3 percent.
The Dow Jones industrial average rose 39 points, or 0.19 percent, to 20,689, with Caterpillar leading advancers and Nike lagging.
The gained 1.3 points, or 0.06 percent, to 2,360, with financials leading four sectors lower and energy outperforming.
The Nasdaq gained nearly 4 points, or 0.07 percent, to 5,898.
About one stock declined for every advancer at the New York Stock Exchange, with an exchange volume of 801 million and a composite volume of 3.199 billion in afternoon trade.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.
On tap this week:
4:30 p.m. Fed Gov. Daniel Tarullo
8:15 a.m. ADP payrolls
9:45 a.m. Services PMI
10:00 a.m. ISM non-manufacturing
2:00 p.m. Fed minutes
8:30 a.m. Jobless claims
8:30 a.m. Employment report
10:00 a.m. Wholesale trade
12:15 p.m. New York Fed's Dudley speaks on financial regulation
3:00 p.m. Consumer credit