Wall St pares gains, Treasury yields turn higher ahead of Powell testimony

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(C) Reuters. FILE PHOTO: A pedestrian holding her mobile phone walks past electronic boards showing the Japan’s Nikkei average (top L) and the Japanese yen’s exchange rate against the euro (top R) outside a brokerage in Tokyo, Japan, February 9, 2016. REUTERS/Yuya Sh
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By Stephen Culp

NEW YORK (Reuters) -Wall Street stocks moved higher and Treasury yields eased as investors weighed China growth expectations and looked ahead to U.S. Federal Reserve Chairman Jerome Powell’s congressional testimony and crucial jobs data expected later in the week.

All three major U.S. stock indexes gained ground on Monday, appearing to extend last week’s rally, with lower Treasury yields boosting interest rate-sensitive megacap stocks.

A drop in U.S. factory orders followed modest growth estimates from China, boosting hopes that economic softening could translate to cooling inflation.

“The guidelines regarding economic growth out of China is being viewed as anti-inflationary,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“The slow-ish growth number, has resulted in the belief that if the economy is slowing that’s good for the belief that inflation is going down, which supports the belief we could be getting close to the end of the (Fed’s) interest rate hike cycle.”

On Tuesday and Wednesday, Fed Chairman Jerome Powell is due to deliver his semi-annual testimony before Congress, which will be closely parsed for any clues regarding the extent and duration of the central bank’s restrictive monetary policy aimed at curbing inflation.

Further down the road, the Labor Department’s much-anticipated February employment report is expected on Friday. Any signs of softening in the robust jobs market will be seen as a sign that the Fed’s hawkish tactics are having their desired effect.

The Dow Jones Industrial Average rose 122.6 points, or 0.37%, to 33,513.57, the S&P 500 gained 26.33 points, or 0.65%, to 4,071.97, and the Nasdaq Composite added 104.07 points, or 0.89%, to 11,793.07.

European shares reversed earlier gains and were last essentially unchanged after modest China growth estimates suggested a possible dampening of demand for European goods.

The pan-European STOXX 600 index lost 0.01% and MSCI’s gauge of stocks across the globe gained 0.68%.

Emerging market stocks rose 0.64%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.57% higher, while Japan’s Nikkei rose 1.11%.

Benchmark U.S. Treasury yields continued to ease as dampening demand supported hopes that the Fed is approaching the end of its rate-hike phase.

Benchmark 10-year notes last rose 5/32 in price to yield 3.9459%, from 3.963% late on Friday.

The 30-year bond last rose 14/32 in price to yield 3.8621%, from 3.887% late on Friday.

The dollar lost ground against a basket of world currencies ahead of Powell’s testimony and the jobs data.

The dollar index fell 0.29%, with the euro up 0.41% to $1.0678.

The Japanese yen strengthened 0.05% versus the greenback at 135.82 per dollar, while sterling was last trading at $1.2021, down 0.16% on the day.

Crude prices headed lower after China’s low-end growth projections fuelled fears of softening demand.

U.S. crude fell 0.53% to $79.26 per barrel and Brent was last at $85.17, down 0.77% on the day.

Gold consolidated recent gains, with the safe-haven metal inching lower in advance of Powell’s congressional testimony.

Spot gold dropped 0.2% to $1,851.53 an ounce.