Stocks rise slightly as Treasury yields touch 4-month high, oil prices cool

NEW YORK/LONDON - A global equity index rose slightly on Monday while Wall Street stocks were muted as U.S. bond yields hit their highest levels since late November and investor optimism about the outlook for Federal Reserve interest rate cuts waned.

The dollar index slid as investors focused on U.S. inflation data due later this week, while the yen dipped to near 34-year lows, with traders remaining alert for any potential action from Japanese authorities to support the weakening currency..

Oil prices fell on Monday on a renewed push for a Middle East ceasefire. However, a Hamas official said no progress had been made on Gaza ceasefire talks in Cairo while Israeli Prime Minister Benjamin Netanyahu said a date was set for an invasion of Rafah, the enclave's last refuge for displaced Palestinians.

Stock markets had made a slow start to the second quarter as the risk of a broader conflict in the Middle East had pushed up oil prices to their highest level since October.

Also, a much stronger-than-expected U.S. jobs report on Friday after solid manufacturing data caused investors to temper bets on a Federal Reserve rate cut in June.

However, Chicago Federal Reserve President Austan Goolsbee said on Monday that the Fed must weigh how much longer it can maintain its current interest rate stance without it damaging the economy.

"People are catching their breath from the underwhelming performance last week. Even with the bounce in markets on Friday, there was more damage done than constructive price action to markets overall," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Also on investors' minds was the upcoming earnings season, which kicks off on Friday with reports from some of the largest U.S. banks, according to Wedbush's James.

"There's elevated anxiety going into the start of earnings season for those in the bullish camp. We need to see some decent prints and raised guidance," said James.

On Wall Street, the Dow Jones Industrial Average .DJI fell 11.24 points, or 0.03%, to 38,892.80, the S&P 500 .SPX lost 1.95 points, or 0.04%, to 5,202.39 and the Nasdaq Composite .IXIC gained 5.44 points, or 0.03%, to 16,253.96.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 1.60 points, or 0.21%, to 778.11.Earlier in Europe the STOXX 600 .STOXX index had closed up 0.47%.

Along with earnings, investor focus this week was also on the U.S. consumer price index (CPI) report due out on Wednesday.

And while millions of people in North America looked upward to witness a rare solar eclipse, trading volume on Wall Street was quiet with about 9.55 billion shares changing hands compared with the 11.53 billion average for the last 20 sessions.

"It's probably a better day to watch the eclipse than it is to trade stocks," said Jay Hatfield, CEO and portfolio manager at InfraCap in New York. "I don't think anybody wants to really reposition one way or the other ahead of CPI."

U.S. Treasury yields moved higher on Monday as fixed income investors lowered their expectations for how deeply the Fed will be able to cut interest rates this year after the jobs report.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 4.6 basis points to 4.424%, from 4.378% late on Friday while the 30-year bond US30YT=RR yield rose 2.3 basis points to 4.5548%.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, rose 6.3 basis points to 4.7949%, from 4.732% late on Friday.

In currencies, the dollar index =USD fell 0.2% at 104.15, with the euro EUR= up 0.2% at $1.0857. Against the Japanese yen JPY=, the dollar strengthened 0.16% at 151.85.

In energy markets, oil settled above its session lows but still lost ground for the day. U.S. crude CLc1 settled down 0.55% at $86.43 a barrel while Brent LCOc1 settled at $90.38 per barrel, down 0.87% on the day.

Meanwhile, gold prices hit a record high for a seventh straight session on Monday, fueled by central bank purchases and geopolitical tensions, while strong economic data failed to dull bullion's allure. — Reuters