MARKET SNAPSHOT: U.S. Stocks Fluctuate As Traders Eye Yields

By William L. Watts, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks reversed a small early decline to post equally modest gains Monday, as investors kept an eye on rising Treasury yields and weighed expectations the Federal Reserve will move soon to curtail the monetary stimulus it provides to the economy.

The Dow Jones Industrial Average (DJI) rose 5.34 points, or less than 0.1%, to 15,086.81, while the S&P 500 (SPX) gained 1.92 points, or 0.1%, to 1657.75. The Nasdaq Composite (RIXF) rose 17.39 points, or 0.5%, to 3,620.11.

"Wall Street hates uncertainty, and right now discerning the appropriate yield on the 10-year Treasury note is resulting in an awful lot of uncertainty," said Sam Stovall, chief equity strategist at S&P Capital IQ, in a note.

Treasury yields continued to push higher, exploring territory last seen in July 2011. The yield on the 10-year Treasury note (10_YEAR) rose 4 basis points, or 0.04 percentage point, to 2.87%.

Rising yields can undercut stocks due to fears that higher borrowing costs will slow economic activity. Yields have been on the rise since this spring, when Federal Reserve Chairman Ben Bernanke indicated the Fed could begin scaling back its $85 billion-a-month bond-buying plan later this year.

While stocks recovered from a June pullback fueled by concerns over the Fed's plans, markets stumbled last week as the 10-year yield rose to two-year highs.

With no major economic data due on Monday, investors are looking ahead to the release Wednesday of the minutes of the latest meeting of Fed policy makers, as well as the Kansas City Federal Reserve's annual retreat in Jackson Hole, Wyo., at the end of the week. Bernanke, however, won't attend the Jackson Hole conference, likely undercutting its influence.

"With U.S. private-sector investors barely buying any longer-dated Treasurys in recent years, the market is nervous about how high yields have to be to lure them in," wrote Kit Juckes, currency strategist at Société Générale in London. "On a day with no data in a week with Jackson Hole as the main focus, nerves are jangling and a yield overshoot possible."

Shares of Intel Corp. (INTC) rose nearly 3%, making it the Dow's biggest gainer. The rise came after Piper Jaffray analyst Auguste Gus Richard raised the stocks' rating to neutral from underweight, citing potential gains from the corporate market and the coming release of Windows 8.1.

J.P. Morgan Chase & Co. (JPM) fell 1.5%, making it the largest loser in the Dow. News reports said U.S. regulators are looking into the bank's hiring practices in China.

Shares of Cliffs Natural Resources Inc. (CLF) dropped 3.9%, making it the biggest loser in the S&P 500. The decline comes after a nearly 4% drop on Friday. Dollar General Corp. (DG) topped S&P 500 gainers with a 2.6% rise.

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