Wall Street takes a pause, Treasury yields dip, focus on Fed

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NEW YORK, April 6 (Reuters) - U.S. stocks struggled to build on the prior session's record closing highs and Treasury yields edged lower on Tuesday as investors digested recent upbeat data and looked to the Federal Reserve for its economic outlook.

Cyclical and small-cap stocks, which stand to benefit most from a reopening economy, were outperforming the broader market.

This suggests market participants are optimistic about an economic rebound - and corporate earnings - fueled by vaccine distribution, stimulus and a robust infrastructure bill being debated in Washington.

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"We had a big push-through on Monday which built on the jobs report on Friday, and it's not uncommon for the market to take a breather after reaching new highs," said Joseph Sroka, chief investment officer at NovaPoint in Atlanta.

Indeed, Friday's blockbuster U.S. jobs report was followed on Monday by PMI data showing the services sector's fastest expansion on record. This was followed by a PMI report from China that confirmed activity in its services sector is accelerating. read more

The market can also take a pause as earnings season draws near, and first-quarter results will be significant, Sroka noted, adding "this is the quarter coming up when we compare COVID year-over-year."

The U.S. Federal Reserve is expected to release the minutes from its last monetary policy meeting on Wednesday, and market participants will parse it for any changes to the central bank's economic outlook.

"(Investors are) going to be looking for little change, a continued supportive and accommodative Fed that sees little risk from inflation and ideally an improved outlook on economic growth," said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut.

The Dow Jones Industrial Average (.DJI) fell 68.19 points, or 0.2%, to 33,459, the S&P 500 (.SPX) gained 1.21 points, or 0.03%, to 4,079.12 and the Nasdaq Composite (.IXIC) added 27.33 points, or 0.2%, to 13,732.93.

European stocks closed at a record high, having recovered all pandemic-related losses as investors bet on a speedy global economic recovery.

The pan-European STOXX 600 index (.STOXX) rose 0.70% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) gained 0.29%.

Emerging market stocks rose 0.71%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 0.76% higher, while Japan's Nikkei (.N225) lost 1.30%.

U.S. Treasury yields dipped, with 5-year notes leading the decline, on investor views that market pricing based on an earlier-than-expected tightening by the Fed was too aggressive.

Benchmark 10-year notes last rose 18/32 in price to yield 1.656%, from 1.72% late on Monday.

The 30-year bond last rose 31/32 in price to yield 2.3145%, from 2.363% late on Monday.

The dollar slipped to a two-week low against a basket of world currencies, with traders taking advantage of its strong March performance as dropping Treasury yields pressured the greenback. read more

The dollar index fell 0.73%, with the euro up 0.47% to $1.1867.

The Japanese yen strengthened 0.30% versus the greenback at 109.87 per dollar, while Sterling was last trading at $1.3821, down 0.55% on the day.

Crude oil prices partially rebounded from the previous session's losses, lifted by strong data from the United States and China. read more

U.S. crude gained 1.16% to settle at $59.33 per barrel, and Brent settled at $62.74 per barrel, up 0.95% on the day.

Gold prices touched their highest level in more than a week, benefiting from the soft dollar and lower Treasury yields.

Spot gold added 0.8% to $1,742.66 an ounce.

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Reporting by Stephen Culp; editing by Jonathan Oatis

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