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By Herbert Lash
NEW YORK (Reuters) - U.S. stocks closed mixed on Monday as downbeat Chinese and New York state data kindled recession fears, but the 10-year Treasury note's yield staying firmly under 3% spurred hopes the Federal Reserve will prudently hike interest rate hikes.
Chinese retail and factory activity fell sharply in April as COVID-19 lockdowns severely disrupted supply chains while New York's factory output slumped in May for the third time this year amid a collapse in new orders and shipments.
The Chinese data cast a long shadow over the world's second-largest economy while the steep drop in New York manufacturing could be an early signal of the impact of the Fed's plans to tighten monetary policy to tackle rapidly rising inflation.
MSCI's gauge of stocks across the globe closed down 0.21% and Treasury yields fell, with the benchmark 10-year note down 4.7 basis points at 2.886% after hitting 3.2% a week ago. Some see the decline since then as a sign the market has priced in all or most of the Fed's expected rate hikes.
"The most important thing happening in the market right now is the fact that the 10-year yield has held below 3%," said Tom Hayes, chairman and managing member of Great Hill Capital LLC.
Five Fed officials slated to speak on Tuesday also is key considering the market's recent tumble, he said.
"Usually when you're near a low in the market and you got five Fed speakers, they're generally not there to talk the market down," Hayes said.
With earnings growth turning positive and a more reasonable price-to-earnings ratio, stocks are more attractive, he said.
The pan-European STOXX 600 index ended flat, up 0.04%, with declining German and French indices closing lower and Britain's FTSE 100 rising on the day.
Emerging market stocks rose 0.30% and on Wall Street, the Dow Jones Industrial Average rose 0.08%, but the S&P 500 lost 0.39% and the Nasdaq Composite dropped 1.2%.
China remains an issue, as does Europe, especially eastern Europe and Putin's threats toward Finnish and Swedish plans to join NATO, said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder.
"When you see big up days, I'm not surprised to see some profit-taking on the subsequent day," Ghriskey said, referring to Friday's rally on Wall Street. "We're simply seeing a reaction to recent strength. There are various factors driving the market, but in general, none of them are very positive."
Goldman Sachs raised its 2022 earnings per share growth forecast to 8% from more than 5%, but cut its year-end target for the S&P 500 to 4,300 from 4,700 on interest rate and growth fears.