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U.S. and Canadian stocks eked out a slight gain on Monday as investors engaged in some bargain hunting after last week’s losses, with jitters persisting about coming Federal Reserve interest rate hikes to tame stubbornly high inflation.

All three main U.S. stock indexes climbed more than 1% shortly after the opening bell, in part due to an easing in Treasury yields, and all three closed well off their session highs. Stocks steadily gave up gains throughout the session as U.S. Treasury yields moved off the day’s lows. The Canadian benchmark stock index closed just above its lowest point of the session, with the energy and materials sectors lending support.

“On the heels of the worst week of the year, first three-week losing streak for the S&P since December, a little green is a welcome change but again the reality is market participants are trying to square the circle with exactly how long the Fed will leave rates high, and is a 50 basis point hike really on the table at the next meeting,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska.

“It’s led to a good deal of uncertainty, and we have seen that when there is uncertainty there can be selling and volatility.”

Economists at UK-based banks Barclays and NatWest believe the Fed could ramp up the pace of its interest-rate rises in March with a half-point hike. Morgan Stanley said it no longer sees a cut by the Fed this year and expects a slower pace of 25 basis points when the central bank does begin lowering rates.

Fed funds futures show traders are pricing in a third 25 bps hikes this year and see rates peaking at 5.4% by September.

Fed Governor Philip Jefferson said he had “no illusion” inflation would quickly fall back to target and was committed to keeping restrictive monetary policy in place for as long as needed.

Data showed new orders for key U.S.-made capital goods increased more than expected in January while shipments of core goods rebounded, suggesting that business spending on equipment picked up.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 40.94 points, or 0.2%, at 20,260.13. It was the second straight day of modest gains for the index after posting on Thursday its lowest closing level in six weeks.

“Realistically this year we are going to be in for a volatile but hopefully just very much sideways market as opposed to down. We could end up with even more pressure if signs of a real recession started to settle in,” said Michael Sprung, president at Sprung Investment Management.

Canadian gross domestic product data, due on Tuesday, is expected to show that the economy grew at an annualized rate of 1.5% in the fourth quarter, slowing from 2.9% in the prior quarter.

The Toronto market’s energy sector rose 0.5% and the materials group, which includes precious and base metals miners and fertilizer companies, was up 1.3% as gold and copper prices rose.

Uni-Select shares surged 16.6% after LKQ Corp said it would buy the auto parts distributor for about C$2.8 billion.

Toronto-Dominion Bank agreed to pay US$1.205 billion to resolve litigation by former Allen Stanford investors who accused it and two other banks of contributing to the imprisoned financier’s massive Ponzi scheme. Its shares ended 0.6% lower.

On Wall Street, the Dow Jones Industrial Average rose 72.17 points, or 0.22%, to 32,889.09, the S&P 500 gained 12.2 points, or 0.31%, to 3,982.24 and the Nasdaq Composite added 72.04 points, or 0.63%, to 11,466.98.

Last week, the Dow Industrials fell by the biggest weekly percentage since September, and the S&P 500 and Nasdaq each had their biggest weekly percentage fall since December as economic data and comments from U.S. Federal Reserve officials heightened expectations the central bank will become more aggressive in raising interest rates.

Easing yields helped growth stocks rebound 0.63% while Tesla jumped 5.46% after the electric automaker said its plant in Brandenburg near Berlin was producing 4,000 cars a week, three weeks ahead of schedule according to a recent production plan reviewed by Reuters.

Seagen Inc surged 10.40% after the Wall Street Journal reported that Pfizer was in early talks to acquire the biotech firm. Pfizer’s shares dipped 2.32%.

U.S. railroad operator Union Pacific climbed 10.09% as Chief Executive Lance Fritz said he would step down. Hedge fund Soroban Capital Partners had called for his ouster.

Advancing issues outnumbered declining ones on the NYSE by a 1.69-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored advancers. The S&P 500 posted 4 new 52-week highs and 8 new lows; the Nasdaq Composite recorded 71 new highs and 102 new lows. Volume on U.S. exchanges was 9.89 billion shares, compared with the 10.72 billion average for the full session over the last 20 trading days.

Reuters, Globe staff

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