Treasuries were mixed after a $42 billion auction of seven-year notes and a heavy slate of new corporate debt. Eight companies are considering selling U.S. investment-grade bonds Tuesday, according to an informal survey of underwriters. The offerings come a day after 18 companies tapped the market, bringing February issuance to a record.

Rates have climbed as Treasury investors contend with an erosion in expectations for how much the Federal Reserve will lower interest rates this year — a policy shift that would likely fuel a bond rally — and an onslaught of new corporate issuance that has given yield-seeking investors ample alternatives. 

"We continue to recommend investors act soon to lock in currently attractive bond yields," said Solita Marcelli at UBS Global Wealth Management. "We particularly like the five-year duration segment of quality bonds, as this part of the yield curve offers the best combination of high yields, stability, and sensitivity to falling interest rate expectations."

Treasury 10-year yields were little changed at 4.29%. The S&P 500 hovered near 5,060. Megacaps edged lower. Chevron Corp. and Hess Corp. slipped after Exxon Mobil Corp. said it's considering a move that could break up the companies' $53 billion merger and increase its share of Guyana's giant offshore oil reserves. Macy's Inc. climbed on plans to close almost a third of its namesake U.S. locations. A bullish outlook from Norwegian Cruise Line Holdings Ltd. spurred an industry rally. Bitcoin hovered around $57,000.

Traders refrained from making big bets ahead of Thursday's inflation data and a parade of central bank speakers. Fed Governor Michelle Bowman repeated her expectation that inflation will continue to decline further with interest rates held at their current level — but said it's too soon to begin rate cuts.

Officials have stressed they're in no rush to lower borrowing costs and will only do so once they're confident that inflation is retreating on a sustained basis. The personal consumption expenditures price index will likely validate that stance and possibly further diminish market expectations for a rate cut in the coming months.

"Because market expectations for a Fed cut this quarter have already reset, we don't anticipate strong volatility resulting from this data print," said Lauren Goodwin at New York Life Investments. "However, since market activity is likely to be heavily driven by interest rate expectations for the foreseeable future, we are watching closely for any surprises."

To Yung-Yu Ma at BMO Wealth Management, while the equity market seems due for a pause and a consolidation of its recent gains, key PCE inflation data on Thursday could be the next short-term catalyst for the market, as investors are looking for additional data to help confirm if inflation is truly re-accelerating.

"This is a 'teflon' stock market, which has shown a remarkable ability to shake off bad news and focus on what is positive," he noted. "Nothing bad has been able to stick to the markets for long – such as upside surprises in inflation data and delayed Fed rate cut expectations."

Barclays Plc was the latest bank to ramp up its year-end target on the S&P 500 — following increases from Goldman Sachs Group Inc., UBS Group AG, and Piper Sandler & Co. Strategists led by Venu Krishna boost forecast on US equity benchmark to 5,300 from 4,800.

"The U.S. economy continues to defy rates headwinds in 2024, much as mega​-​cap tech continues to defy even the most bullish earnings targets," they wrote.

Indeed, the "Magnificent Seven" group of tech megacaps saw its average earnings per share rise 55% in the fourth quarter compared to a year ago, according to data compiled by Bloomberg. Most of that group has helped power the Nasdaq 100 to a record high and its fourth consecutive monthly gain.

S&P 500 companies are headed for their highest quarterly earnings beat rate since the fourth quarter of 2021, according to data compiled by Bloomberg Intelligence strategists Gina Martin Adams and Wendy Soong. With more than 90% of S&P 500 companies having reported results, the gauge is on track for 7.7% year-on-year earnings per share growth, blowing past the pre-season forecast for 1.2%.

The stock market is responding, with the S&P 500 last week logging its 13th closing record of 2024, while the Dow Jones Industrial Average surpassed 39,000 for the first time. It's telling that the milestones all occurred while investors speculated that the Fed will be in no rush to cut interest rates after a batch of hot inflation news and pushback from officials.

To Kristina Hooper at Invesco, there is a perception that the U.S. stock market is trading at very lofty valuations. While it is true that the S&P 500 is trading at an above-average price-to-earnings ratio, much of that is driven by just a few stocks, she noted.

"The good news is that this narrow group of stocks — dubbed the "Magnificent Seven" — have been meeting the high expectations set for them," Hooper said. "Given their collective performance, valuations for the Magnificent Seven remain elevated compared to the broader U.S. equity market, but their earnings growth is expected to be almost five times that of the remaining 493 stocks in the S&P 500 over the next years,"

"This isn't 'irrational exuberance' — it's more like 'rational exuberance,' she concluded.

Matt Maley at Miller Tabak has a word of caution.

He says that after the big run in equities, the market is showing signs of froth. While that doesn't mean stocks will roll over in a big way soon, it is a reason for investor to avoid being too complacent.

"The stock market could easily continue to advance," Maley noted. "However, we believe that it's important for investors to remain nimble and to have a plan in place — in advance — for what they will do if some sort of significant 'surprise' creates a big increase in volatility at some point in the coming months."