NEW YORK/LONDON, March 28 (Reuters) - The S&P 500 (.SPX) inched lower on Tuesday after the previous session's gains while Treasury yields rose with gold with investors still wary of banks and the economy in the absence of strong positive catalysts.
Stocks had rallied on Monday when investors were relieved by no new bank failures in evidence over the weekend and they were reassured by the sale of assets in collapsed technology industry lender Silicon Valley Bank.
With the bank sector in turmoil for weeks after the unexpected failure of two U.S. banks and the rescue of Credit Suisse (CSGN.S) in Europe, lawmakers demanded details from top U.S. bank regulators on Tuesday about regional lenders Silicon Valley Bank and Signature Bank during testimony in Congress.
While U.S. consumer confidence unexpectedly increased in March, Americans were becoming anxious about the labor market, according to a survey released on Tuesday. And the U.S. trade deficit in goods widened modestly in February as exports fell, potentially creating a drag on first-quarter economic growth.
But Tuesday's crop of economic data did little to adjust weak investor sentiment, according to Brad McMillan, chief investment officer at Commonwealth Financial Network.
"We're playing wait-and-see until we get some real news we can react to," said McMillan, adding that in the meantime investors were still nervous about banks and the economy.
"Everybody's waiting for a recession but the economic news continues to be pretty good. It's hard for the market to bounce when everybody's looking for bad news even if the bad news isn't there."
The Dow Jones Industrial Average (.DJI) rose 57.09 points, or 0.18%, to 32,489.17, the S&P 500 (.SPX) lost 5.89 points, or 0.15%, to 3,971.64 and the Nasdaq Composite (.IXIC) dropped 71.98 points, or 0.61%, to 11,696.86.
The pan-European STOXX 600 index (.STOXX) lost 0.03% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) gained 0.20%.
Emerging market stocks (.MSCIEF) rose 0.77%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 0.81% higher, while Japan's Nikkei (.N225) rose 0.15%.
In U.S. Treasuries benchmark 10-year yields edged higher on Tuesday as investors showed cautious optimism that stress in the banking system could be contained as they waited for a sale of five-year notes.
Benchmark 10-year notes were up 2.1 basis points at 3.549%, from 3.528% on Monday. The 30-year bond was last up 0.3 basis point to yield 3.7631%. The 2-year note yield was last was up 6.4 basis points at 4.029%.
The U.S. dollar was falling against a basket of currencies for a second straight day as easing worries about the banking system revived investors' appetite for riskier currencies.
The dollar index fell 0.282%, with the euro up 0.4% at $1.0839. The Japanese yen strengthened 0.47% versus the greenback at 130.91 per dollar, while Sterling was last trading at $1.2342, up 0.47% on the day.
The Mexican peso gained 0.56% versus the U.S. dollar at 18.25. The Canadian dollar rose 0.29% versus the greenback at 1.36 per dollar.
Federal Reserve Governor Philip Jefferson said on Monday that stress among small banks could hit small businesses hardest.
But analysts at Goldman Sachs said tighter credit conditions stemming from the Fed's efforts to temper inflation will provide a headwind to the economy but will not derail it.
"We do not expect this to be a hurricane that pushes the economy into recession and forces aggressive Fed easing," they said in a note on Tuesday.
Crude prices rose on Tuesday, extending sharp gains from the previous session due to supply disruption risks from Iraqi Kurdistan. Crude prices rose more than $3 on Monday on supply concerns after export halts from Iraq's Kurdistan region.
U.S. crude recently rose 1.02% to $73.55 per barrel and Brent was at $78.92, up 1.02% on the day.
Gold prices rose after two sessions of declines with support from a weaker U.S. dollar even as bond yields rose and bank sector fears appeared to recede.
Spot gold added 0.6% to $1,967.73 an ounce.
(This story has been corrected to remove erroneous reference to gold rising for 2 consecutive days, in paragraph 1)
