Wall Street is struggling to gain traction in the face of bond market jitters, leaving the short-term outlook murky for stocks, analysts say.
The past week saw the major indexes gyrate with no clear direction. The blue-chip Dow Jones Industrial Average gained 0.5 percent to 11,076.34, while the broad-market Standard & Poor's 500 index lost 0.43 percent to 1,281.58.
The tech-heavy NASDAQ composite index slipped 1.76 percent for the week to 2,262.04.
The biggest concerns for Wall Street were the jitters on the bond market, in response to indications from central banks around the world -- most recently in Japan -- that they will be tightening monetary policies.
Although the Bank of Japan retained its zero-interest rate policy, it indicated it would ending its ultra-loose policy of flooding the market with liquidity.
This follows hints from the European Central Bank about more rate hikes and suggestions that the US Federal Reserve may be lifting rates beyond most expectations.
More rate hikes would spell the end of easy-credit terms for investors, hedge funds and others around the world, posing a risk for financial markets.
With the moves by the Bank of Japan and the ECB, "the last two engineers have finally jumped off the global liquidity gravy train," said Michael Gregory, senior economist at BMO Nesbitt Burns.
"The world is becoming a less accommodative place for leveraged asset buyers, be they hedge funds or homeowners," he said.
"The fallout from rising bond yields will leave few markets or sectors untouched. While global pension fund managers will see the burden of their future liabilities decline, equity markets will have to deal with a more challenging valuation environment," he added.
The market's best day however came on Friday, in a strong rally generated by a US report showing better-than-expected US payrolls growth of 243,000. Analysts said this signals solid economic momentum even if it that also means higher interest rates.
John Silvia, chief economist at Wachovia Securities, said the report suggests consumer spending, a key to the US economy, can be maintained.
"Job gains combined with wage improvements suggest personal income growth will sustain consumer spending in the period ahead," he said. "The gains here are again widespread and further suggest the economy has the forward momentum to continue to grow" despite higher interest rates."
Bob Dickey at RBC Dain Rauscher said the stock market is showing some resilience.
"It's hard to believe that the market could rally in the face of all the bad news of higher rates, high oil and gas prices, international strife of all kinds, and very low popularity readings of our elected officials. But on the other hand, if investors haven't sold by now, maybe there just isn't all that much weakly-held stock out there right now," Dickey said.
The bond market was sharply lower over the past week as interest rates jumped.
The yield on the 10-year US Treasury bond rose to 4.755 percent from 4.684 percent a week earlier and that on the 30-year bond rose to 4.742 percent from 4.660 percent. Bond yields and prices move in opposite directions.