MCD McDonalds Corp

By Ellie Ismailidou and Victor Reklaitis, MarketWatch

Market caught between 'nervousness and cautiousness,' analysts say

U.S. stocks pared early gains Tuesday after Federal Reserve Chairwoman Janet Yellen said a victory for the "leave camp" in this week's U.K. referendum on membership in the European Union would pose a significant risk to the U.S. economy and global financial market stability.

In her testimony to the Senate Banking Committee (http://www.marketwatch.com/story/feds-yellen-says-brexit-could-have-significant-economic-repercussions-2016-06-21), Yellen reiterated the cautious approach to raising interest rates that the Federal Open Market Committee signaled last week when it stood pat on U.S. interest rates.

"Our cautious approach...remains appropriate," Yellen said Tuesday.

Stocks slid at the beginning of her testimony but later recovered some ground, building on the gains from a strong rally on Monday, which was aided by polls showing support swinging back toward the U.K. remaining a member of the European Union.

The S&P 500 was up 3 points, or 0.1%, at 2,086, led by telecom shares, which were up 0.6%. Four of the S&P's 10 sectors were in negative territory, with materials stocks leading the losses, in part weighed by a drop in crude-oil prices .

The Dow Jones Industrial Average added 22 points, or 0.1%, to 17,825, led by a 1.4% gain by Microsoft Corp.(MSFT) and a 0.8% rise by Nike Inc.(NKE). The blue-chip gauge was weighed down by American Express Co.(AXP) and McDonald's Corp.(MCD), both down 0.8%.

Meanwhile, the Nasdaq Composite was up 2 points, or less than 0.1%, at 4,839.

Even as stocks held on to modest gains, the overall tone of the market was "nervousness and cautiousness," said Phil Orlando, equity market strategist at Federated Investors.

Investors are "playing defense until [they] get some clarity" on a series of uncertainties looming over the market, most notably this Thursday's referendum on a potential Brexit, the U.S. elections and the Fed's next steps on monetary policy. That is partly why telecom, traditionally viewed as a safety play in times of market turmoil, was leading the market, Orlando added.

According to some analysts, Yellen's testimony on Tuesday did little to offer a clear view on when the central bank could hike U.S. rates again.

"Bottom line, there is nothing new here that is any different than the FOMC statement and press conference last week," said Peter Boockvar, chief market analyst at The Lindsey Group, in emailed comments.

Though policy makers "would love" to raise interest rates, Boockvar said, "they remain scared about the implications of higher rates on a fragile economy that remains very overindebted and [about] what higher rates will mean for asset prices."

Meanwhile, investors continued to closely follow the most recent polls from the U.K., the latest of which showed a split vote (http://www.marketwatch.com/story/pound-pressured-as-brexit-poll-shows-remain-lead-shrinking-2016-06-21), with a slight advantage for the "remain" vote, which got 45% of voters, while the "leave" vote got 44%.

While that's a statistical dead heat, it marked a narrowing of the "remain" camp's three percentage point lead seen in a poll published Saturday, leading the British pound to pull back from a five-month high reached overnight.

See:Soros says Brexit aftermath will be worse than time he broke Bank of England (http://www.marketwatch.com/story/soros-says-brexit-aftermath-will-be-worse-than-time-he-broke-the-bank-of-england-2016-06-20)

Other markets: European stocks advanced moderately after soaring Monday (http://www.marketwatch.com/story/european-stocks-leap-as-brexit-polls-show-shift-to-remain-camp-2016-06-20) as Brexit fears abated, while Asian markets closed mostly higher (http://www.marketwatch.com/story/nikkei-leads-asia-mostly-higher-as-bets-against-brexit-rise-2016-06-21).

July West Texas Intermediate crude traded lower (http://www.marketwatch.com/story/crude-oil-turns-lower-as-markets-refocus-on-supply-issues-2016-06-21) as market players turned their attention back to oversupply worries. The July contract expires at Tuesday's settlement, and August will become the front month for WTI. Gold futures (http://www.marketwatch.com/story/gold-extends-decline-ahead-of-yellen-testimony-brexit-vote-2016-06-21) tumbled by the ICE U.S. Dollar Index rose.

Read: The Brexit gold bet could be the smartest, or the dumbest, ever (http://www.marketwatch.com/story/the-brexit-gold-bet-could-be-the-smartest-or-the-dumbest-ever-2016-06-21)

Company news: Shares of home builder Lennar Corp.(LEN) gained 1.1% after the company posted better-than-expected quarterly earnings and revenue (http://www.marketwatch.com/story/lennar-posts-double-digit-gains-in-new-orders-2016-06-21).

Used-car seller CarMax Inc.(KMX) fell 4.8%, after the company's profit and sales lagged estimates (http://www.marketwatch.com/story/carmax-profit-and-sales-lag-estimates-2016-06-21).

Sabre Corp. shares (SABR) fell 1.3% after the travel software company said CEO Tom Klein plans to resign (http://www.marketwatch.com/story/sabre-corp-ceo-klein-to-resign-2016-06-20).

Facebook Inc.(FB) was up 1% after the tech company's executives reiterated Monday their interest in entering China (http://www.marketwatch.com/story/facebook-still-hopes-to-gain-entry-to-china-2016-06-20), while answering questions at the company's annual shareholder meeting.

(END) Dow Jones Newswires

June 21, 2016 10:52 ET (14:52 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.