(Bloomberg) — Stocks saw their gains fizzle out after some strong economic reports raised questions on whether the Federal Reserve will be able to decelerate its pace of monetary tightening soon.

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At a time when good economic news is considered bad news when it comes to policy conjectures, the S&P 500 retreated as a gauge of manufacturing topped estimates while a report showed a still solid labor market on the eve of the central bank decision. Treasury 10-year yields were almost flat following an earlier plunge of as much as 13 basis points.

To Matt Maley at Miller Tabak + Co., a lot of what will take place in markets over the next few weeks will hinge upon Powell’s signals on Wednesday as well as the subsequent Fedspeak. He noted that a throttling back of the size of hikes “is not something that can be considered a ‘pause’… much less a ‘pivot’.”

“We believe that they merely want to do what they were always going to do: turn the rate hikes into smaller ones,” Maley added. “However, that does not mean they’ll be overly dovish in their rhetoric.”

Derivatives cues imply the pace of the ongoing rebound in the S&P 500 is likely to dwindle after the Fed’s rate decision, according to Nomura Holdings Inc.

The comparatively low volatility ahead of Wednesday’s Fed meeting shows that the options market is “increasingly optimistic” about the event, quantitative strategist Yoshitaka Suda wrote. A shift in options hedging by traders could also weigh on the market, he added.

Earlier in the day, speculation that China is preparing to gradually exit the stringent Covid Zero stance helped bolster sentiment. A gauge of the nation’s stocks listed in Hong Kong surged almost 7% intraday. Shares pared gains after Chinese Foreign Ministry spokesman Zhao Lijian said he’s “not aware” of a committee on ending the policy.

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In corporate news, Uber Technologies Inc. posted revenue that beat expectations as gains in ridership assuaged investor concerns that rising inflation would damp consumer spending. Pfizer Inc. increased its forecast for adjusted earnings for the year as sales of its Covid-19 vaccine were stronger than expected. Eli Lilly & Co. cut its 2022 profit outlook due to the stronger US dollar and one-time charges.

Key events this week:

• EIA crude oil inventory report, Wednesday

• Federal Reserve rate decision, Wednesday

• US MBA mortgage applications, ADP employment, Wednesday

• Bank of England rate decision, Thursday

• US factory orders, durable goods, trade, initial jobless claims, ISM services index, Thursday

• ECB President Christine Lagarde speaks, Thursday

• US nonfarm payrolls, unemployment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 10:15 a.m. New York time

• The Nasdaq 100 fell 0.4%

• The Dow Jones Industrial Average fell 0.2%

• The Stoxx Europe 600 rose 0.8%

• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%

• The euro rose 0.2% to $0.9904

• The British pound rose 0.3% to $1.1498

• The Japanese yen rose 0.5% to 147.96 per dollar

Cryptocurrencies

• Bitcoin was little changed at $20,389.73

• Ether rose 0.4% to $1,570.6

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.03%

• Germany’s 10-year yield declined one basis point to 2.13%

• Britain’s 10-year yield advanced two basis points to 3.53%

Commodities

• West Texas Intermediate crude rose 1.9% to $88.17 a barrel

• Gold futures rose 0.4% to $1,647.70 an ounce

–With assistance from Vildana Hajric.

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