Apple, Tesla lifts stocks to higher close in light pre-holiday trading

Investors were waiting for U.S. labor market data due later this week for clues about the interest rate outlook.

"The most important driver of earnings is GDP and the economy still looks very healthy to us," said Ben Snider, a senior equity strategist at Goldman Sachs Research.

"We're forecasting economic growth this year in the U.S. - over trend - above 2%, so underlying revenue growth still looks strong. On top of GDP, profit margins seem to be recovering after a pretty rough couple of years."

A quarter of earnings on the S&P 500 index comes from the largest technology stocks, which also look strong, he said.

Wells Fargo added Tesla stock to its third-quarter "Tactical Ideas list" yet kept its "underweight" rating and expressed concerns about slowing growth in deliveries and a risk of price cuts.

Real estate stocks S&P 500 Real Estate , also seen as a bond proxy, dropped almost 1%, as U.S. Treasury yields jumped to multi-week highs. But higher yields often boost bank profits so the S&P 500 banks index (.SPXBK) jumped to its highest in more than a month.

Trading volumes were thin, with the equity market set to shut on Thursday for U.S. Independence Day. Volume on U.S. exchanges was 10.59 billion shares, down from the 11.89 billion average for the full session over the last 20 trading days. Thin volumes were expected all week.

Manufacturing PMI data from the Institute for Supply Management showed manufacturing contracted for a third straight month in June, while prices paid dropped to a six-month low in an encouraging sign for the U.S. Federal Reserve's battle with inflation.

Traders have stuck to their bets of around two interest rate cuts this year, starting from September, LSEG FedWatch showed.

Also scheduled for the week are JOLTS job openings data on Tuesday, and ADP employment, factory orders, ISM services PMI data and minutes of the Fed's latest policy meeting on Wednesday. Non-farm payroll data are due on Friday.

New York Fed President John Williams noted he still believes price pressures are moderating back to the 2% target.

Declining issues outnumbered advancers by a 1.87-to-1 ratio on the NYSE. There were 162 new highs and 99 new lows on the NYSE.

The S&P 500 posted 13 new 52-week highs and 4 new lows while the Nasdaq Composite recorded 45 new highs and 157 new lows. On Friday, the Nasdaq and the S&P 500 notched their third straight quarterly gains, with the tech-heavy index doing so for the first time in three years. However, the Dow's quarterly decline raised concerns about the need for greater diversification in investor holdings.