US stocks closed lower Monday as investors digested weaker-than-expected economic data ahead of next week's Federal Reserve meeting.

The S&P 500 (^GSPC) was down 0.20%, the Dow Jones Industrial Average (^DJI) dropped 0.59%, or less than 160 points, and the Nasdaq Composite (^IXIC) dipped below the flatline.

Meanwhile, the S&P 500 looked set to enter into a bull market in early morning trade but reversed course following weaker economic data. Still, strong jobs numbers and passage of the US debt ceiling bill sent major indexes higher last week.

Crude prices pointed upward but pared earlier gains after Saudi Arabia on Sunday said it will slash its oil output by another 1 million barrels per day starting in July. The world's top oil exporter is going it alone with the voluntary cut, as the Organization of the Petroleum Exporting Countries (OPEC+) and its allies agreed to stick to their current oil-production target through 2024 at their meeting this weekend.

US benchmark WTI crude futures were up trading at $71.84 on Monday, while Brent crude futures, the global benchmark, dipped to trade at $76.42 a barrel.

Meanwhile, Treasury yields lost some steam after the gauge of US services showed a less upbeat tone for the economy, with the benchmark 10-year Treasury rising to 3.7%. ISM services PMI fell to 50.3 in May from 51.9 in April, the lowest reading since May 2020 and below forecasts of 52.4.

The two-year yield fell to reach 4.48%, while the 30-year bond traded up to 3.89%.

Elsewhere in economic news, data from the US Census Bureau showed that new orders for US manufactured goods climbed 0.4% in April from the previous month. That represented a slowdown from the downwardly revised 0.6% gain in March and missed economists expectations of a 0.8% increase.

Investors are closely watching economic data releases for signs of whether the Fed will continue to hike interest rates. Markets are pricing in a 79% chance that the Fed will hold interest rates steady at its June 13-14 meeting, according to CME's FedWatch tool.

Jim Reid of Deutsche Bank wrote to clients Monday morning that May's Consumer Price Index, slated for release on Tuesday, "might be the main thing that shifts those odds towards a hike if the report is strong."

“If the Fed wants to subtly communicate to the market one way or another ahead of next week, then well placed media stories might surface. However before CPI, that does seem unlikely, as nothing will be 100% decided until then. We are back to having a fair bit of uncertainty over the near-term Fed outlook, though,” Reid added.

Elsewhere, Apple Inc. (AAPL) unveiled its new hardware product on Monday at its Worldwide Developers Conference, in Cupertino, California. The iPhone maker's shares moved lower following the highly anticipated release.

In other news, shares of Palo Alto Networks, Inc. (PANW) climbed over 4% amid news that the stock will join the S&P 500 index, replacing Dish Network (DISH).

Separately, bitcoin (BTC-USD) fell to below $26,000, after crypto exchange Binance Holdings and its founder Changpeng Zhao are facing allegations of breaking US securities laws. Prices of major cryptocurrencies took a hit Monday amid SEC lawsuit with shares of Coinbase Global, Inc. (COIN) plunging more than 10%.

Shares of Palantir Technologies Inc. (PLTR) rallied more than 4% after the data analytics software company said it was awarded a contract to deliver technology to the U.S. Special Operations Command.

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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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