U.S. stock investors will keep a close eye on Treasury bond yields and economic reports this week as the market considers whether interest-rate increases will go further — and last longer — than originally thought.

Attention will be paid on Thursday, when the February consumer price index will give some clues about inflation.

Overall, CPI is expected to rise 0.1 percent in February, after January's 0.7 percent gain, according to economists polled by Reuters. Core CPI, excluding food and energy costs, is seen up 0.2 percent, matching January's increase.

"Investors remain very cautious. They're holding back, waiting for the Fed," said Fred Dickson, market strategist and director of retail research for D.A. Davidson & Co.

"We still have buyers in the market, looking very selectively to put money to work on pullbacks."

The yield on the benchmark 10-year Treasury note climbed to 4.81 percent, its highest in nearly two years, last week as strong economic data boosted talk that the Federal Reserve has more monetary tightening in store.

The stock market rallied on Friday on February's stronger-than-expected job growth, viewed as a sign that the economy can expand even as interest rates rise.

But bond investors sold Treasury debt because they are worried about inflation after average hourly earnings rose at a 3.5 percent annual rate for the 12 months through February.

For the week, the Dow Jones industrial average rose 0.5 percent to 11,076.34. The Standard & Poor's 500 Index ended the week down 0.4 percent at 1,281.58 and the Nasdaq Composite Index fell 1.8 percent to 2,262.04.

How High Will Rates Go?

The Fed is expected to raise its benchmark fed funds rate from the current 4.5 percent to control inflation, but analysts debate how high rates will go.

"The odds of the Fed raising interest rates in the March meeting are slightly over 90 percent," said Kim Daifotis, senior vice president and chief investment officer of fixed income for Charles Schwab Investment Management in San Francisco.

"When you go to the next meeting in May, the odds are around 80 percent so the concern is that the Fed is going to overshoot on their tightening," Daifotis said.

In a Reuters poll taken on Friday, Wall Street's top economists were unanimous in expecting the Fed to raise benchmark rates at the March 27-28 meeting.

Most of the 22 primary dealers of government bonds surveyed also said they expect another rate increase at the May 10 policy meeting. That would bring the fed funds rate up to 5 percent from the historic low of 1.0 percent, when the tightening cycle began on June 30, 2004.

Adding to interest-rate worries in the United States, the European Central Bank raised a key rate last week by a quarter-percentage point to 2.5 percent to stem inflationary pressures from high energy prices and credit growth. That increase — the ECB's second credit tightening in three months — pushed the euro zone's key interest rate up to the highest level in nearly three years.

Last week, the Bank of Japan decided to end the super-loose monetary policy it has maintained for five years. The termination of that policy is seen as the first step toward interest-rate increases in Japan.

This week, five Fed officials will be on the lecture circuit. Janet Yellen, president of the Federal Reserve Bank of San Francisco, will speak on Monday and Wednesday. Jack Guynn, president and CEO of the Federal Reserve Bank of Atlanta, is also scheduled to give a speech on Wednesday.

Retail Sales and Housing

In the week ahead, Tuesday's data on February Retail sales will be noted to see if consumers are spending less. The Reuters forecast calls for February's overall retail sales to drop 0.8 percent, after January's jump of 2.3 percent.

Wall Street's economic calendar this week includes the Fed's "Beige Book" report on Wednesday, which will give anecdotal evidence about the economy in the regions served by the 12 federal reserve district banks.

On Thursday, February housing starts and building permits will be released, with a slower pace forecast in the Reuters poll. On Friday, two reports will be noted, with gains likely: February industrial production and capacity utilization data, plus the University of Michigan's preliminary March reading on consumer sentiment.

Anxiety About Oil and Iran

Although U.S. crude oil futures prices finished the week below $60 a barrel, Wall Street will remain cautious about energy costs because of escalating tension over Iran's nuclear plans. NYMEX April crude settled Friday at $59.96, down 51 cents for the day, and down 5.8 percent for the week.

Crude oil prices had risen in recent weeks, reflecting anxiety about potential supply disruptions due to Iran's dispute with Western world powers over its nuclear program, as well as violence in Nigeria's oil delta. That's another negative for stock investors since higher energy costs reduce consumer spending and corporate profits.

"Geopolitics ought to be something in the forefront of everyone minds," said Philip Orlando, chief portfolio manager, at Federated Investors. "The developments in Iran and the sort of related energy issues with Iraq, Venezuela and Nigeria are all areas that need to be paid attention to very closely, with the tone of current events impacting the crude market, which is likely to impact both fixed-income and equity markets."

The situation in Iran and energy-related issues with Iraq, Venezuela and Nigeria could move the crude oil market, which is likely to affect bond and stock markets, he said.

The U.N. Security Council will take Iran's case early this week after the U.N. nuclear watchdog sent a report last week, saying it could not verify that Iran's nuclear plans were purely peaceful.

Wall Street's Score Card

Investment banks Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Bear Stearns Cos. Inc. will report quarterly financial results this week in what will amount to a financial score card for Wall Street.

For most companies, though, the quarterly earnings period is winding down.

Companies have been reporting good earnings, but the guidance has been muted, " Orlando said.

Fourth-quarter earnings for S&P 500 companies are expected to rise 13.7 percent from a year ago, according to Reuters Estimates. That marks the 14th consecutive quarter of double-digit earnings growth for S&P 500 companies.