U.S. stocks late-morning Monday traded near their lows of the session, amid concerns that the current two-month rally from December lows overpriced. Those concerns appeared to overshadow reports that a U.S.-China trade pact was near.

How did benchmarks fare?

The Dow Jones Industrial Average

DJIA, -1.18%

fell 256 points, or 1.1%, to 25,747, while the S&P 500 index

SPX, -0.93%

shed 23 points, or 0.8%, to 2,781. The Nasdaq Composite Index

COMP, -1.00%

 shed 68 points, or 0.9%, to 7,526.

At their peaks Monday morning, the Dow Jones had risen 130 points, the S&P was up 13 points, and the Nasdaq Composite Index had climbed 48 points.

Read: Stocks may roar to start the month, but end March with a whimper, analysts say

What’s driving the market?

Citing sources, a report in The Wall Street Journal said Washington and Beijing could reach a trade deal as soon as this month. Reports said the pact would end most U.S. tariffs levied against China in exchange for the latter following up on its own promises to allow in more U.S. exports, among other measures.

While the deal has yet to be completed and hurdles remain on both sides, a formal agreement could be reached at a summit — likely around March 27 — between President Donald Trump and Chinese President Xi Jinping, those sources said. Trade optimism has played a key role in driving gains for stocks this year.

China’s economy will also be in focus this week with the National People’s Congress due to kick off and officials expected to announce growth targets.

On Monday, the Commerce Department reported that construction spending fell by 0.6% in December, versus a 0.3% increase expected by economists polled by MarketWatch.

Read: All the bad news on the economy can’t overshadow where the real strength lies

Over the weekend, Trump took a fresh swipe at Federal Reserve Chairman Jerome Powell and a strong dollar in a lengthy speech at the Conservative Political Action Conference in National Harbor, Md.

“We have a gentleman that likes a very strong dollar at the Fed. I want a strong dollar, but I want a dollar that is great for our country not a dollar that is so strong that it is prohibitive for us to be dealing with other nations,” said Trump, according to reports. He also lashed out at the media, Democrats, environmentalists and special counsel Robert Mueller’s Russia probe.

What are strategists saying?

“Markets have firmed on new that the U.S.-China deal is really close, John Vail, chief global strategist at Nikko Asset Management told MarketWatch. “there are also signs of macroeconomic improvement in China recently,” he added, noting that manufacturing data has improved, while there are signs that the government is beginning to simulate the economy by encouraging banks to lend to the private sector.

Nevertheless, he warned that “the market is not cheap,” and that the recovery in valuations of U.S. stocks over the past two months has made high stock prices “a headwind” going forward.

“This morning’s news reinforces the view that from a short-term macroeconomic perspective, the U.S.-China trade deal (or not) is the only game in town,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

“It is, however, a busy week globally on the data front. We have a plethora of central bank rate decisions, starting with the Reserve Bank of Australia on Tuesday, Bank of Canada on Wednesday and the European Central Bank on Thursday,” said Halley.

Which stocks are in focus?

Shares of AT&T

T, -2.76%

were in focus Monday, after the telecommunications giant announced its plans to consolidate its affiliates and ad sales groups under a single structure. The Wall Street Journal reported that the effort will lead to significant layoffs.

Shares of Kraft Heinz Co.

KHC, +1.98%

were up 2.5% early Monday morning, after Morgan Stanley upgraded the stock to equal weight from underweight. The stock is down 22.8% year-to-date after the firm wrote down the value of its Kraft and Oscar Mayer brands by $15.4 billion in February.

Bed Bath and Beyond

BBBY, -6.41%

stock is in focus Monday, after Barclay’s downgraded the stock from underweight to equal weight. Shares are down 3.5% Monday.

Shares of Children’s Place Inc.

PLCE, -9.51%

fell 11.1% early Friday, after the children’s apparel provider reported fiscal fourth-quarter earnings and sales, and provided a full-year outlook, that were all well below expectations

How did the benchmarks perform last week?

On Friday, the S&P 500 index

SPX, -0.93%

rose 0.7% to 2,803.69, closing above the 2,800 level for the first time since Nov. 8. The Dow industrials

DJIA, -1.18%

closed up 110.32 points, or 0.4%, to 26,026.32, while Nasdaq Composite Index

COMP, -1.00%

advanced 0.8% to 7,595.35.

Last week, the S&P 500 gained 0.4% and the Nasdaq added 0.9%. The Dow, meanwhile, shed about 0.1% to snap its nine-week winning streak, the longest since May 1995.

How were other markets trading?

Stocks in Asia surged on trade hopes, with China’s Shanghai Composite Index

SHCOMP, +1.12%

surging 1.1% to 3,027.58, its highest level in nine months.

European equities were also trading higher; the Stoxx Europe 600

SXXP, +0.23%

gained 0.5%.

Gold prices

GCJ9, -0.76%

took a hit as the dollar

DXY, +0.35%

strengthened. The price of oil

CLJ9, +0.91%

was rising 1.8%.

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2019-03-04