By Amruta Khandekar and Shristi Achar A
Wall Street's main indexes slipped in choppy trade on Tuesday as U.S. Treasury yields hit multi-year highs on growing worries about interest rates staying higher for longer, while Nvidia shares declined in the run-up to the chip designer's earnings.
Further weighing on markets, big U.S. banks including JPMorgan, Wells Fargo and Bank of America lost between 1% and 1.8% following an S&P downgrade of multiple regional U.S. lenders.
The S&P 500 banks index was down 1.8% while the KBW regional banking index fell 2.0%.
The benchmark 10-year Treasury yield hit almost 16-year peaks on Tuesday, with the bond selloff triggered by concerns that the Federal Reserve could keep interest rates elevated for a while given evidence of a strong U.S. economy.
"There's concern about interest rates moving up (and whether) inflation is going to continue to come down," said Bob Doll, chief investment officer at Crossmark Global Investments.
"These uncertainties that frankly were around in July when the market was going straight up, people are paying attention to now and that's the source of the sloppiness."
Wall Street had regained some ground on Monday due to a rally in Nvidia and other tech stocks ahead of the chip designer's second-quarter results on Wednesday.
Investors will be keen to see if Nvidia's results and forecast can match heightened market expectations following a blockbuster report last quarter that fueled a blistering rally in tech stocks amid the frenzy around artificial intelligence.
Shares of Nvidia hit an all-time high of $481.87 soon after markets opened but were last down 3.2%.
Other big technology and growth stocks also pared gains, with Tesla down 0.4%, Amazon.com flat and Microsoft up 0.5%.
Federal Reserve Chair Jerome Powell will speak at a meeting in Jackson Hole on Friday, which will be closely monitored by investors for more clues on the direction for U.S. interest rates.
Traders' bets of a pause in rate hikes next month stand at 84.5%, while odds of a 25 basis point rate hike in November have risen to nearly 39% from about 35.8% a week ago, according to CME Group's FedWatch tool.
At 12:15 p.m. ET, the Dow Jones Industrial Average was down 168.92 points, or 0.49%, at 34,294.77, the S&P 500 was down 12.43 points, or 0.28%, at 4,387.34, and the Nasdaq Composite was down 3.08 points, or 0.02%, at 13,494.51.
Among other stocks, Lowe's Cos rose 3.3% after the home improvement retailer topped quarterly profit estimates.
Macy's tanked 13.3% after the department store chain warned of weak consumer spending through the crucial holiday shopping season, also dragging the broader retail sector down 0.3%.
Activision Blizzard gained 1.0% after the "Call of Duty" maker's proposed sale of its its streaming rights to Ubisoft Entertainment in a fresh attempt to win approval from Britain's anti-trust regulator for its $69 billion sale to Microsoft.
Declining issues outnumbered advancers for a 1.27-to-1 ratio on the NYSE and for a 1.52-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and 12 new lows, while the Nasdaq recorded 31 new highs and 164 new lows.
(Reporting by Amruta Khandekar and Shristi Achar A; Editing by Shinjini Ganguli and Maju Samuel)
