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Dow Jones falls to lowest since May 2, VIX at highest

since

early May

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Airlines fall after American Airlines ( AAL ) cuts profit forecast

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Nasdaq closed above 17,000 for first time on Tuesday

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Indexes down: Dow 0.96%, S&P 0.79%, Nasdaq 0.71%

(Updated at 9:49 am ET/1349 GMT)

By Johann M Cherian and Lisa Pauline Mattackal

May 29 (Reuters) - Wall Street indexes retreated on

Wednesday, as concerns around the timing and scale of the

Federal Reserve's interest rate cuts pushed Treasury yields

higher and pressured stocks.

Megacaps Microsoft, Alphabet and Meta

dipped between 0.3% and 0.6% as U.S. bond yields across

the board rose to near four-week highs after Tuesday's

unexpectedly strong consumer confidence data.

The Dow led declines, falling to its lowest in nearly

one month, and all major S&P 500 subsectors were in the red in

early trading.

Conflicting expectations on the size and timing of interest

rates have kept the market on edge since the start of this year.

Traders began the year expecting cuts by March, but sticky

inflation and hawkish comments from central bankers have

dampened expectations to a 25 basis points cut only by November

or December, as per the CME FedWatch Tool.

"The Fed is in a conundrum, with strong growth numbers and

yet, inflation does not seem to be responding to anything," said

Robert Pavlik, senior portfolio manager at Dakota Wealth

Management.

The tech-heavy Nasdaq retreated after closing above

the 17,000 mark for the first time on Tuesday. Chip stocks,

which drove gains in the last session, were down 1.9%.

Small-cap stocks also came under pressure, with the Russell

2000 losing 1.3%

"Folks are saying, 'what's the reason for me to be buying

right now?'" said Pavlik.

The CBOE Volatility Index, a Wall Street fear gauge,

hit its highest levels since May 3.

The central bank's Beige Book, due at 2:00 p.m. ET on

Wednesday, is expected to throw light on the state of the U.S.

economy. Markets will also monitor comments from Fed

policymakers including New York President John Williams and

Raphael Bostic.

But the main focus this week is on Friday's release of

April's Personal Consumption Expenditure data - the Fed's

preferred inflation gauge.

At 9:49 a.m. ET, the Dow Jones Industrial Average was

down 372.81 points, or 0.96%, at 38,480.05, the S&P 500

was down 41.93 points, or 0.79%, at 5,264.11, and the Nasdaq

Composite was down 121.39 points, or 0.71%, at

16,898.49.

Marathon Oil ( MRO ) advanced 8.68% after ConocoPhillips ( COP )

said it would buy the company in an all-stock deal for a

little over its $15 billion market value. ConocoPhillips ( COP ) lost

2.9%.

Airline stocks fell, led by American Airlines ( AAL ), which

declined 13.0% after the company cut its second-quarter profit

forecast. An index tracking airline stocks dropped

4.4%.

DICK'S Sporting Goods jumped 15.6% after lifting

forecasts for annual sales and profit, while Abercrombie & Fitch ( ANF )

rose 16.1% after raising its annual sales growth

forecast.

Broadly strong corporate earnings have helped offset rate

worries. Nearly 78% of the 480 S&P 500 companies that had

reported earnings as of Friday surpassed analyst estimates,

according to LSEG data.

Declining issues outnumbered advancers for a 8.45-to-1 ratio

on the NYSE. Declining issues outnumbered advancers for a

4.01-to-1 ratio on the Nasdaq.

The S&P index recorded 3 new 52-week highs and 13 new lows,

while the Nasdaq recorded 16 new highs and 82 new lows.

(Reporting by Johann M Cherian and Lisa Pauline Mattackal in

Bengaluru; Editing by Shinjini Ganguli)