(Updates prices to late afternoon, adds analyst comments)

* Indexes down: Dow 0.15%, S&P 500 0.19%, Nasdaq 0.30%

* Stocks pare losses, chips and software reverse course

* Akamai Technologies ( AKAM ) down after announcing senior notes

offering

* Yields rally after slight dip in early trading

By Sinéad Carew and Ragini Mathur

May 19 (Reuters) - Wall Street's main indexes fell on

Tuesday as the benchmark 10-year Treasury yield climbed to its

highest level in more than a year on mounting inflation concerns

as oil prices stayed elevated and investors considered the

possibility of Federal Reserve interest rate hikes.

While they pared earlier losses, the S&P 500 and the

technology-heavy Nasdaq were still on track for their third

straight day of declines as investors took profits after a steep

rally that started in late March.

While Brent crude futures dipped 1.4%, they were still

above $110 a barrel as traders monitored the latest

communications about the Middle East war which has all but

closed the Strait of Hormuz, a crucial energy conduit. After

announcing on Monday that he had held off on a planned military

strike against Iran scheduled for Tuesday, due to a new proposal

from Tehran to end the Iran war, U.S. President Donald Trump

said on Tuesday that the U.S. may need to strike Iran again but

that Iran was begging for a deal.

U.S. Vice President JD Vance said the U.S. and Iran have

made a lot of progress in their talks and that neither side

wants to see a resumption of the military campaign.

Meanwhile, with inflation expectations rising, the 10-year

Treasury yield surged, in its third day of gains, to

4.687%, its highest level since January 2025. After paring gains

it was still around 4.65%.

"One hundred percent of the story is yields," said Ben

Sullivan, chief investment officer at AE Wealth Management.

"It's an expectation of higher for longer inflation ...

investors, admittedly, are just starting to capitulate to the

idea that we may be in this a lot longer than we thought, and

oil may stay stickier a lot longer than we thought. What you're

getting is a natural healthy selloff and an acknowledgement of

that."

Meanwhile, traders have started to price in higher probabilities

for rate hikes from the Federal Reserve. The latest bets on a

25-basis-point increase in rates for December this year rose to

40% probability while the probability for a 50-basis-point hike

was near 14%, up from 4.7% a week ago, according to CME Group's

FedWatch tool. On Wednesday, investors will focus on minutes

from the Fed's last policy meeting for clues on the extent of

policymakers' support for pivoting to a neutral stance from an

easing bias.

At 2:14 p.m. EDT, the Dow Jones Industrial Average

fell 73.61 points, or 0.15%, to 49,612.51, the S&P 500

lost 13.59 points, or 0.19%, to 7,389.12 and the Nasdaq

Composite lost 79.54 points, or 0.30%, to 26,011.19.

Six of the 11 major S&P 500 sectors were lower, with

communications services and consumer discretionary

the biggest drags on the benchmark index. Higher

yields often put pressure on shares of high-growth companies

because their valuations depend heavily on future profit

expectations.

After outperforming earlier in the session, software stocks

reversed course to lose ground, with the S&P 500 software index

down 1%, after gaining almost 2% earlier in the day.

Conversely, the Philadelphia Semiconductor Index was up

about 1.4% after falling more than 3% earlier in the day.

Defensive Healthcare was leading sector gains,

rising 1.2%.

Among individual stocks, cloud firm Akamai Technologies ( AKAM )

fell 2.8% after announcing a $2.6 billion convertible bond

offering.

Investors are waiting for earnings from AI chip leader

Nvidia ( NVDA ), due on Wednesday. Results from the world's most

valuable company will be closely watched for evidence AI-driven

demand is strong enough to justify elevated valuations across

semiconductors.

Declining issues outnumbered advancers by a 2.04-to-1 ratio

on the NYSE, where there were 106 new highs and 196 new lows. On

the Nasdaq, 1,883 stocks rose and 2,803 fell as declining issues

outnumbered advancers by a 1.49-to-1 ratio. The S&P 500

posted 16 new 52-week highs and 21 new lows while the Nasdaq

Composite recorded 43 new highs and 155 new lows.