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Dow Jones falls to lowest since May 2

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Airlines fall after American Airlines ( AAL ) cuts profit forecast

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Fed's Beige Book shows continued economic expansion

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Indexes down: Dow 1.04%, S&P 0.64%, Nasdaq 0.42%

(Updates to 2:30 p.m. ET)

By Abigail Summerville

NEW YORK, May 29 (Reuters) - U.S. stocks fell on

Wednesday amid further gains in Treasury yields and concern over

the timing and scale of possible interest rate cuts from the

Federal Reserve.

The Dow fell to its lowest level in nearly a month, while

rate-sensitive utilities were among S&P 500 sectors

with the biggest declines.

The yield on the benchmark 10-year U.S. Treasury note hit

four-week highs at 4.6%, extending Tuesday's gains, after weak

debt auctions.

"Today's stock market action is primarily about what's going

on in the fixed income space, with yields pushing higher... It's

consistent with when this has happened a few times - as rate

expectations have been repriced, it causes some indigestion in

the stock market temporarily," said Zachary Hill, head of

portfolio management at Horizon Investments in Charlotte, North

Carolina.

Conflicting expectations on the size and the timing of

interest rates have kept the market on edge since the start of

this year.

Sticky inflation and hawkish comments from central bankers

have forced traders to temper down rate cut expectations to only

one by November or December, per the CME FedWatch Tool, from

multiple cuts expected at the start of the year.

Stocks held their losses following the release of a U.S. Fed

survey. It showed U.S. economic activity continued to expand

from early April through mid-May but firms grew more pessimistic

about the future while inflation increased at a modest pace.

The main focus this week will be on Friday's release of

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

preferred inflation gauge.

The Dow Jones Industrial Average fell 402.30 points,

or 1.04%, to 38,450.56, the S&P 500 lost 33.79 points, or

0.64%, to 5,272.25 and the Nasdaq Composite lost 71.14

points, or 0.42%, to 16,948.74.

The Nasdaq retreated after closing above the 17,000 mark for

the first time on Tuesday, while the small-caps Russell 2000

index was down 1.4%.

Marathon Oil ( MRO ) advanced 7.7% 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

4%, dropping to the bottom of the energy sector that

lost 1.3%.

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

declined 14.7% after the company cut its second-quarter profit

forecast.

Dick's Sporting Goods jumped 15.2% after lifting

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

rose 23.7% on raised annual sales growth forecast.

Salesforce ( CRM ) and HP Inc ( HPQ ) are set to report

quarterly results after the close.

Declining issues outnumbered advancers by a 5.85-to-1 ratio

on the NYSE and by a 2.74-to-1 ratio on the Nasdaq.

The S&P 500 posted seven new 52-week highs and 15 new lows,

while the Nasdaq Composite recorded 42 new highs and 130 new

lows.