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CBOE Volatility index hits over one-month high

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Pfizer ( PFE ) gains on report Starboard Value takes $1 bln stake

in co

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Oil stocks track crude prices higher

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Indexes down: Dow 0.34%, S&P 500 0.26%, Nasdaq 0.27%

(Updated at 9:38 a.m. ET)

By Lisa Pauline Mattackal and Pranav Kashyap

Oct 7 (Reuters) - U.S. stock indexes fell on Monday,

pressured by rising Treasury yields as markets recalibrated

expectations for the Federal Reserve rate cuts, while rising

conflict in the Middle East kept traders on the sidelines.

U.S. Treasury yields rallied as investors reassessed the

Fed's rate path, with the yield on benchmark 10-year notes

exceeding 4% for the first time in two months.

Investors are pricing in an over 88% chance of a 25 basis

point rate cut at the Fed meeting in November, according to the

CME's FedWatch tool, and around 50 bps easing by the end of this

year.

The yield spike cast a shadow over rate-sensitive megacap

growth stocks. Alphabet lost 0.3%, Microsoft ( MSFT )

shed 0.3%, while Amazon ( AMZN ) fell nearly 3% after a Wells

Fargo downgrade.

The Dow Jones Industrial Average fell 142.64 points,

or 0.34%, to 42,210.11, the S&P 500 lost 15.00 points, or

0.26%, to 5,736.07 and the Nasdaq Composite lost 48.61

points, or 0.27%, to 18,089.24.

Escalating geopolitical tensions in the Middle East have

also hurt investor appetite. Early on Monday, Hezbollah rockets

hit Israel's third-largest city of Haifa.

The CBOE Volatility index, Wall Street's fear gauge,

rose as high as 21.45, at its highest level in over one

month. It was last at 20.95.

Ten of the 11 S&P 500 sectors were lower, with only energy

stocks up 0.4%. Crude prices extended gains on concerns

about supply disruptions from the Middle East conflict, boosting

shares of oil companies.

"(The) concerns that would keep people on the sidelines have

to do with higher energy prices in the near term, (the) impact

of that inflation and that yields which have been falling

precipitously (have) now firmed up," said Art Hogan, chief

market strategist at B Riley Wealth.

Investors are keenly awaiting the consumer price index data,

due on Thursday, and comments from several Fed officials,

including Neel Kashkari and Raphael Bostic, who are slated to

speak throughout the week.

Third-quarter earnings for S&P 500 companies also begin this

week, with several major banks scheduled to report on Oct. 11.

Earnings will be a significant test for Wall Street's rally

this year - the S&P 500 is up about 20% year-to-date and stands

near record highs.

Goldman Sachs raised its 2024 year-end S&P 500 target

to 6,000 from 5,600, and also lowered its odds of a U.S.

economic recession to 15% from 20%.

Shares of Pfizer ( PFE ) rose 3.1% on Monday after a report

that activist investor Starboard Value has taken a roughly $1

billion stake in the drug giant.

Air Products and Chemicals ( APD ) was the top S&P 500

gainer on a report that activist hedge fund Mantle Ridge has

built up a position in the company.

Declining issues outnumbered advancers by a 2.33-to-1 ratio

on the NYSE. There were 90 new highs and 10 new lows on the

NYSE.

The S&P 500 posted 14 new 52-week highs and no new lows,

while the Nasdaq Composite recorded 44 new highs and 27 new

lows.

(Reporting by Lisa Mattackal and Pranav Kashyap in Bengaluru;

Editing by Shinjini Ganguli)