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CBOE Volatility index hits one-month high

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Pfizer ( PFE ) gains on report Starboard Value takes $1-billion

stake

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Oil stocks track crude prices higher

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Indexes down: Dow 0.82%, S&P 500 0.59%, Nasdaq 0.56%

(Updated prices at 2:29 p.m ET/ 1829 GMT)

By Sinéad Carew and Lisa Pauline Mattackal

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

while Treasury yields rose, as traders tamped down bets for

Federal Reserve interest-rate easing.

Uncertainty around the Middle East conflict added to worries

ahead of quarterly earnings season and fresh economic data.

After Friday's stronger-than-expected jobs report, traders

pulled back from bets for a 50-basis-point rate cut in November.

They were pricing in an 86% chance of a 25-basis-point cut and a

roughly 14% chance the central bank would not cut rates at all,

according to the CME's FedWatch tool.

The change in rate-cut expectations caused U.S. Treasury

yields to rally, with the yield on benchmark 10-year notes

exceeding 4% for the first time in two months.

Besides next month's Fed meeting, investors are waiting for

the Consumer Price Index inflation reading for September and the

kickoff of third-quarter earnings season with reports from

banks, both due this week.

"We think this is short-term nervousness that will be healed

over the next five days when the CPI number is released and the

bank earnings," said James Demmert, chief investment officer at

Main Street Research.

Demmert noted the intensifying Middle East conflict as a

concern for U.S. investors who are worried about the war's

economic impact, including rising oil prices.

Investors continue to fret about how Israel would respond to

Iran's missile strikes. On Monday, Lebanon's armed group

Hezbollah fired rockets at Israel's city of Haifa while Israeli

forces looked poised to expand ground raids into south Lebanon.

On Wall Street at 2:29 p.m. ET, the Dow Jones Industrial

Average fell 347.82 points, or 0.82%, to 42,004.93, the

S&P 500 fell 34.11 points, or 0.59%, to 5,717.01 and the

Nasdaq Composite fell 102.95 points, or 0.56%, to

18,035.60.

Among the S&P 500's 11 major industry indexes, only energy

advanced, rising 0.5%. U.S. crude futures rose

for the fifth-straight session on concerns about Middle East

supply disruptions.

The biggest industry laggard was utilities, down

2.2%.

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

hit its highest level in a month.

The S&P's biggest drag from a single stock was from

Amazon.com ( AMZN ), which fell almost 3% after a Wells Fargo

downgrade. Amazon's ( AMZN ) decline also pressured the consumer

discretionary sector, which was down 1.8%.

Shares of Pfizer ( PFE ) rose 2.4% after a report that

activist investor Starboard Value has taken a roughly $1-billion

stake in the drugmaker.

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

500 gainers, rising 8.8% on a report that activist hedge fund

Mantle Ridge has built a position in the company.

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

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

15% from 20%.