Wall St slips as rising Treasury yields weigh, energy firms cap losses

By Shristi Achar A and Amruta Khandekar

(Reuters) -Wall Street’s main indexes fell in choppy trade on Tuesday, pressured by a rise in Treasury yields as investors assessed prospects for interest rate cuts by the Federal Reserve, while gains in energy stocks on higher crude prices limited losses.

All three main U.S. stock indexes logged gains in the previous week after data pointed to a softening labor market, boosting expectations that the Fed could pause its monetary tightening this month.

“Markets (are) wrestling with whether they’re going to get a decline in rates … the soft landing scenario is beginning to be called into question,” said Hugh Anderson, managing director at HighTower Advisors in Las Vegas.

The yield on the climbed to 4.25%, while two-year yield rose to 4.936%.

China’s services activity expanded at the slowest pace in eight months in August, a private-sector survey showed, hurting sentiment as traders returned from the Labor Day holiday.

U.S.-listed shares of Chinese companies including PDD Holdings, JD (NASDAQ:).com, Baidu (NASDAQ:) and Alibaba (NYSE:) fell between 0.7% and 2.5%.

The energy sector was a bright spot, up 1.3% and at a seven-month high after Saudi Arabia and Russia announced a fresh extension to their voluntary supply cuts. [O/R]

The S&P 1500 airlines index lost 1.9%.

Utilities led declines among S&P 500 indexes, down nearly 2%, while China-exposed materials sector fell 1.2%.

Major growth stocks were mixed, with Amazon.com (NASDAQ:) and Nvidia (NASDAQ:) down 1.2% and 0.4%, while Tesla (NASDAQ:) gained 3.1%.

Data on Tuesday showed orders for U.S. factory goods declined 2.1% in July, ending a four-month streak of gains.

Traders’ bets that the Fed will leave interest rates unchanged in the next policy meeting stood at 93%, while pricing in a 57.6% chance of a pause in November, according to the CME Group’s (NASDAQ:) FedWatch tool.

Federal Reserve Governor Christopher Waller said on Tuesday he currently sees nothing that would force a move toward boosting the cost of short-term borrowing again.

Meanwhile, Goldman Sachs lowered the chances of a U.S recession in the next 12 months to 15% from 20%.

At 11:42 a.m. ET, the was down 64.72 points, or 0.19%, at 34,772.99, the S&P 500 was down 11.85 points, or 0.26%, at 4,503.92, and the was down 25.83 points, or 0.18%, at 14,005.99.

Shares of Airbnb and Blackstone (NYSE:) added 7.7% and 3.6%, respectively, as the companies were set to join the .

Oracle (NYSE:) gained 2% after Barclays upgraded the software firm to “overweight” from “equal weight”.

Declining issues outnumbered advancers for a 3.02-to-1 ratio on the NYSE and a 2.08-to-1 ratio on the Nasdaq.

The S&P index recorded 11 new 52-week highs and 20 new lows, while the Nasdaq recorded 39 new highs and 96 new lows.