Wall St dips as higher bond yields drag megacaps

U.S. stock indexes fell on Wednesday, dragged by losses in Tesla and Uber, while a rebound in bond yields further pressured megacap stocks as investors sought clarity on the Federal Reserve's rate path.

Uber UBER lost 5.4% after the ride-hailing platform forecast second-quarter gross bookings below expectations and posted a surprise first-quarter loss.

Tesla TSLA fell 3.1% after Reuters reported that U.S. prosecutors were examining whether the company committed securities or wire fraud by misleading investors and consumers about its electric vehicles' self-driving capabilities.

Among other megacap stocks, Microsoft MSFT, Nvidia NVDA and Alphabet GOOG fell between 0.3% and 1.1%, following a rise in the 10-year Treasury yield US10Y after five days of declines.

The day's losses come after the S&P 500 SPX closed higher for a fourth straight session on Tuesday, its best winning run since March, while the blue-chip Dow DJI scored a fifth session of gain in its longest positive run since December 2023.

Markets have mostly traded higher so far in May, as investors took comfort from an upbeat earnings season as well as a recent softer-than-expected labor market report, which tempered concerns about the Fed keeping interest rates higher for longer.

Traders are pricing in a 65% chance of the U.S. central bank cutting interest rates by at least 25 basis points in September, according to the CME Group's Fedwatch tool, up from about 54% a week ago.

"The market has now priced in the Fed's move for the rest of the year, so the reaction function will be lower moving forward and investors will start to focus more on the economic and earnings backdrop," said Dylan Kremer, chief investment officer at Certuity.

"The bond yields aren't necessarily reflecting the expected Fed activity..and that's primarily due to still resilient growth."

Investors will closely monitor comments from Fed speakers — Vice Chair Philip Jefferson, Boston President Susan Collins and Governor Lisa Cook during the day — for fresh clues on the central bank's monetary easing plans.

With the earnings season at its tail-end and only a few economic reports expected this week, markets are now awaiting next week's consumer prices reading to gauge if inflation is cooling.

Rate-sensitive real estate S5REAS led sectoral declines, down 0.8%.

At 09:38 a.m. ET, the Dow Jones Industrial Average DJI fell 7.11 points, or 0.02%, to 38,877.15, the S&P 500 SPX lost 16.17 points, or 0.31%, to 5,171.53 and the Nasdaq Composite IXIC lost 88.08 points, or 0.54%, to 16,244.48.

Intel INTC lost 2.2% after the chipmaker said the U.S. Department of Commerce was revoking certain export licenses for its consumer-related items to a customer in China, a move that would impact its second-quarter revenue.

Uber rival Lyft LYFT climbed 7.8% after projecting higher-than-expected gross bookings and a core profit for the current quarter.

Declining issues outnumbered advancers by a 3.08-to-1 ratio on the NYSE and a 2.57-to-1 ratio on Nasdaq.

The S&P 500 posted 12 new 52-week highs and 2 new lows while the Nasdaq recorded 22 new highs and 38 new lows.