US STOCKS-Wall St slips as Middle East escalations lifts oil; Trump-Xi talks in focus

By Johann M Cherian and Avinash P

Sept 24 (Reuters) - Wall Street's main indexes dropped on Thursday, with the blue-chip Dow hitting a more than three-month low, as escalating tensions in the Middle East lifted oil prices and Treasury yields while investors monitored a US-China summit.

Crude prices shot up $4 a barrel, with Brent futures hitting $107 after Yemen's Houthis said they attacked Saudi military sites in Jazan, days after US and Iran leaders exchanged barbs at the UN General Assembly.

The developments stoked inflation concerns, with the yield on the 30-year Treasury bond reaching its highest since 2004. Bond prices move inversely to yields.

Technology stocks .SPLRCT led declines on the S&P 500, with Nvidia NVDA.O, Broadcom AVGO.O and Microsoft MSFT.O slipping over 1% each. Analysts, however, said faith in the AI trade, which powered the Nasdaq .IXIC to record highs earlier this week, helped limit losses.

"People were maybe less willing to chase stocks, but they didn't seem particularly eager to sell them," said Steve Sosnick, chief market analyst at Interactive Brokers.

Oracle ORCL.N dropped 5% after a report said it sent a "force majeure" notice to protect itself from potential cost increases related to a large data center project in New Mexico. Shares of alternative asset manager Blue Owl OWL.N, whose unit is developing the project, also fell 5%.

At 11:44 a.m. ET, the Dow Jones Industrial Average .DJI fell 337.09 points, or 0.65%, to 51,174.50; the S&P 500 .SPX lost 35.17 points, or 0.46%, to 7,670.68 and the Nasdaq Composite .IXIC lost 199.02 points, or 0.74%, to 26,737.02.

Eight of the 11 sectors on the benchmark index were trading lower, while the energy sector .SPNY gained 1.5%. The CBOE Volatility Index .VIX, sometimes referred to as Wall Street's fear gauge, climbed to a one-week top of 16.2 points.

XI AT THE WHITE HOUSE

President Donald Trump welcomed Chinese President Xi Jinping to the White House for a lavish state summit, with investors anticipating discussions around AI regulation, the Middle East conflict and Taiwan. The leaders are expected to meet executives from top US companies.

US Treasury Secretary Scott Bessent, meanwhile, said on Wednesday that the two superpowers have agreed to extend their truce until January 10.

Higher energy costs and recent data suggesting strong business activity and a robust labor market led investors to bet on further interest rate increases by the Federal Reserve. They now see a 71% chance of at least a 25-basis-point hike next month — up from around 50% a day ago — the CME Group's FedWatch Tool showed.

New York Fed President John Williams, who has a vote on the Federal Open Market Committee, underlined those expectations. It was reasonable to think that rates might need to be raised again this year, he said.

Meta Platforms META.O, which has been in focus for its Muse consumer AI agent, on Wednesday launched Charm, a handheld gadget for using Muse. The social media giant's shares climbed 1.1%.

Among other movers, MGM Resorts MGM.N slumped 10% after media mogul Barry Diller's People Inc PPLI.O withdrew its proposal to purchase the casino operator.

Everpure P.N jumped 18.2% after the data management and storage company announced strong preliminary revenue forecasts.

Declining issues outnumbered advancers by 2.99-to-1 ratio on the NYSE and by 2.55-to-1 on the Nasdaq.

The S&P 500 posted 10 new 52-week highs and 36 new lows while the Nasdaq Composite recorded 35 new highs and 187 new lows.