US STOCKS-Wall Street falls as oil rebounds, Middle East tensions simmer

By Avinash P and Shashwat Chauhan

Sept 23 (Reuters) - Wall Street's main indexes fell on Wednesday as crude oil prices and bond yields climbed, while investors assessed the latest developments from the US-Iran talks to end the Middle East conflict ahead of the high-stakes Washington-Beijing summit.

Iranian President Masoud Pezeshkian said at the UN that Tehran would never surrender to the US, but still believes in diplomacy, a day after President Donald Trump threatened to "annihilate" Iran.

The dueling speeches bookended the first US-Iran shuttle talks in months, underscoring the lack of progress toward ending the Middle East conflict.

Meanwhile, Brent crude prices climbed over 3% after five straight sessions of declines, bouncing off a near two-week low. O/R

Yields on two-year US government bonds touched their highest since 2024, while those on 10-year Treasury notes hit their highest since 2007, adding to market concerns that the Federal Reserve could hike interest rates further.

A survey showed US business activity raced to a more than five-year high in September, spurring government bond yields higher.

"This report indicates that downstream price pressures remain intense, but it paints a more mixed picture of pass-through to consumers," said Oliver Allen, senior US economist at Pantheon Macroeconomics.

Eight out of 11 S&P 500 sectors were trading lower, with utilities .SPLRCU leading declines. It was down 1.6%.

Chip-related companies came under pressure, including AMD AMD.O, Nvidia NVDA.O and Intel INTC.O. The broader Philadelphia chips index .SOX shed 1.5% and was set to snap a six-session winning streak.

Meta Platforms META.O rose 2.8%, building on its more than 13% jump so far this week following strong reception of its AI assistant Muse, which analysts say could benefit tech infrastructure stocks, while also spurring AI disruption chatter in pockets of the market.

Online travel-related companies, including Expedia EXPE.O, Airbnb ABNB.O and Booking Holdings BKNG.O, were among the biggest laggards on the S&P 500.

In the previous session, the tech-heavy Nasdaq notched its first intraday record high since early June, as optimism around AI remains a dominant theme on Wall Street.

At 11:44 a.m. ET, the Dow Jones Industrial Average .DJI fell 279.08 points, or 0.54%, to 51,585.28, the S&P 500 .SPX lost 41.98 points, or 0.54%, to 7,722.66 and the Nasdaq Composite .IXIC lost 250.05 points, or 0.92%, to 26,994.22.

Chinese President Xi Jinping is expected to arrive in Washington later in the day on a state visit. The agenda includes extending the trade truce reached last year between the two superpowers, AI regulation and US arms sales to Taiwan.

Markets also parsed comments from Federal Reserve Governor Michael Barr, who said the central bank will likely need to deliver further interest rate hikes as inflation remains north of the Fed's 2% target.

Traders are now pricing in a 71% chance that interest rates could be hiked by at least 25 basis points next month, the CME Group's FedWatch Tool showed.

On the earnings front, casual dining chain Cracker Barrel CBRL.O added 5% after beating fourth-quarter sales estimates.

Paychex PAYX.O dropped 7.1% after the HR and payroll services provider said that its largest segment missed first-quarter revenue estimates.

Declining issues outnumbered advancers by a 2.92-to-1 ratio on the NYSE and by a 2.87-to-1 ratio on the Nasdaq.

The S&P 500 posted 14 new 52-week highs and 31 new lows, while the Nasdaq Composite recorded 33 new highs and 121 new lows.