US STOCKS-Wall St slides as Treasury yields dent megacaps after retail sales data

Wall Street's main indexes dropped on Wednesday, as rising Treasury yields pressured megacaps after upbeat December retail sales data, tempering hopes of the Federal Reserve kicking off its rate-cut campaign as early as March. The benchmark S&P 500 fell to an over one-week low, while the blue-chip Dow dropped to a near one-month low.

The NYSE FANG+TM index of momentum stocks dropped 0.9% to a one-week low, as the 10-year Treasury yield rose to over 4.1% - its highest this year. The rate-sensitive real estate sector dropped 1.8% to a one-month low, in an overall decline in the 11 S&P 500 sectors.

Data showed discounts from retailers and increased motor-vehicle purchases aided a higher-than-expected rise in U.S. retail sales

, keeping the economy on a solid footing in 2024. Traders' expectations

of a 25-basis-point rate cut by the Fed in March dipped to 55%, from around 60% before the data was released. "The market is beginning to recalibrate its expectations for rate cuts, but I don't think that adjustment is completely over," said Brian Jacobsen, chief economist at Annex Wealth Management.

"A lot of what we're seeing now is a tug-of-war between what the Fed intends on doing and what the market wants the Fed to do." Halfway into the first month of 2024, Wall Street's near-14% rally in the last two months of 2023 is losing steam as U.S. central bankers continue to downplay expectations of a quick start to the policy-easing cycle, while data on the economy's performance appears mixed.

The CBOE Market Volatility Index, a market fear gauge, rose to an over two-month high of 15.37 points during the day. Investors will also keenly monitor remarks by several policymakers on Wednesday, along with the release of the "Beige Book", a snapshot of the U.S. economy, at 2:00 p.m. ET.

Meanwhile, Tesla shed 2.8% after the electric-vehicle maker slashed the prices of its Model Y cars in Germany, a week after reducing prices for some China models. Morgan Stanley fell 2.0% on brokerage rating downgrades after Tuesday's weak fourth-quarter earnings. Other lenders such as Bank of America and Citigroup lost over 0.5% each.

At 11:40 a.m. ET, the Dow Jones Industrial Average was down 3.76 points, or 0.01%, at 37,357.36, the S&P 500 was down 22.35 points, or 0.47%, at 4,743.63, and the Nasdaq Composite was down 118.09 points, or 0.79%, at 14,826.25. The small-cap Russell 2000 index dropped 0.9% to a fresh one-month low.

On the earnings front, Charles Schwab

was down 3.3%, after its fourth-quarter profit fell 47%. Spirit Airlines nosedived 22.4%, following a plunge in the previous session, after a U.S. judge blocked JetBlue from acquiring the carrier.

Ford Motor lost 2.1% after UBS downgraded the stock to "neutral" from "buy". Boeing

gained 1.4% after the Federal Aviation Administration said inspections of an initial group of 737 MAX 9 airplanes had been completed. Declining issues outnumbered advancers for a 3.31-to-1 ratio on the NYSE and for a 2.66-to-1 ratio on the Nasdaq.

The S&P index recorded 23 new 52-week highs and four new lows, while the Nasdaq recorded 33 new highs and 170 new lows.