Jan 3 (Reuters) - U.S. stock indexes fell on Wednesday as investors locked in profits after a strong 2023 and awaited the Federal Reserve's December meeting minutes for clues on its interest rate path.
Wall Street kicked off the new year on a dull note on Tuesday as Apple and other high-growth companies came under pressure from higher yields, halting a blistering rally in stock markets.
The benchmark S&P 500 (.SPX) came within striking distance of its all-time closing high last week as investors priced in aggressive rate cuts this year following signs of cooling inflation.
Shares of rate-sensitive megacap stocks extended their drop on Wednesday, with Nvidia (NVDA.O), Apple (AAPL.O) and Tesla (TSLA.O) down between 0.8% and 3.8% as the 10-year Treasury yield climbed for a fourth straight session to 3.959%.
"This is a kind of a defensive rotation that is premature to suggest that investors are cautious about the equity market but rather repositioning in light of overbought conditions," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
Seven of 11 S&P 500 sectors traded in the red, with real-estate (.SPLRCR) and consumer discretionary (.SPLRCD) leading declines.
Investors remained cautious ahead of the minutes of the Fed's December meeting, scheduled for release at 2:00 p.m. ET, which could offer details about the central bank's pivot to interest rate cuts.
While the Fed is widely expected to keep rates on hold in January, traders have priced in 67% chance of a 25 basis point rate cut in March, as per CMEGroup's FedWatch tool.
Richmond Fed President Thomas Barkin said the U.S. central bank is "making real progress" towards taming inflation without inflicting major damage on the job market, with a hoped-for soft landing "increasingly conceivable."
Meanwhile, data showed U.S. job openings fell for the third straight month in November as labor market conditions gradually ease.
The Institute for Supply Management's survey showed U.S. manufacturing activity contracted further in December, though the pace of decline slowed amid a modest rebound in production and improvement in factory employment.
At 11:29 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 235.15 points, or 0.62%, at 37,479.89, the S&P 500 (.SPX) was down 28.05 points, or 0.59%, at 4,714.78, and the Nasdaq Composite (.IXIC) was down 116.57 points, or 0.79%, at 14,649.37.
The Russell 2000 index (.RUT) of small-cap stocks fell 1.4%, while airline stocks came under pressure as a 3% jump in oil prices, following disruption at Libya's top oilfield, raised concerns about fuel costs.
The S&P 1500 passenger airlines index (.SPCOMAIR) tumbled 3.1%.
Verizon Communications (VZ.N) rose 1.2% after KeyBanc upgraded the stock to "overweight".
Charles Schwab (SCHW.N) and Blackstone (BX.N) dropped 3.8% and 4.4%, respectively, after Goldman Sachs downgraded the stocks to "neutral" from "buy".
SentinelOne (S.N) dropped 4.4% as the cybersecurity firm plans to acquire Indian cloud security firm PingSafe to expand its cloud capabilities in a cash-and-stock deal.
Declining issues outnumbered advancers for a 3.11-to-1 ratio on the NYSE and 2.79-to-1 ratio on the Nasdaq.
The S&P index recorded 17 new 52-week highs and no new lows, while the Nasdaq recorded 39 new highs and 47 new lows.
