Dow slips nearly 1%, Nasdaq below 17,000 as rate worries push bond yields higher

The Dow led declines, falling to its lowest in nearly one month, and all major S&P 500 subsectors were in the red in early trading.

Conflicting expectations on the size and timing of interest rates have kept the market on edge since the start of this year.

Traders began the year expecting cuts by March, but sticky and hawkish comments from central bankers have dampened expectations to a 25 basis points cut only by November or December, as per the .

"The Fed is in a conundrum, with strong growth numbers and yet, inflation does not seem to be responding to anything," said Robert Pavlik, senior portfolio manager at .

The tech-heavy retreated after closing above the 17,000 mark for the first time on Tuesday. Chip stocks, which drove gains in the last session, were down 1.9%.

Small-cap stocks also came under pressure, with the Russell 2000 losing 1.3%

"Folks are saying, 'what's the reason for me to be buying right now?'" said Pavlik.

The CBOE Volatility Index, a Wall Street fear gauge, hit its highest levels since May 3.

The central bank's Beige Book, due at 2:00 p.m. ET on Wednesday, is expected to throw light on the state of the U.S. economy. Markets will also monitor comments from Fed policymakers including New York President John Williams and Raphael Bostic.

But the main focus this week is on Friday's release of April's Personal Consumption Expenditure data - the Fed's preferred inflation gauge.

At 9:49 a.m. ET, the Industrial Average was down 372.81 points, or 0.96%, at 38,480.05, the S&P 500 was down 41.93 points, or 0.79%, at 5,264.11, and the Composite was down 121.39 points, or 0.71%, at 16,898.49.

Marathon Oil advanced 8.68% after ConocoPhillips said it would buy the company in an all-stock deal for a little over its $15 billion market value. ConocoPhillips lost 2.9%.

Airline stocks fell, led by American Airlines, which declined 13.0% after the company cut its second-quarter profit forecast. An index tracking airline stocks dropped 4.4%.

DICK'S Sporting Goods jumped 15.6% after lifting forecasts for annual sales and profit, while Abercrombie & Fitch rose 16.1% after raising its annual sales growth forecast.

Broadly strong corporate earnings have helped offset . Nearly 78% of the 480 S&P 500 companies that had reported earnings as of Friday surpassed analyst estimates, according to LSEG data.

Declining issues outnumbered advancers for a 8.45-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 4.01-to-1 ratio on the Nasdaq.

The S&P index recorded 3 new 52-week highs and 13 new lows, while the Nasdaq recorded 16 new highs and 82 new lows.