By Noel Randewich and Johann M Cherian
Sept 24 (Reuters) - Wall Street was down on Thursday as uncertainty about the Middle East lifted oil prices and Treasury yields, but stocks came off session lows after Reuters reported US and Iranian negotiators were exploring a deal to reopen the Strait of Hormuz.
The S&P 500 and Nasdaq pared losses after the report that US and Iranian negotiators in New York were exploring a path out of war that would also include Washington lifting its economic blockade of Iran.
US and Iranian leaders exchanged barbs this week at the UN General Assembly. Brent crude prices were up about 4% at $107 per barrel after a Houthi missile attack on Saudi Arabia revived fears of supply disruptions.
"This just reinforces the view that we're dealing with one major market catalyst right now," said Bill Northey, senior investment director at U.S. Bank Wealth Management. "It's really all about oil and inflation and the effect on interest rates, and then the interest rate cascading across the capital markets."
AI heavyweights were mixed, with Microsoft and Broadcom down about 1%, while Advanced Micro Devices rose 1%.
Meta Platforms added 3.4%, a day after the social media company unveiled a small handheld gadget for use with its recently launched AI assistant.
Oracle lost 4.1% after a report said the company sent a 'force majeure' notice to a New Mexico data center. Shares of Blue Owl, the project's developer, also fell 5%.
Treasury yields rose, with the 30-year Treasury bond yield reaching its highest since 2004.
The S&P 500 was down 0.09% at 7,698.90 points.
The Nasdaq declined 0.20% to 26,883.15 points, while the Dow Jones Industrial Average was down 0.31% at 51,350.11 points.
Seven of the 11 S&P 500 sector indexes declined, led lower by materials, down 1.01%, followed by a 0.66% loss in information technology.
The S&P 500 this week has traded just under 19 times expected earnings, its lowest valuation since 2023, according to LSEG data. AI-related heavyweights are responsible for much of the recent increase in earnings expectations.
US President Donald Trump welcomed Chinese President Xi Jinping to the White House for a summit expected to be heavy on symbolism but light on substance related to issues including AI, trade, Taiwan and the war in the Middle East.
Data on Wednesday suggesting strong business activity has led to increased expectations the Federal Reserve will raise interest rates again following its 25-basis-point hike last week. Traders are now pricing in a nearly 70% chance of a hike next month, according to the CME FedWatch Tool.
New York Fed President John Williams, who has a vote on the Federal Open Market Committee, on Thursday said it was reasonable to think that the US central bank might need to raise interest rates again before the end of the year.
MGM Resorts slumped 11% after media mogul Barry Diller's People Inc withdrew its proposal to purchase the casino operator.
Declining stocks outnumbered rising ones within the S&P 500 by a 1.7-to-one ratio.
The S&P 500 posted 10 new highs and 38 new lows; the Nasdaq recorded 41 new highs and 210 new lows.
(Reporting by Johann M Cherian and Avinash P in Bengaluru; Editing by Joyjeet Das and David Gregorio)
