US STOCKS-Wall St indexes edge lower as Middle East conflict persists

By Kanchana Chakravarty and Sukriti Gupta

June 17 (Reuters) - Wall Street indexes edged lower on Tuesday as the Israel-Iran conflict entered its fifth day, weighing on investor confidence ahead of the Federal Reserve's upcoming monetary policy decision.

Iran and Israel's air war, which began on Friday when Israel attacked Iran's nuclear facilities, has raised concerns that the conflict could create bottlenecks for oil exports from the oil-rich Middle East.

U.S. energy stocks rose as oil prices remained elevated on the uncertainty. Chevron CVX.N was up 2.1% and Exxon XOM.N advanced 1.5%.

The surge in oil prices comes ahead of the Fed's monetary policy decision on Wednesday, when policymakers are widely expected to keep interest rates unchanged.

Money market moves show traders are pricing in about 46 basis points of rate cuts by the end of 2025, with a 55% chance of a 25-bps rate cut in September, according to CME Group's FedWatch tool.

"With price hikes likely on the way due to the tariffs, we think that officials will be reluctant to sound too dovish at this junction, either in the communications or the dot plot," Matthew Ryan, head of market strategy at Ebury, said in an emailed note.

At 11:26 a.m. ET, the Dow Jones Industrial Average .DJI fell 71.08 points, or 0.17%, to 42,444.01, the S&P 500 .SPX lost 19.72 points, or 0.33%, to 6,013.39 and the Nasdaq Composite .IXIC lost 70.66 points, or 0.36%, to 19,630.55.

Ten of the 11 major S&P 500 sub-sectors fell. Healthcare .SPXHC stocks dropped the most, with a nearly 1% decline. On the flip side, energy .SPNY stocks gained 1.2%.

Data on Tuesday showed U.S. retail sales dropped more than expected in May, while factory production barely rose last month.

U.S. Senate Republicans late on Monday unveiled proposed changes to President Donald Trump's sweeping tax-cut bill that had cleared the House of Representatives in May.

Solar stocks dipped after the Senate's changes to Trump's tax-cut bill revealed a phase-out of solar, wind and energy tax credits by 2028.

Shares of Enphase Energy ENPH.O dropped 23.7% and Sunrun RUN.O fell 41%. Invesco Solar ETF TAN.P was down 8.9%.

As investors flock to traditional safe-haven assets amid heightened geopolitical uncertainty, a rise in U.S. Treasuries pushed yields lower across the curve. Yields on the benchmark 10-year US10YT=RR fell about 3 basis points to 4.42%.

Among megacap stocks, Tesla TSLA.O lost 2.8%.

Eli Lilly LLY.N fell 1.5% after it agreed to acquire Verve Therapeutics VERV.O for up to $1.3 billion. Shares of Verve surged 76.5%.

T-Mobile TMUS.O fell 3.9% as Japan's SoftBank 9984.T raised $4.8 billion from a sale of 21.5 million of the wireless carrier's shares at $224 each, according to a term sheet reviewed by Reuters.

Declining issues outnumbered advancers by a 1.43-to-1 ratio on the NYSE and by a 1.5-to-1 ratio on the Nasdaq.

The S&P 500 posted eight new 52-week highs and lows each, while the Nasdaq Composite recorded 43 new highs and 65 new lows.