US STOCKS-Wall Street subdued after Trump's latest attack on Fed

By Johann M Cherian and Sanchayaita Roy

Aug 26 (Reuters) - Wall Street's main indexes were flat on Tuesday, pressured by a rise in Treasury bond yields as President Donald Trump's decision to fire a central bank governor renewed concerns about the Federal Reserve's independence.

Investors also awaited Nvidia's NVDA.O results and a key inflation report later this week for more insight on artificial intelligence and interest rate cuts - the two big themes behind recent market gains.

In an unprecedented move, Trump said he was removing Fed Governor Lisa Cook over alleged improprieties in obtaining mortgage loans, prompting investor unease about what it could also mean for the outlook on monetary policy just weeks ahead of the central bank's meeting.

Trump's action is likely to face legal challenges but, if successful, it would let him nominate a new member to the Fed's board at a time when he has called for lower interest rates.

"Before there were only been words and threats. Now the fact that an actual decision has been implemented, that has garnered the attention of the investment community more than before," said Peter Andersen, founder of Andersen Capital Management.

Despite lingering inflation pressures, traders have been pricing in a 25-basis-point interest rate cut for September, encouraged by dovish signals from Fed Chair Jerome Powell, data pointing to labor market weakness and a shake up at the central bank.

Key upcoming inflation and jobs reports could prompt investors to reassess rate-cut expectations.

At 09:49 a.m. ET, the Dow Jones Industrial Average .DJI fell 26.31 points, or 0.06%, to 45,256.16, the S&P 500 .SPX lost 8.19 points, or 0.13%, to 6,431.13 and the Nasdaq Composite .IXIC lost 53.53 points, or 0.25%, to 21,395.76.

Six of the 11 S&P 500 sectors edged lower, with communication services .SPLRCL leading losses with a 0.6% drop.

U.S. 10-year US10YT=RR and 30-year US30YT=RR Treasuries also fell and the dollar =USD declined against major currency pairs. Bond yields move inversely to prices.

Nvidia's results on Wednesday will be a major catalyst for U.S. stocks that have rallied over the past few years on the potential earnings growth from AI. Investors will also look for details on how the recent revenue-sharing deal with the U.S. government could impact forecasts.

The AI enthusiasm has also pushed up valuations of Wall Street's benchmark S&P 500 .SPX to above long-term averages, heightening the risk of a selloff in case the chip giant falls short of market expectations. Nvidia's shares were marginally lower.

Advanced Micro Devices AMD.O gained 1.6% after Truist Securities upgraded the chip stock to "buy" from "hold".

Eli Lilly LLY.N gained 4.2% after the drugmaker said its experimental pill cuts body weight by 10.5% in diabetes patients.

EchoStar SATS.O jumped 76%, hitting a record high in early trading, after telecom giant AT&T T.N said it has agreed to buy certain wireless spectrum licenses from the satellite communications firm for about $23 billion.

Meanwhile, data showed new orders for manufactured capital goods increased more than expected in July. Investors will also focus on remarks from Richmond Fed President Thomas Barkin.

Advancing issues outnumbered decliners by a 1.27-to-1 ratio on the NYSE and by a 1.51-to-1 ratio on the Nasdaq.

The S&P 500 posted six new 52-week highs and no new lows while the Nasdaq Composite recorded 52 new highs and 23 new lows.