US STOCKS-US stocks drop as investors wait for Fed rate decision

By Sinéad Carew and Johann M Cherian

Dec 8 (Reuters) - Wall Street's main indexes slipped on Monday, with all but one S&P 500 industry sector in the red, while Treasury yields gained as investors waited nervously for the Federal Reserve monetary policy update due in two days.

Hopes for a December rate cut were solidified after last week's data that showed consumer spending increased moderately toward the end of the third quarter. However, investors are still waiting for clues about future policy moves in what is expected to be the most divided Fed in years.

"It'll be hard for the market to find a direction that it wants to follow until after the Fed meeting," said Carol Schleif, chief market strategist at BMO Private Wealth. "We just came off a really strong earnings season and we won't have earnings again for another four weeks. The only thing that the market really has to hang its hat on or to point to is the Fed."

Traders are now pricing in an 87% chance of a 25-basis-point rate cut on Wednesday, up from as low as 30% in November, according to the CME's FedWatch Tool.

Meanwhile, higher yields on U.S. Treasury bonds also put some pressure on equities. The U.S. 10-year Treasury yield rose soon after a powerful earthquake struck off the coast of Japan.

At 2:06 p.m. EST (1906 GMT), the Dow Jones Industrial Average .DJI fell 298.74 points, or 0.63%, to 47,654.94, the S&P 500 .SPX lost 38.22 points, or 0.56%, to 6,832.18 and the Nasdaq Composite .IXIC lost 107.45 points, or 0.46%, to 23,470.67.

In individual stocks, Paramount Skydance's PSKY.O hostile $108.4 billion bid to buy Warner Bros Discovery WBD.O garnered investor attention as it aimed to outbid Netflix NFLX.O. The bid sent shares of Warner Bros Discovery up 3%. Paramount's shares were up more than 7% and it was leading S&P 500 gains, while Netflix fell more than 4%.

Netflix was one of the top drags on the S&P 500 Communication Services Index .SPLRCL, which was off 2% and the biggest decliner among the benchmark index's 11 major industry groups.

Technology .SPLRCT was the sole gainer of the 11, up 0.5%, with its biggest boosts coming from Microsoft MSFT.O, Nvidia NVDA.O and Broadcom AVGO.O. Broadcom shares were up 2%, supported by a report that Microsoft is in talks with the company about developing custom chips.

Later this week, the focus will shift to tech sector valuations, with earnings expected from Broadcom and Oracle ORCL.N, as investors worry about debt-funded artificial intelligence spending and complex corporate deals.

Elsewhere, chipmaker Marvell Technology MRVL.O fell more than 7% after used-car dealer Carvana beat it to securing a spot in the S&P 500. Carvana shares rose 13% after the decision.

Confluent gained 29% after IBM said it will acquire the data-infrastructure company for about $11 billion. Big Blue gained 1.5%.

Tesla TSLA.O lost 4%, the biggest drag on the S&P 500, following Morgan Stanley's bearish view on the electric-vehicle maker.

Also on Monday, Oppenheimer forecast a Street-high year-end 2026 target of 8,100 points for the S&P 500, citing strong earnings and macro resilience.

Declining issues outnumbered advancers by a 2.04-to-1 ratio on the NYSE, where there were 145 new highs and 58 new lows. On the Nasdaq, 1,971 stocks rose and 2,633 fell as declining issues outnumbered advancers by a 1.34-to-1 ratio.

The S&P 500 posted 20 new 52-week highs and 10 new lows while the Nasdaq Composite recorded 144 new highs and 67 new lows.