US STOCKS-Wall St slips as optimism over Russia-Ukraine peace talks ebbs

(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window)

* U.S. bond market signals economic pain ahead

* Private payrolls increased by 455,000 jobs in March

* Indexes down: Dow 0.19%, S&P 0.47%, Nasdaq 0.64% (Adds comment; updates prices, details)

By Bansari Mayur Kamdar and Amruta Khandekar

March 30 (Reuters) – U.S. stocks fell on Wednesday, as optimism around Ukraine-Russia peace talks waned and concerns grew over the prospect of a rapid rise in interest rates hurting economic growth.

The Kremlin said there was no sign of a breakthrough yet even though it welcomed Kyiv’s move to set out its demands in written form.

Markets had rallied in the previous session after Russia pledged to scale down military operations around Kyiv and in northern Ukraine, while on Wednesday, Russian forces bombarded the outskirts of Kyiv.

Worries about the fallout of the nearly five-week long invasion and rising rates have put Wall Street indexes on course for their worst quarter since the sell-off during the peak of the pandemic in 2020.

Still, the indexes are set to end March higher, with the S&P 500 erasing more than half of its quarterly losses in the last few days, powered by upbeat economic data and gains in megacap stocks.

“It’s more just a pause in a rally than a bearish shift … a little bit of sentiment headwind from the Russia-Ukraine situation, from the yield curve briefly inverting yesterday,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky.

Eight of the 11 major S&P sectors declined. The S&P 500 energy sector rose 1.1%, set to post its best quarter ever, according to Refinitiv data, as crude prices cut back some of this week’s heavy losses.

The utilities sector rose 0.3%, hitting a record high as investors favored defensive stocks.

Investors have raised doubts about the strength of a recent market rebound against the backdrop of a hawkish Federal Reserve, warnings of recession from the bond market and geopolitical uncertainty.

Story continues

The widely tracked U.S. 2-year/10-year Treasury yield curve briefly inverted on Tuesday for the first time since September 2019, as bond investors bet aggressive tightening by the Fed could hurt the U.S. economy over the longer term.

“The Fed had laid out its plan before the war in Ukraine unfolded, but obviously the spike in commodity prices, the additional pressures on global supply chains, all of that is contributing to inflationary pressures at a time when we really didn’t need that,” Mayfield said.

At 12:14 p.m. ET, the Dow Jones Industrial Average was down 66.26 points, or 0.19%, at 35,227.93, the S&P 500 was down 21.55 points, or 0.47%, at 4,610.05, and the Nasdaq Composite was down 93.37 points, or 0.64%, at 14,526.26.

Lululemon Athletica Inc jumped 10.8% after forecasting full-year profit and revenue above estimates, as demand for athletic wear remains strong.

Meanwhile, U.S. private employers maintained a strong pace of hiring in March, data showed, in a boost to the labor market. The numbers come ahead of the more comprehensive nonfarm payrolls report on Friday.

Advancing issues outnumbered decliners for a 1.01-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.15-to-1 ratio on the Nasdaq.

The S&P index recorded 43 new 52-week highs and no new low, while the Nasdaq recorded 45 new highs and 24 new lows. (Reporting by Bansari Mayur Kamdar and Amruta Khandekar in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)