Stocks fall as traders dial back Fed-cut wagers

 Stocks fell as traders trimmed their bets on Federal Reserve rate cuts, sending Treasury 10-year yields above 4%. Oil rallied as the market waited to see if Israel will retaliate against Tehran for a missile attack last week.

Without much on the economic calendar on Monday, Wall Street awaited a raft of Fed speakers and key inflation data later this week. In the wake of surprisingly strong job growth for September, expectations for a continued slowdown in inflation reinforced speculation that policymakers will opt for a smaller rate reduction next month.

Money markets no longer see another half-point cut this year, while a quarter-point reduction in November that was seen as certain is now priced at a 86% probability.

“Friday’s strong jobs report not only appeared to kill any chance of a 50-basis-point rate cut in November, it kickstarted chatter about the Fed leaving rates unchanged if economic data continues to come in hotter than expected,” said Chris Larkin at E*Trade from Morgan Stanley. “But as last week showed, geopolitics can’t be ignored - any escalation of the situation in the Middle East has the potential to ramp up volatility.”

The S&P 500 fell to around 5,730. Treasury 10-year yields rose six basis points to 4.02%. West Texas Intermediate crude climbed 1.5% to $75.46 a barrel.

Corporate Highlights:

—Chevron Corp. agreed to sell stakes in oil sands and shale assets in Western Canada to Canadian Natural Resources Ltd. for $6.5 billion.

—Activist investor Starboard Value has taken a stake of about $1 billion in Pfizer Inc. and is seeking to spur a turnaround of the struggling pharmaceuticals giant, according to a person familiar with the matter.

—Amazon.com Inc. fell as Wells Fargo & Co. cut the recommendation on the e-commerce and cloud computing giant to equal-weight from overweight, saying the company faces multiple headwinds.

—Casino stocks gained after Wynn Resorts Ltd. received a commercial gaming operator’s license in the United Arab Emirates.

—Air Products and Chemicals Inc. climbed after the Wall Street Journal reported activist investor Mantle Ridge has a more than $1 billion stake in the company, citing people familiar with the matter.

—Apollo Global Management Inc. agreed to buy Barnes Group Inc. in an all-cash transaction that values the technology and aerospace manufacturer at about $3.6 billion.