© Reuters. FILE PHOTO: Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 27, 2023. REUTERS/Andrew Kelly

By Johann M Cherian

(Reuters) - U.S. main stock indexes slipped on Wednesday as comments from certain Federal Reserve officials exacerbated worries that the central bank will keep hiking interest rates this year.

New York Federal Reserve President John Williams backed views of a peak rate of 5.00%-5.25%, higher than what markets expect, after Fed Chair Jerome Powell acknowledged on Tuesday that the battle against inflation will take quite a bit of time.

Money market participants are now betting the U.S. central bank's benchmark rate to rise above 5% in May before peaking to 5.18% by July, levels that officials have backed vociferously.

"I could understand the market being weak ... with the Fed funds futures implying more rate hikes moving forward, compared with before last Friday and before yesterday's (Powell) speech," Thomas Hayes, chairman at Great Hill Capital Llc, said.

Fed Governor Lisa Cook said the U.S. central bank is not yet done raising rates and even though inflation has shown signs of moderation, the economy is still running too hot.

Comments from the policymakers come after a strong jobs report on Friday that stymied expectations of rate cuts any time this year, and could test the solid start to 2023 for U.S. equities following last year's battering.

"The market's view is that the Fed may cut rates, but only by 25 basis points at the end of the year, and the Fed is still signaling they won't make any cuts this year," said Art Hogan, chief market strategist at B Riley Wealth in Boston.

In a bright spot, Microsoft Corp (NASDAQ:MSFT) rose 1.5% after the tech giant said it was revamping its Bing search engine and Edge Web browser with artificial intelligence.

Offsetting Microsoft's gains was Alphabet (NASDAQ:GOOGL) Inc, which was down 7% after its much anticipated AI chatbot Bard delivered an incorrect answer in an online advertisement.

At 10:40 a.m. ET, the Dow Jones Industrial Average was down 58.20 points, or 0.17%, at 34,098.49, the S&P 500 was down 21.61 points, or 0.52%, at 4,142.39, and the Nasdaq Composite was down 109.91 points, or 0.91%, at 12,003.88.

Ten of the 11 major S&P 500 sectors fell, with communications services shares down 3.7%.

President Joe Biden's comments at the State of the Union address on Tuesday evening that supported calls to tax corporate share buybacks also weighed on sentiment.

Of all the S&P 500 companies that have reported quarterly earnings, 69% of them have beaten expectations, according to Refinitiv. Still, analysts expect quarterly earnings to decline 2.9%.

Activision Blizzard Inc (NASDAQ:ATVI) slid 1.6% after UK's antitrust regulator said Microsoft's purchase of the "Call of Duty" maker raised competition concerns about cloud and console gaming.

Uber Technologies (NYSE:UBER) Inc rose 0.7% on upbeat earnings expectations for the year.

Declining issues outnumbered advancers for a 1.86-to-1 ratio on the NYSE and a 2.05-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and two new lows, while the Nasdaq recorded 56 new highs and 18 new lows.

We read at: Investing.com