By Caroline Valetkevitch
NEW YORK (Reuters) - The dollar broke into positive territory for the year and U.S. bond yields inched higher again on Tuesday as the recent rise in oil prices fueled expectations the Federal Reserve could flag more interest rate hikes at its policy meeting this week.
U.S. stocks fell in late morning trading as the latest batch of earnings from companies such as Pfizer and Tapestry, formerly Coach, disappointed investors, and as energy shares fell.
Apple's quarterly results are due after Wall Street closes and will be a big focus after several weeks of speculation about ebbing smartphone demand based on selective reports from companies in its supply chain.
Technology sector results so far – at least from the likes of Amazon, Alphabet, Microsoft, Samsung and SAP – have broadly beaten forecasts for Q1 and the overall aggregate U.S. earnings growth is tracking seven-year highs of almost 25 percent.
The dollar attracted attention as it turned positive for 2018 just ahead of a two-day Fed meeting that is expected to pave the way for another two or even three U.S. rate hikes this year.
A divergence between growth and the rate outlook versus those of other countries prompted investors to push the currency higher.
The dollar index rose 0.65 percent, with the euro down 0.65 percent to $1.1998.
"We're pretty much back to where we were at the beginning of the year, so a lot of the dollar weakness has been pretty much wiped out," said Sireen Harajli, foreign exchange strategist at Mizuho in New York.
The Dow Jones Industrial Average fell 258.77 points, or 1.07 percent, to 23,904.38, the S&P 500 lost 13.31 points, or 0.50 percent, to 2,634.74 and the Nasdaq Composite dropped 7.74 points, or 0.11 percent, to 7,058.52.
MSCI's gauge of stocks across the globe shed 0.54 percent.
May Day holidays across Asia and Europe meant trading was thinner than usual.
For Europe's stocks followers, only London's FTSE and Denmark's bourse were open. [.EU]
U.S. Treasury yields rose, with prices pressured ahead of a quarterly refunding announcement. The U.S. Treasury is scheduled to announce its findings on a refunding survey on Wednesday, with analysts projecting an increase in auction sizes, or new issuance at different points on the yield curve.
Benchmark 10-year notes last fell 10/32 in price to yield 2.9718 percent, from 2.936 percent late on Monday.
Brent oil prices eased off four-month highs of just over $75 a barrel set on Monday on worries that U.S. President Donald Trump may pull out of the 2015 Iran nuclear deal and thereby bring back sanctions on its oil output.
The White House had said on Monday that information provided by Israel on Iran's nuclear program had provided "new and compelling details".
A high-level U.S. trade delegation will also be in Beijing for meetings later this week, amid lingering worries about a possible trade war between the world's top two economies.
U.S. crude fell 1.23 percent to $67.73 per barrel and Brent was last at $73.72, down 1.3 percent on the day.
Gold slid to a two-month low as the dollar strengthened. Spot gold was down 0.7 percent at $1,306.26 an ounce, off an earlier low of $1,305.36, its weakest since March 1.
(Additional report by Karen Brettell in New York, Marc Jones and Jan Harvey in London and Hideyuki Sano in, Tokyo; Editing by Hugh Lawson and Chizu Nomiyama)