US STOCKS-Wall St pounded as investors grapple with higher rates

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

*

All 11 S&P 500 sectors sink

*

Moody's warns government shutdown bad for U.S. credit

*

Amazon.com (AMZN) shares drop as U.S. files antitrust lawsuit

(Updates at 4 p.m. ET)

By Lewis Krauskopf, Ankika Biswas and Shashwat Chauhan

Sept 26 (Reuters) - Wall Street's main indexes ended sharply lower on Tuesday as 10-year Treasury yields held their multi-year highs, with investors still wrestling with prospects for a long period of high interest rates and the economic fallout.

Adding to investor anxiety was the potential of a partial U.S. government shutdown by the weekend, which ratings agency Moody's warned would harm the country's credit.

Benchmark 10-year Treasury yields have climbed to 16-year highs in the wake of the Federal Reserve's hawkish longer-term rate outlook last week.

"We continue to adjust to the higher interest rates," said Brad McMillan, chief investment officer for Commonwealth Financial Network.

"What you are getting is increasingly a sense that the market is overvalued. ... There's a real sense out there that this isn't sustainable, and buyers are being scared away."

According to preliminary data, the S&P 500 lost 63.77 points, or 1.47%, to end at 4,273.67 points, while the Nasdaq Composite lost 206.02 points, or 1.55%, to 13,065.30. The Dow Jones Industrial Average fell 388.75 points, or 1.14%, to 33,618.13.A

All 11 S&P 500 sectors ended lower. The heavyweight tech sector dropped sharply as did the rate-sensitive utilities and real estate groups.

Megacap stocks that have propelled indexes higher this year mainly dragged on Tuesday.

Amazon.com (AMZN) shares dropped as the U.S. Federal Trade Commission filed a long awaited antitrust lawsuit against the online retailer.

Investors are focused on Friday's personal consumption expenditures price index for a fresh view of the inflation picture. This week also brings other data including on durable goods and second-quarter gross domestic product, as well as remarks by Fed policymakers such as Chair Jerome Powell.

In company news, Immunovant (IMVT) shares surged after early-stage data from the drug developer's experimental antibody treatment exceeded analysts' expectations. (Reporting by Lewis Krauskopf in New York, Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel and Richard Chang)