US STOCKS-Wall St slips after hot producer inflation data; Fed in focus

* Indexes off: Dow 0.35%, S&P 500 0.19%, Nasdaq 0.16%

* Traders price out Fed rate cuts in 2026

* Fed rate decision expected at 2 p.m. ET

* Crude prices reverse losses; Brent last up over 5% (Updates after market open, prices throughout)

By Johann M Cherian and Utkarsh Hathi

March 18 (Reuters) - Wall Street's main indexes slipped on Wednesday after data showed producer prices rose more than expected in February, prompting investors to price out any hopes for an interest rate cut by the Federal Reserve this year.

A Labor Department report showed the Producer Price Index rose 3.4% on an annual basis in February, compared with a 2.9% rise expected by economists polled by Reuters. Prices could accelerate further as the Middle East conflict boosts shipping and oil prices.

Traders now see the Fed lowering borrowing costs by at least 25 basis points in April 2027, compared with December 2026 seen before the report, according to LSEG-compiled data.

"This will be the third PPI in a row that has come above expectations and that further cements the idea that the Fed will not be cutting rates anytime soon," said Art Hogan, chief market strategist at B. Riley Wealth.

Treasury yields, a reflection of interest rate expectations, spiked following the data and weighed on S&P 500 sector indexes offering higher dividends. Healthcare and consumer staples lost over 1% each.

The spotlight will be on the Fed, which is expected to leave benchmark interest rates unchanged at the end of its two-day meeting at 2 p.m. ET.

The greater focus, however, will be on Chair Jerome Powell's remarks on how tariffs, higher energy costs triggered by the Middle East crisis and a weakening job market will influence monetary policy decisions later this year.

"With the Fed not knowing the duration of the war and therefore the impact on inflation and economic activity, I actually wouldn't be surprised if they decided not to issue the summary of economic projections," Hogan said.

Brent crude extended gains and reached near $110 a barrel after an Iranian news agency reported that some facilities belonging to Iran's oil industry in South Pars and Asaluyeh were attacked.

Prices had eased earlier in the session following the resumption of crude exports from Iraq's Kirkuk fields.

Travel stocks were mixed as investors weighed higher energy costs against forecast raises flagged by Delta and American in the previous session. Delta slipped 0.2%, while American added 0.4%.

At 10:00 a.m. ET, the Dow Jones Industrial Average fell 170.46 points, or 0.35%, to 46,826.67, the S&P 500 lost 12.95 points, or 0.19%, to 6,703.14 and the Nasdaq Composite lost 36.29 points, or 0.16%, to 22,441.23.

Wall Street's fear gauge, the CBOE volatility index, spiked 0.64 points to 23. The Middle East conflict has exacerbated volatility in global markets; however, U.S. stocks have been buoyed by a rebound in technology shares and on relief that the U.S. is a net energy exporter.

On Wednesday, shares of Micron gained 0.8% ahead of the chipmaker's earnings after the market close, while SanDisk (SNDK) added 1.8%.

Among others, Lululemon gained 3.3% after quarterly results. The yoga-wear maker's founder, Chip Wilson, is in a proxy battle with the company and said lead director David Mussafer's decision to exit the board was "a step in the right direction", but reiterated the need for a "substantial" board refresh.

Department store chain Macy's added 8.3% after saying the hit from import tariffs could ease in the second half of the year.

Asset managers such as Ares, KKR and Apollo were up about 3% each, rebounding from sharp losses in the previous week on private credit quality concerns.

Packaged foods maker General Mills (GIS) fell 1.6% as its sales declined in the third quarter over persisting weak demand.

Declining issues outnumbered advancers by a 1.87-to-1 ratio on the NYSE and by a 1.94-to-1 ratio on the Nasdaq.

The S&P 500 posted 13 new 52-week highs and 11 new lows, while the Nasdaq Composite recorded 19 new highs and 111 new lows. (Reporting by Johann M Cherian and Utkarsh Hathi in Bengaluru; Editing by Anil D'Silva and Maju Samuel)