US STOCKS-Wall St falls as policymakers' comments fan rate hike worries; Alphabet slumps

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Alphabet hauls S&P 500, Nasdaq lower

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Microsoft climbs on AI integration

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CVS Health rises on offer to buy Oak Street

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Indexes down: Dow 0.51%, S&P 1.02%, Nasdaq 1.55%

(Adds comments; updates prices, details)

By Johann M Cherian

Feb 8 (Reuters) - Wall Street's main stock indexes slipped on Wednesday as comments from Federal Reserve officials intensified worries over the central bank's rate hike path, while Alphabet slumped on a disappointing debut of its much-awaited AI chatbot.

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

Money market participants are now betting the Fed's benchmark rate to rise above 5% in May before peaking to 5.16% by July, levels that officials have backed vociferously.

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.

"If you get somebody like John Williams and another prominent Fed governor speaking again this morning, at some point the markets are going to listen," said John Lynch, chief investment officer at Comerica Bank.

The comments come after a strong jobs report on Friday frustrated investors hoping for rate cuts later this year, and could test a solid start for markets 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 edged up 0.5% after the tech giant said it was revamping its Bing search engine and Edge Web browser with artificial intelligence.

Meanwhile, AI rival Alphabet Inc tumbled 7.9% after its AI chatbot Bard delivered an incorrect answer in an online advertisement.

At 12:39 p.m. ET, the Dow Jones Industrial Average was down 173.23 points, or 0.51%, at 33,983.46, the S&P 500 was down 42.42 points, or 1.02%, at 4,121.58, and the Nasdaq Composite was down 187.22 points, or 1.55%, at 11,926.56.

All of the 11 major S&P 500 sectors declined, with communication services plunging 4.3%.

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%.

CVS Health Corp surged 4.7% on its $9.5 billion cash buyout offer for Oak Street Health Inc. Oak Street Health rose 4.5%.

Declining issues outnumbered advancers for a 2.41-to-1 ratio on the NYSE and for a 2.42-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and two new lows, while the Nasdaq recorded 63 new highs and 27 new lows. (Reporting by Johann M Cherian, Shubham Batra and Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila)