* Yellen: Risks "moderated, not elevated"; no bubbles forming
* Private employers add fewest jobs since Jan 2014
* Tech stocks weigh; energy stocks shed most gains
* Indexes down: Dow 0.7 pct, S&P 0.7 pct, Nasdaq 0.7 pct (Updates to mid-afternoon)
By Noel Randewich
May 6 (Reuters) - U.S. stocks traded lower on Wednesday afternoon after U.S. Federal Reserve Chair Janet Yellen warned of high valuations, adding to anxiety about a global bond rout and upcoming economic data.
The S&P 500 dipped to its lowest since mid-April after Yellen said high equity valuations could pose dangers, although she also said she does not see any bubbles forming.
With corporate earnings season winding down, U.S. investors are bracing for an April payroll report later this week that could give a hint of when the Fed will begin raising interest rates.
"Everyone is obsessed with the Fed," said Michael Church, president of Addison Capital Management in Philadelphia. "It shouldn't surprise anyone that we didn't break out to new highs this week, given that you had Yellen speaking today and payrolls coming out on Friday."
A worldwide selloff in government bonds was also spreading unease across Wall Street and other financial markets.
At 2:20 p.m., the Dow Jones industrial average fell 127.69 points, or 0.71 percent, to 17,800.51, the S&P 500 lost 13.97 points, or 0.67 percent, to 2,075.49 and the Nasdaq Composite dropped 35.14 points, or 0.71 percent, to 4,904.19.
U.S. private employers added 169,000 jobs last month, the fewest since January 2014 and far below economists' estimates, posing a downside risk for the more comprehensive nonfarm payrolls report due on Friday.
Yellen's comments stung investors already nervous about stock prices. The S&P 500 currently trades at 16.8 times forward earnings, higher than its 10-year median of 14.7, according to Thomson Reuters StarMine.
The telecom services index was the biggest loser among the 10 major S&P sectors, down 1.4 percent.
Tech stocks, led by Apple and Microsoft, were the biggest drag on the three major indices. Apple was down 1.6 percent, declining for its third straight session.
MoneyGram gave up some of its earlier gains after Western Union said it was not in talks to buy the company. MoneyGram was up 15.76 percent while Western Union was up 4.34 percent.
Declining issues outnumbered advancing ones on the NYSE by 2,260 to 789, for a 2.86-to-1 ratio; on the Nasdaq, 1,629 issues fell and 1,067 advanced, for a 1.53-to-1 ratio favoring decliners.
The S&P 500 was posting 6 new 52-week highs and 5 new lows; the Nasdaq Composite was recording 26 new highs and 63 new lows. (Reporting by Noel Randewich, additional reporting by Tanya Agrawal; Editing by Nick Zieminski)