Yorath criticised his defence for 'ball watching' when the goals went in and his attack for not capitalising on their first half chances.
Speaking to readingfc.co.uk the Sheffield Wednesday boss said: "I am bitterly disappointed. Reading started well and got the ball in our area but we could have been possibly 3-0 up at half time.
"It was a huge disappointment to concede so early in the second half - collectively the three defenders were poor. We were ball watching for both goals and you can't do that, whatever league your in.
Terry Crane had a late goal ruled out because he used his hand to put the ball in the net. Speaking on the incident Yorath added: "His hand went up straight away. If he hadn't put his hand up then Gerald Sibon could have had a chance. Cheats don't prosper and I'm not happy with that.
Meanwhile, Wednesday also had Irishman Alan Quinn sent off - to the displeasure of his boss: "He was crazy. I fined him a week's wages. We need eleven men on the field - not ten."