Adam Dunn hit an RBI single, and Encarnacion had a two-run single off Wang, who faced 10 batters. Leadoff batter Norris Hopper singled twice off Wang in the inning.
"My stride was too long," Wang said. "My ball was not moving. I'll fix it quick."
Manager Joe Girardi has made Wang the leading candidate for the No. 1 spot in the rotation. Wang was expected to pitch the season opener last year, but was sidelined by a hamstring injury during spring training.
In his first spring start, Wang pitched two scoreless innings against Philadelphia and allowed only one hit. His pitches didn't dip Thursday, making for a quick exit.
"His sinker was up," Girardi said. "His slider was flat and he got into some bad counts. They were aggressive and didn't miss.
"He knows what he has to do. It was his second start and obviously didn't go the way he wanted."
Darrell Rasner walked three batters before giving up Encarnacion's slam in the fourth inning, putting the Reds up 10-0.
Aaron Harang, scheduled to pitch the season opener for Cincinnati, allowed two hits and struck out two in three innings.
Dunn's opposite-field single in the first inning got the Reds going and provided more encouragement for the left fielder, who has worked hard to cut down his strikeout total in the last year.
"I'm trying to be more aggressive early in the count," Dunn said. "I think where I got in trouble is taking a lot of good pitches and putting myself in a hole. The second part of last year and this spring, I've felt a lot better. I even hit a ball down the third-base line. I don't think I've done that my entire life."
The Yankees rallied late against Reds minor leaguers. Bobby Abreu homered off Matt Maloney in the seventh and Greg Porter hit a grand slam off Alexander Smit in the eighth.
"Our young lefties got roughed up," manager Dusty Baker said. "Hopefully they learn from it."
