According to Peter Abraham of The Journal News:
BREAKING NEWS UPDATE, 12:55 p.m.: Nothing official yet, but the word is that Xavier Nady will need surgery and miss the season.
UPDATE, 1:47 p.m.: We just spoke to Nady. He didn’t want to say too much until he sees the team doctor in NYC tomorrow. But he indicated that the MRI showed a tear and surgery will be needed.
Nady left Tuesday's game with elbow pain; he had Tommy John surgery on it back in '01. The injury doesn't affect the Yankees as much as it affects Nady. The Yanks fortunately chose not to trade Nick Swisher this winter, so they'll be OK. But Nady is eligible for free agency after the season.