Tuesday's early afternoon trade: Stocks drop as tensions climb of trade talks

US stocks fell on Tuesday as hopes of progress in high-level trade talks were dashed by a report Washington was moving ahead with efforts to limit capital flows to China and the inclusion of some top Chinese startups to a blacklist.

The declines were broad-based, with all the 11 major S&P 500 sectors trading lower and 28 of the 30 components of the blue-chip Dow Jones index in negative territory.

The developments weighed on the fragile sentiment fueled by a South China Morning Post report that said China had toned down expectations ahead of the high-level talks, and that the Chinese delegation could depart a day earlier than planned.

"The headlines are painting a picture of a less optimistic tone to the trade talks this week," said John Zaller, chief investment officer of MAI Capital Management in Cleveland, Ohio.

The US widened its trade blacklist to include Chinese video surveillance firm Hikvision and surveillance equipment maker Zhejiang Dahua Technology among others, drawing a sharp rebuke from Beijing.

This pressured US suppliers. Intel Corp, Nvidia Corp, Western Digital and Seagate Technology fell between 1% and 3.6%, while Ambarella Inc declined 8.6%.

The Philadelphia Semiconductor index dropped 2%, while the technology index slipped 1%.

The Dow Jones Industrial Average was also weighed down by a 1% fall in shares of Boeing Co.

The Dow Jones Industrial Average was down 229.90 points, or 0.87%, at 26,248.12, the S&P 500 was down 31.94 points, or 1.09%, at 2,906.85. The S&P 500 and Dow indexes fell below their 100-day moving average. The Nasdaq Composite was down 88.97 points, or 1.12%, at 7,867.33.