* Copper prices hit 3-week low, oil down about 2 pct
* All 30 Dow components and 10 S&P sectors down
* Volatility index jumps
* Goldman falls after CEO discloses he has cancer
* Indexes down: Dow 1.1 pct, S&P 1.2 pct, Nasdaq 1.5 pct (Updates to late afternoon, changes byline)
By Caroline Valetkevitch
Sept 22 (Reuters) - U.S. stocks dropped late Tuesday afternoon, dragged down by investor uncertainty over when the Federal Reserve will raise interest rates and as a selloff in commodities pushed materials shares lower.
S&P materials, down 1.8 percent, led the decline, but the selloff was broad-based. All 30 Dow components were down, along with all 10 major S&P sectors.
Copper prices hit a three-week low. U.S. crude oil also settled lower.
The Fed's decision last week to keep rates near zero levels has left investors guessing when the central bank will make its big move, increasing volatility in the market. Atlanta Fed President Dennis Lockhart said on Monday a rate hike later this year was still possible.
The CBOE Volatility index, Wall Street's fear gauge, jumped 12.3 percent to 22.61, above its long-term average of 20.
Goldman Sachs fell 1.9 percent to $179.83 and was the biggest drag on the Dow after Chief Executive Lloyd Blankfein said he had a "highly curable" form of lymphoma.
At 3:39 p.m., the Dow Jones industrial average fell 179.09 points, or 1.08 percent, to 16,331.1, the S&P 500 lost 23.54 points, or 1.2 percent, to 1,943.43 and the Nasdaq Composite dropped 71.66 points, or 1.48 percent, to 4,757.30.
The S&P 500 index, which is 9 percent below its May record-high, has seen moves of at least 1 percent in more than 12 sessions since Aug. 20 as investors fretted over a China-led global economic slowdown and the looming rate hike.
"Investors are nervous because there is a sense that the Fed knows more than it is letting on regarding the health of the global economy," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
Atlanta Fed President Lockhart is scheduled to speak again later on Tuesday. Fed Chair Janet Yellen speaks on Thursday.
Apple was down 2 percent at $112.86, leading the decline in tech stocks, and was the biggest drag on the S&P and the Nasdaq.
Shares of Volkswagen suppliers BorgWarner, Honeywell and Delphi Automotive were down between 2.2 percent and 7.5 percent after the German carmaker admitted to cheating on vehicle emission tests.
Biotech stocks fell for a second day after Democratic presidential candidate Hillary Clinton said she would propose a $250 monthly cap on prescription drugs. (Additional reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza and Nick Zieminski)