* Strong data pushes dollar to one-month high
* Apple weighs the most on S&P and Nasdaq
* All 30 Dow components in the red
* Indexes down: Dow 0.96 pct, S&P 0.92 pct, Nasdaq 1.07 pct
* Indexes gains for month fall below 2 pct (Updates to early afternoon)
By Tanya Agrawal
May 26 (Reuters) - U.S. stocks were recording their steepest fall in three weeks in midday trading on Tuesday, as a host of positive economic data increased the likelihood of a rate hike in the near term and sent the dollar soaring.
The dollar was hovering at a one-month peak against a basket of major currencies and at one point gained as much as 1.38 percent, pushing for its largest daily move in almost two years.
"A strong dollar is going to hurt exports and the revenue line of companies, which wasn't strong to begin with," said Rick Fier, director of trading at Conifer Securities in New York.
The overall economy is gradually firming, with reports on Tuesday showing business investment spending plans increasing solidly in April, consumer confidence perking up this month and house prices extending gains in March.
The buoyant data comes after Federal Reserve Chair Janet Yellen said on Friday that the central bank could raise interest rates this year if the economy keeps improving as expected. The comments kept the prospects of a September rate increase high.
Yellen's comments and the dollar's rise have pushed the monthly gain for each of the three major U.S. stock indexes to below 2 percent in the past two trading sessions.
At 12:19 p.m. ET (1619 GMT) the Dow Jones industrial average was down 175.9 points, or 0.96 percent, at 18,056.12. All 30 Dow components were in the red, with IBM's 1.3 percent fall to $170 weighing the most.
The Nasdaq Composite was down 54.69 points, or 1.07 percent, at 5,034.67 and the S&P 500 was down 19.52 points, or 0.92 percent, at 2,106.54.
All 10 major S&P 500 sectors were lower, with the energy index's 1.39 percent the biggest decline as oil prices fell 2 percent partly due to the dollar's rally.
Apple fell 1.5 percent to $130.61 and was the biggest drag on the S&P 500 and the Nasdaq.
Charter Communications' shares were up 1.9 percent at $178.68 after it agreed to buy Time Warner Cable for $55.8 billion. Time Warner Cable rose 6 percent to $181.62, well below Charter's cash and stock offer of $195.71.
First Solar fell 6.7 percent, the biggest on the S&P, to $51.40 after RBC downgraded the solar panel maker's stock to "underperform" from "sector perform".
LivePerson jumped 14 percent at $10.20 after an Israeli website reported software provider Nice Systems was in talks to acquire the chat software firm. Nice was down 3.7 percent at $62.67.
Declining issues outnumbered advancers on the NYSE by 2,398 to 609, for a 3.94-to-1 ratio on the downside. On the Nasdaq, 2,088 issues fell and 611 advanced for a 3.42-to-1 ratio favoring decliners.
The S&P 500 index showed four new 52-week highs and seven new lows while the Nasdaq Composite was recording 41 new highs and 63 new lows. (Editing by Savio D'Souza)