* March trade deficit hits near 6-1/2 year high
* Disney hits record high after results
* Tech stocks biggest drag on indexes
* Indexes off: Dow 0.5 pct, S&P 0.8 pct, Nasdaq 1.3 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
May 5 (Reuters) - U.S. stocks were lower in morning trading on Tuesday after the U.S. trade deficit surged in March, suggesting that economic growth contracted in the first quarter and negating the boost to energy stocks from the highest oil prices this year.
The $51.4 billion deficit was the highest in nearly 6-1/2 years and larger than the $45.2 billion the government assumed in its snapshot of first-quarter gross domestic product last week.
“Everyone is now keeping an eye on Friday’s jobs numbers to see if last month’s dismal numbers were a momentary blip or for real,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
The wider trade deficit dampened the effect of a rebound in service sector growth in April.
Energy stocks including Exxon and Chevron were the biggest gainers, limiting the fall in the Dow and S&P 500.
“There is a little bit of optimism that’s starting to brew around industrial businesses that serve the energy sector,” said Doug Burtnick, senior investment manager on Aberdeen Asset Management’s North American equity team in Philadelphia.
Still, eight of the 10 S&P sectors were down. Technology stocks, led by Apple, were the biggest drags on the three major indexes and led the Nasdaq to nearly wipe out its gains in the past two days.
At 11:30 a.m. EDT (1530 GMT) the Nasdaq Composite was down 65.97 points, or 1.32 percent, at 4,950.96, the Dow Jones industrial average was down 96.66 points, or 0.53 percent, at 17,973.74, and the S&P 500 was down 16.56 points, or 0.78 percent, at 2,097.93.
Dow component Disney was up 0.5 percent at $111.61 after hitting a record high of $113.30. The company’s quarterly revenue beat analysts’ expectations.
Tesla gained 1.3 percent to $233.54 after Jefferies started coverage with a “buy” rating, saying investors’ worries about China sales were overblown.
Cosmetics maker Estee Lauder rose to a record high of $89.84 after it reported better-than-expected profit. The stock later slipped back to $88.11, up 5.5 percent.
Netflix was up 3.6 percent at $574.38 after BofA Merrill Lynch upgraded the stock to “buy” from “underperform”.
AcelRx Pharmaceuticals slumped 27.1 percent to $3.06 after the FDA rejected a meeting request to discuss the need for additional trial of its pain drug device.
News Corp and Groupon are scheduled to report after the close.
Declining issues outnumbered advancing ones on the NYSE by 2,231 to 705, for a 3.16-to-1 ratio on the downside; on the Nasdaq, 1,999 issues fell and 618 advanced for a 3.23-to-1 ratio favoring decliners.
The benchmark S&P 500 index was posting 15 new 52-week highs and no new lows; the Nasdaq Composite was recording 28 new highs and 44 new lows. (Editing by Savio D‘Souza)