* 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 0.6 pct, S&P 0.9 pct, Nasdaq 1.4 pct (Updates to early afternoon)
By Tanya Agrawal
May 5 (Reuters) - U.S. stocks fell further in afternoon trading on Tuesday after the U.S. trade deficit surged in March, suggesting that the economy contracted in the first quarter.
Energy stocks retreated after a brief rally.
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.
All 10 major S&P sectors were down, with the utilities index down 2.2 percent. The energy sector was off 0.5 percent, reversing course after having risen earlier in the session as oil prices hit their highest this year.
Technology stocks, led by Apple, were the biggest drag on the three major indexes and nearly wiped out the Nasdaq’s gains in the past two days.
At 13:14 p.m. EDT (1714 GMT) the Nasdaq Composite was down 70.94 points, or 1.41 percent, at 4,945.99, the Dow Jones industrial average was down 106.63 points, or 0.59 percent, at 17,963.77, and the S&P 500 was down 19.58 points, or 0.93 percent, at 2,094.91.
Dow component Disney was up 0.5 percent at $111.64 after hitting a record high of $113.30. The company’s quarterly revenue beat analysts’ expectations.
Kellogg fell 2.3 percent to $62.65 after the world’s largest maker of breakfast cereals’ net sales fell 5 percent.
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 $88.25, up 5.7 percent.
Netflix was up 3.2 percent at $574.54 after BofA Merrill Lynch upgraded the stock to “buy” from “underperform”.
AcelRx Pharmaceuticals slumped 25.2 percent to $3.14 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 2,392 to 617, for a 3.88-to-1 ratio on the downside; on the Nasdaq, 2,079 issues fell and 604 advanced for a 3.44-to-1 ratio favoring decliners.
The benchmark S&P 500 index was posting 16 new 52-week highs and no new lows; the Nasdaq Composite was recording 33 new highs and 50 new lows. (Editing by Savio D‘Souza)