June 25, 2019 / 3:38 PM / 3 months ago

US STOCKS-Wall St dragged down by Iran tensions, trade worries; Fed in focus

* Bank stocks weigh the most on S&P

* AbbVie slides after $63 bln deal to buy Allergan

* Lennar rises after qtrly profit beat

* Fed Chair Jerome Powell to speak at 1:00 p.m. ET

* Indexes down: Dow 0.16%, S&P 0.18%, Nasdaq 0.27% (Updates to open)

By Medha Singh

June 25 (Reuters) - Wall Street’s main indexes slipped on Tuesday, as bank stocks fell ahead of a handful of speeches by Federal Reserve officials, while escalating tensions in the Middle East and trade jitters added to the dour mood.

At least five Fed policy makers are speaking later in the day, including Chair Jerome Powell, and markets assume they will stick with the recent message that rates could be about to be cut for the first time since the financial crisis.

Traders fully expect an rate cut from the U.S. central bank in July and see a 40% chance of a 50 basis point move, CME Group’s FedWatch program showed.

Rate-sensitive bank stocks were down 1%, as U.S. benchmark yields fell below the closely watched 2% level.

Dampening hopes of a U.S.-China trade deal at the G20 summit later this week, a senior U.S. official said President Donald Trump is “comfortable with any outcome” from the talks with his Chinese counterpart.

“It is unlikely that any resolution of the trade situation will take place until after the next Fed meeting late next month,” said Robert Johnson, chief executive officer at Economic Index Associates in New York.

A trade resolution will allow the Fed to forestall any interest rate cut, Johnson said. “I believe what Trump wants is both a Fed rate cut and to declare victory in the trade dispute with China.”

In a dramatic and unprecedented move, Trump on Monday imposed new sanctions on Iran’s supreme leader and foreign minister, a decision Tehran said closed the path to diplomacy between the countries.

The rising tension prompted a flight to the safety of government bonds and the yen and Swiss franc.

At 9:55 a.m. ET the Dow Jones Industrial Average was down 42.63 points, or 0.16%, at 26,684.91, the S&P 500 was down 5.23 points, or 0.18%, at 2,940.12 and the Nasdaq Composite was down 21.66 points, or 0.27%, at 7,984.04.

Wall Street’s main indexes have risen at least 7% this month, with the S&P 500 hitting a record high last week, on the prospect of more monetary stimulus for the economy.

A multibillion dollar deal helped the healthcare sector rise 0.42%, the most among the three S&P sectors trading higher.

AbbVie Inc said it would buy Botox-maker Allergan Plc for about $63 billion. AbbVie tumbled 14.2%, while shares of Allergan surged 27.2%.

Lennar Corp rose 2.4% after the No. 2 U.S. homebuilder reported a higher-than-expected quarterly profit, helping the PHLX Housing index edge 0.4% higher.

Declining issues outnumbered advancers for a 1.15-to-1 ratio on the NYSE and for a 1.06-to-1 ratio on the Nasdaq.

The S&P index recorded 16 new 52-week highs and four new lows, while the Nasdaq recorded 12 new highs and 36 new lows. (Reporting by Medha Singh and Aparajita Saxena in Bengaluru; Editing by Anil D’Silva)

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