* U.S. yield curve inversion deepens; Financials fall
* J&J up after opioid lawsuit decision
* Dow down 0.35%, S&P 500 down 0.28%, Nasdaq down 0.39% (Updates to mid-afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, Aug 27 (Reuters) - Wall Street slipped on Tuesday, weighed down by financial stocks as a deepened yield curve raised U.S. recession worries, while uncertainty reigned on the progress of trade negotiations between the U.S. and China.
U.S, stocks initially opened higher, building on Monday's advance, as U.S. President Donald Trump predicted another round of talks with Beijing. China's foreign ministry, however, reiterated on Tuesday that it had not received any recent U.S. telephone call on trade.
Further weighing on sentiment was a deepening of the inversion in the yield curve between the 2-year and 10-year U.S. Treasuries, underscoring worries about a weakening global economy.
"The progression of trade talks seem to occur very much in real time and it is the primary influence around what it is driving the capital markets at this point," said Bill Northey at U.S. Bank Wealth Management in Minneapolis.
"You have this degree of uncertainty and what has seemed to be a period of heightened uncertainty, that certainly does impact confidence and confidence does drive behaviors like spending and investing, which ultimately manifest in economic activity."
The Dow Jones Industrial Average fell 94.15 points, or 0.36%, to 25,804.68, the S&P 500 lost 8.7 points, or 0.30%, to 2,869.68 and the Nasdaq Composite dropped 32.57 points, or 0.41%, to 7,821.16.
Financial shares, which tend to weaken in lower rate and soft economic environments, lost 0.84%, while defensive sectors such as utilities and real estate led advancing sectors.
The S&P 500 has lost nearly 4% in August on worries the impact of the intensifying U.S.-China trade war will have on the slowing global economy and corporate profits, along with uncertainty around the pace of U.S. interest rate cuts from the Federal Reserve.
With the next Federal Reserve meeting scheduled for mid-September, investors are gauging the strength of the U.S. economy for clues on where rates are headed. They will have data on the labor market and manufacturing next week to consider before the policy announcement.
Among stocks, Johnson & Johnson shares rose 1.93% after an Oklahoma judge said J&J must pay $572.1 million for its part in fueling the U.S. opioid epidemic, a sum that was substantially less than what investors had expected.
Philip Morris International shares fell 7.42% after the tobacco maker said it was in talks with Altria Group Inc to combine in an all-stock merger of equals. Altria's shares were down 3.53%.
Shares in J. M. Smucker Co tumbled 7.03% after the packaged food maker cut its full-year earnings forecast and missed estimates for quarterly profit and sales.
Declining issues outnumbered advancing ones on the NYSE by a 1.57-to-1 ratio; on Nasdaq, a 2.51-to-1 ratio favored decliners.
The S&P 500 posted 28 new 52-week highs and 29 new lows; the Nasdaq Composite recorded 33 new highs and 188 new lows. (Reporting by Chuck Mikolajczak; Editing by Dan Grebler)