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* U.S. still pushing to limit capital flows to China - BBG
* China tones down expectations ahead of trade talks - SCMP
* Washington expands blacklist on Chinese firms
* Boeing falls on fresh worries over 737 MAX
* Indexes down: Dow 0.87%, S&P 500 1.09%, Nasdaq 1.12% (Updates to early afternoon)
By Shreyashi Sanyal
Oct 8 (Reuters) - U.S. stocks fell on Tuesday as hopes of progress in high-level trade talks were dashed by a report Washington was moving ahead with efforts to limit capital flows to China and the inclusion of some top Chinese startups to a blacklist.
The declines were broad-based, with all the 11 major S&P 500 sectors trading lower and 28 of the 30 components of the blue-chip Dow Jones index in negative territory.
The developments weighed on the fragile sentiment fueled by a South China Morning Post report that said China had toned down expectations ahead of the high-level talks, and that the Chinese delegation could depart a day earlier than planned.
The reports hit just as U.S. and Chinese deputy trade negotiators geared up to meet in Washington for a second day of talks on Tuesday, with high-level discussions scheduled to start on Thursday.
"The headlines are painting a picture of a less optimistic tone to the trade talks this week," said John Zaller, chief investment officer of MAI Capital Management in Cleveland, Ohio.
"Investors are not expecting a big deal or a small deal this week, but anything less than a tariff delay would be a pretty big disappointment for the markets."
The U.S. widened its trade blacklist to include Chinese video surveillance firm Hikvision and surveillance equipment maker Zhejiang Dahua Technology among others, drawing a sharp rebuke from Beijing.
This pressured U.S. suppliers. Intel Corp, Nvidia Corp, Western Digital and Seagate Technology fell between 1% and 3.6%, while Ambarella Inc declined 8.6%.
The Philadelphia Semiconductor index dropped 2%, while the technology index slipped 1%.
The Dow Jones Industrial Average was also weighed down by a 1% fall in shares of Boeing Co.
The Wall Street Journal reported friction between the United States and Europe could further delay efforts to resume flights of the planemaker's best-selling 737 MAX jets, which have been grounded since early 2019. Separately, Boeing said it delivered half the number of planes in the first nine months of 2019 than it did in the same period a year earlier.
The Dow Jones Industrial Average was down 229.90 points, or 0.87%, at 26,248.12, the S&P 500 was down 31.94 points, or 1.09%, at 2,906.85. The S&P 500 and Dow indexes fell below their 100-day moving average.
The Nasdaq Composite was down 88.97 points, or 1.12%, at 7,867.33.
Despite the day's declines, the indexes were trading above last week's lows, when a contraction in U.S. manufacturing and a dismal reading on business activity sparked fears of a looming recession in the world's biggest economy.
While moderate jobs growth in September lifted sentiment on Friday, traders still see an 84% chance of the Federal Reserve cutting interest rates by a quarter percentage point in October, according to CME Group's FedWatch tool.
Those bets were bolstered on Tuesday by data that showed U.S. producer prices unexpectedly fell in September.
Investors will now focus on third-quarter earnings season beginning next week and analysts expect the worst quarterly profit performance since 2016, with earnings from S&P 500 companies declining nearly 3% from a year earlier, based on IBES data from Refinitiv.
U.S.-listed Chinese stocks declined, with Alibaba Group Holding, JD.com Inc and Baidu Inc falling between 1% and 3%.
Declining issues outnumbered advancers for a 3.23-to-1 ratio on the NYSE and for a 3.43-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and 20 new lows, while the Nasdaq recorded nine new highs and 121 new lows. (Reporting by Shreyashi Sanyal and Arjun Panchadar in Bengaluru; Editing by Sriraj Kalluvila)