* U.S. plans limits on Chinese investment in tech firms
* Harley Davidson sees extra costs due to EU tariffs, shares drop
* Oil drops after recent run-up, drags energy stocks lower
* Indexes down: Dow 1.04 pct, S&P 0.89 pct, Nasdaq 1.28 pct (Updates to open)
By Sruthi Shankar
June 25 (Reuters) - Wall Street's main indexes dropped on Monday as a move to check Chinese investments in U.S. technology firms further raised tensions between the United States and its trading partners.
The U.S. Treasury Department was drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with "industrially significant technology," a government official said on Sunday.
A separate report by the Wall Street Journal said the U.S. Commerce Department and National Security Council were proposing "enhanced" export controls to keep such technologies from being shipped to China.
Technology stocks bore the brunt of the news, with the S&P technology index falling 1.5 percent, the most among the major S&P 11 sectors.
The Philadelphia Semiconductor index dropped 2.3 percent, with chipmakers taking a hit as they depend on China for a large part of their revenue.
The move marks another escalation of President Donald Trump's trade conflict with China, which has sent ripples across financial markets and threatened to dent global growth.
Harley-Davidson dropped 1.2 percent after the motorcycle maker forecast additional costs due to European Union tariffs.
Trump, last week, threatened to impose a 20 percent tariff on all European Union car imports. The EU — which has promised retaliatory measures on Harley-Davidson, bourbon and other products — vowed to respond.
"The catalyst for weakness is overnight reports pointing to White House plans to tighten restrictions on Chinese investments in the US and limiting tech exports to China. Moreover, EU rhetoric continues to be tough," Peter Cecchini, chief market strategist at Cantor Fitzgerald in New York, wrote in a client note.
At 9:56 a.m. ET the Dow Jones Industrial Average was down 255.62 points, or 1.04 percent, at 24,325.27, the S&P 500 was down 24.51 points, or 0.89 percent, at 2,730.37 and the Nasdaq Composite was down 98.58 points, or 1.28 percent, at 7,594.23.
Brent crude prices fell about 1.7 percent as investors prepared for an extra 1 million barrels per day in output to hit the markets after OPEC and its partners agreed to raise production. The S&P energy index was down 1.4 percent.
Campbell Soup jumped 7.6 percent after a New York Post report that Kraft Heinz was considering buying the company. Kraft Heinz rose 2 percent.
Declining issues outnumbered advancers for a 3.17-to-1 ratio on the NYSE and for a 3.40-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and 11 new lows, while the Nasdaq recorded 26 new highs and 26 new lows. (Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)