December 4, 2018 / 3:35 PM / 7 days ago

US STOCKS-Wall Street drops on trade truce doubts, bond market jitters

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* Technology, industrials lead declines on S&P

* Flattening U.S. yield curves hit bank stocks

* Apple dips on weak outlook from supplier Cirrus Logic

* Dollar General falls on cutting full-year forecast

* Indexes down: Dow 0.67 pct, S&P 0.53 pct, Nasdaq 0.62 pct (Updates to open)

By Shreyashi Sanyal

Dec 4 (Reuters) - U.S. stocks dropped on Tuesday, as skepticism over chances of a breakthrough in the U.S.-China trade talks weighed on industrial and technology companies, while banks fell as flattening U.S. bond yield curves raised fears of a slowing domestic economy.

The three major indexes pulled back just over half a percent following a rally on Monday after Washington and Beijing agreed to a three-month truce, offering relief to a market clouded for much of the year by the prospect of an all-out trade war.

However, different dates from the White House regarding start of the ceasefire and skepticism over an actual resolution in the agreed negotiating window dampened the mood.

Traders were questioning the recent trade agreement as "it isn't very clear on what both sides agreed to, other than just a temporary truce," Scott Brown, chief economist at Raymond James in St. Petersburg, Florida said.

The S&P technology sector fell 0.96 percent, while industrials dropped 1.22 percent. Both sectors tend to react the most to trade news and had led the market's gains on Monday.

Yields on two U.S. Treasury maturities at the front of the curve rose above longer-dated 5-year notes for the first time in more than a decade.

Meanwhile, the difference between yields on the 2-year and benchmark 10-year notes — with an inversion seen as a precursor of a U.S. recession — narrowed to its lowest in over a decade.

That pressured bank stocks, with the KBW Bank index falling 1.78 percent, while the overall S&P financial sector dropping 1.41 percent.

At 9:59 a.m. ET the Dow Jones Industrial Average was down 173.97 points, or 0.67 percent, at 25,652.46, the S&P 500 was down 14.80 points, or 0.53 percent, at 2,775.57 and the Nasdaq Composite was down 46.18 points, or 0.62 percent, at 7,395.34.

Apple Inc, one of Monday's leaders, dropped 2.0 percent as supplier Cirrus Logic Inc trimmed its revenue outlook, adding to growing evidence that the latest iPhones are not selling well. Cirrus fell 4.6 percent.

Toll Brothers Inc dropped 8.3 percent after the luxury home builder reported its first fall in quarterly orders in more than four years on rising interest rates and higher home prices.

Dollar General Corp fell 5 percent after lowering its full-year profit and sales forecasts, hit by higher costs related to hurricanes.

Declining issues outnumbered advancers for a 1.89-to-1 ratio on the NYSE and a 1.93-to-1 ratio on the Nasdaq.

The S&P index recorded 32 new 52-week highs and one new low, while the Nasdaq recorded 27 new highs and 35 new lows. (Reporting by Shreyashi Sanyal in Bengaluru; Additional reporting by Sruthi Shankar)

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