US STOCKS-Wall St dips on trade tensions, hopes of rate cut limit losses

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* U.S. consumer prices barely rise in May
* Banks fall as prospects of rate cut rise
* Expectations low for Trump-Xi talks, preparations limited
* Indexes dip: Dow 0.03%, S&P 0.05%, Nasdaq 0.21%

(Updates to open)
By Shreyashi Sanyal
June 12 (Reuters) - Wall Street's main indexes dipped on
Wednesday as worries of a protracted U.S.-China trade war were
heightened by Washington's tough stance, but losses were limited
by a tame inflation report that supported the case for an
interest rate cut.
Data showed consumer prices edged up 0.1% in May, in line
with expectations of economists polled by Reuters and pointed to
moderate inflation. Excluding the volatile food and energy
components, the CPI nudged up 0.1%. "We're not seeing much signs of creeping inflation, or at
least increasing inflation. That's one of the things that gives
the Federal Reserve to think about lowering rates later this
year," Art Hogan, chief market strategist at National Securities
in New York.
"This is a market that would love to see us get back to the
negotiating table. The longer these trade tensions last, the
most damage it'll do to the economy, and therefore to
earnings."
Fresh worries erupted on the trade front after President
Donald Trump said he was holding up a deal with China and had no
interest in moving ahead unless Beijing agrees to four or five
major points. With under three weeks to go before proposed talks between
the United States and Chinese leaders, sources say there has
been little preparation for a meeting even as the health of the
world economy is at stake.
Hopes that the Federal Reserve will act to counter a slowing
global economy due to escalating trade war have spurred a rally
in stocks this month, with the S&P 500 index .SPX up about 5%
so far in June.
Fed policymakers will meet on June 18-19 and markets have
priced in at least two rate cuts by the end of 2019. Fed fund
futures FEDWATCH imply around an 80% chance of an easing as
soon as July.
Banking stocks .SPXBK , which tend to benefit from a higher
interest rate environment, dropped 0.55%.
At 9:55 a.m. ET the Dow Jones Industrial Average .DJI was
down 8.88 points, or 0.03%, at 26,039.63, the S&P 500 .SPX was
down 1.35 points, or 0.05%, at 2,884.37 and the Nasdaq Composite
.IXIC was down 16.18 points, or 0.21%, at 7,806.39.
Semiconductor stocks, which get a sizeable portion of
revenue from China, declined, with the Philadelphia
Semiconductor index .SOX slipping 1.27%.
Adding pressure on the main indexes were declines in shares
of oil majors Exxon Mobil Corp XOM.N and Chevron Corp CVX.N
as crude prices fell nearly 2%. The energy index .SPNY fell
0.90%, the most among the 11 S&P sector. O/R
Qualcomm Inc QCOM.O dropped 1.56% after smartphone maker
LG Electronics Inc 066570.KS and U.S. Federal Trade Commission
opposed the chip supplier's efforts to put a sweeping U.S.
antitrust decision on hold.
Declining issues outnumbered advancers for a 1.25-to-1 ratio
on the NYSE and a 1.31-to-1 ratio on the Nasdaq.
The S&P index recorded 19 new 52-week highs and two new
lows, while the Nasdaq recorded 12 new highs and 37 new lows.