US STOCKS-Indexes briefly cut losses in choppy trade after Powell comments

(For a live blog on the U.S. stock market, click LIVE/ or
type LIVE/ in a news window.)
* U.S. still pushing to limit capital flows to China -BBG
* Indexes down: Dow 0.8%, S&P 500 1%, Nasdaq 1%

(Updates to after Powell speech)
By Caroline Valetkevitch
NEW YORK, Oct 8 (Reuters) - U.S. stocks briefly cut losses
in choppy trading on Tuesday after Federal Reserve Chairman
Jerome Powell suggested openness to further rate cuts and said
the time has come to allow the Fed's asset holdings to begin to
expand again.
Powell also said the Fed would "soon announce measures to
add to the supply of reserves over time." However, indexes soon reversed course to fall further in
late trading after the U.S. State Department said it is imposing
visa restrictions on Chinese officials for treatment of Muslims
in Xinjiang. The interest-rate sensitive financials index .SPSY was
down more than 1%.
Market expectations have increased that the Fed will cut
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. "The overall tone from the Fed is showing a little more
concern," said Willie Delwiche, investment strategist at Baird
in Milwaukee.
"The Fed is trying to send a message of 'we are paying
attention and we are on top of this, and we are going to focus
on the mission and not the politics,'" he added.
At 3:17 p.m. ET, the Dow Jones Industrial Average .DJI
fell 213.3 points, or 0.81%, to 26,264.72, the S&P 500 .SPX
lost 31.08 points, or 1.06%, to 2,907.71 and the Nasdaq
Composite .IXIC dropped 90.75 points, or 1.14%, to 7,865.55.
A Bloomberg report that Washington was moving ahead with
efforts to limit capital flows to China and the inclusion of
some top Chinese startups on a blacklist also weighed on stocks.
The trade blacklist was widened to include Chinese video
surveillance firm Hikvision 002415.SZ and surveillance
equipment maker Zhejiang Dahua Technology 002236.SZ among
others, drawing a sharp rebuke from Beijing.
The Philadelphia Semiconductor index .SOX dropped 1.7%.
U.S. and Chinese deputy trade negotiators were to meet in
Washington for a second day of talks on Tuesday, with high-level
discussions scheduled to start on Thursday.
Declining issues outnumbered advancing ones on the NYSE by a
2.09-to-1 ratio; on Nasdaq, a 2.22-to-1 ratio favored decliners.
The S&P 500 posted 6 new 52-week highs and 20 new lows; the
Nasdaq Composite recorded 9 new highs and 138 new lows.