US STOCKS-Indexes tumble as visa restrictions fuel U.S.-China worries

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* U.S. still pushing to limit capital flows to China -BBG
* Indexes down: Dow 1.2%, S&P 500 1.6%, Nasdaq 1.7%

(Updates to close)
By Caroline Valetkevitch
NEW YORK, Oct 8 (Reuters) - U.S. stocks ended down sharply
and near the day's lows on Tuesday as news that the United
States has imposed visa restrictions on Chinese officials
overshadowed comments by Federal Reserve Chairman Jerome Powell
suggesting openness to further interest rate cuts.
Stocks cut losses following Powell's remarks but quickly
reversed course to fall further in late trading after the U.S.
State Department said it has imposed visa restrictions on
Chinese government and Communist Party officials it believes
responsible for the detention or abuse of Muslim minorities in
Xinjiang province. The move stoked tensions ahead of high-level trade talks in
Washington this week and added to the day's bearishness.
Earlier, the U.S. government widened its trade blacklist to
include some of China's top artificial intelligence
start-ups. "The market was down because the headlines were negative
coming into the U.S.-China negotiations. With Powell not
changing the narrative, it makes sense that on further signs of
deterioration in trade that the market would sell off," said
Keith Lerner, chief market strategist at SunTrust Advisory
Services in Atlanta.
Losses were broad-based, led by a 2% drop in the
interest-rate sensitive S&P 500 financial index .SPSY , while
the Philadelphia Semiconductor index .SOX dropped 3.1%.
A Bloomberg report said that Washington was moving ahead
with efforts to limit capital flows to China, while a South
China Morning Post report said China had toned down expectations
ahead of the talks in Washington.
In his remarks, Powell also said the time has come to allow
the Fed's asset holdings to begin to expand again, and that the
Fed would "soon announce measures to add to the supply of
reserves over time." The Dow Jones Industrial Average .DJI fell 313.98 points,
or 1.19%, to 26,164.04, the S&P 500 .SPX lost 45.73 points, or
1.56%, to 2,893.06 and the Nasdaq Composite .IXIC dropped
132.52 points, or 1.67%, to 7,823.78.
"The overall tone from the Fed is showing a little more
concern," said Willie Delwiche, investment strategist at Baird
in Milwaukee.
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. Declining issues outnumbered advancing ones on the NYSE by a
3.01-to-1 ratio; on Nasdaq, a 3.42-to-1 ratio favored decliners.
The S&P 500 posted 6 new 52-week highs and 22 new lows; the
Nasdaq Composite recorded 11 new highs and 148 new lows.
Volume on U.S. exchanges was 6.74 billion shares, compared
with the 7.2 billion average for the full session over the last
20 trading days.