US STOCKS-Stocks fall as trade concerns spark growth fears

* China ready to hit back at U.S. with rare earths
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* All 11 S&P sectors close lower
* Capri plunges after profit forecast disappoints
* Dow down 0.87%, S&P 500 down 0.69%, Nasdaq down 0.79%

(Updates to market close)
By Chuck Mikolajczak
NEW YORK, May 29 (Reuters) - U.S. stocks fell on Wednesday,
with the S&P 500 and Nasdaq closing just above key support
levels, as worries that a lengthy U.S.-China trade war would
crimp global growth pushed investors into the safety of
government bonds.
Trade tensions between the two largest economies in the
world showed little signs of relaxing as Chinese newspapers
warned that Beijing could use rare earth elements to strike back
after President Donald Trump remarked on Monday that he was "not
yet ready" to make a deal with China over trade. Rare earths are
a group of 17 chemical elements used in everything from
high-tech consumer electronics to military equipment.
Adding to worries, China's Huawei Technologies Co Ltd
HWT.UL filed a lawsuit against the U.S. government late on
Tuesday in its latest bid to fight sanctions from Washington.

"It is trade and the effect of trade. The problem is right
now it is what I call an 'unquantifiable potential outcome' - so
nobody really knows what is going to happen," said Sam Stovall,
chief investment strategist at CFRA Research in New York.
"All we know is there is increasingly heated rhetoric
regarding trade and if we are not careful we end up in a trade
war that will definitely slow economic growth and possibly push
us into recession," he added.
Each of the major U.S. indexes suffered their fourth decline
in five sessions. The S&P is down 5.5% from its April 30 closing
high. However, both the S&P 500 and Nasdaq managed to close just
above their 200-day moving averages, seen as a key level of
support.
The uncertainty in markets has pressured investors to dump
equities and seek safety in U.S. government debt, which has led
to an inversion of the yield curve between 3-month bills and
10-year Treasury notes, a precursor to a possible recession.
Benchmark U.S. 10-year note yields US10YT=RR touched a low of
2.21%, the lowest since September 2017.
Federal funds futures indicated that traders saw a nearly
58% chance the U.S. central bank would lower policy rates by at
least a quarter of a percentage point at its Sept. 17-18
meeting, compared with a 50% likelihood late on Tuesday.
Each of the 11 major S&P sectors were in negative territory,
with utilities .SPLRCU the worst performer.
The Dow Jones Industrial Average .DJI fell 221.36 points,
or 0.87%, to 25,126.41, the S&P 500 .SPX lost 19.37 points, or
0.69%, to 2,783.02 and the Nasdaq Composite .IXIC dropped
60.04 points, or 0.79%, to 7,547.31.
The Dow Jones Industrial Average closed at its lowest level
since Feb. 11, while the S&P and Nasdaq ended the session at
their lowest closing levels in nearly three months.
The benchmark S&P index briefly fell below its 200-day
moving average, a key indicator of long-term momentum during the
session.
Among other stocks, Johnson & Johnson JNJ.N dropped 4.19%
after a lawsuit that accused the drugmaker of fueling the U.S.
opioid epidemic entered its second day of trial, pulling
healthcare stocks .SPXHC down 1.20%. Capri Holdings Ltd CPRI.N plunged 9.85% as the worst-
performing S&P 500 component after the Michael Kors fashion
business owner issued a disappointing first-quarter profit
forecast as it spends more on marketing. General Mills GIS.N dropped 5.56% after Goldman Sachs
downgraded the cereal maker's stock to "sell."
Declining issues outnumbered advancing ones on the NYSE by a
2.05-to-1 ratio; on Nasdaq, a 2.23-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 40 new lows; the
Nasdaq Composite recorded 25 new highs and 213 new lows.
About 7.31 billion shares changed hands on U.S. exchanges,
compared with the 7.04 billion daily average over the last 20
sessions.