US STOCKS-Wall St drifts lower as trade concerns weigh, big rate cut hopes fade

* 3M falls after RBC downgrade, weighs on industrials
* BASF profit warning drags on U.S. chemical companies
* Acacia soars on Cisco's $2.84 bln buyout deal
* Gains in Facebook, Netflix help keep Nasdaq afloat
* Dow down 0.29%, S&P off 0.03%, Nasdaq up 0.39%

(Updates to early afternoon)
By Medha Singh
July 9 (Reuters) - The S&P 500 and the Dow Industrials edged
lower on Tuesday, as investors worried over warnings of a hit to
earnings from the U.S.-China trade dispute and reined in hopes
of a steep interest rate cut this month.
In the latest indication of the trade war hurting
businesses, German chemicals giant BASF BASFn.DE forecast a
30% fall in its adjusted annual profit, triggering a 1.20% drop
in shares of U.S. chemical companies .SPXCM . Adding to the downbeat mood, RBC Capital Markets downgraded
3M Co MMM.N to "sector perform", citing macro pressures from
China, auto and electronics sectors. The industrial
conglomerate's shares fell 2.6% and pulled down the S&P
industrial sector .SPLRCI 0.56%.
The warnings come as second-quarter earnings season kicks
off in earnest next week. Profits at S&P 500 companies are set
to dip 0.2% from a year earlier, according to Refinitiv IBES
data.
"Second-quarter earnings are a very important part of the
puzzle for investors right now," said Michael Geraghty, equity
strategist at Cornerstone Capital Group in New York.
"What has been driving stocks throughout 2019 is optimism
about the Federal Reserve's policy and a trade agreement with
China, among other things."
Wall Street's main indexes have retreated from their record
closing highs after a robust June jobs report on Friday tempered
expectations of an aggressive 50 basis point interest rate cut
by the Federal Reserve.
Focus this week will be on Fed chief Jerome Powell's remarks
at his two-day testimony before the Congress, starting
Wednesday. Also due on Wednesday is the central bank's June
policy meeting minutes.
On the trade war front, the United States and China are set
to relaunch trade talks this week after a two-month hiatus.
White House economic adviser Larry Kudlow said discussions with
the European Union on a trade pact were also progressing.
At 12:47 p.m. ET, the Dow Jones Industrial Average .DJI
was down 79.05 points, or 0.29%, at 26,727.09, and the S&P 500
.SPX was down 1.03 points, or 0.03%, at 2,974.92.
The Nasdaq Composite .IXIC was up 31.32 points, or 0.39%,
at 8,129.70.
Gains in Amazon.com AMZN.O , Facebook Inc FB.O and
Netflix NFLX.O kept Nasdaq firmly in the positive territory.
Netflix rose 2% after Cowen and Co said the video streaming
services provider would benefit from high viewership for the
recently released third series of its original show "Stranger
Things".
Network gear maker Cisco Systems Inc CSCO.O said it would
buy Acacia Communications Inc ACIA.O for $2.84 billion in
cash, sending the optical component maker's shares 35% higher.
Declining issues outnumbered advancers for a 1.30-to-1 ratio
on the NYSE and for a 1.11-to-1 ratio on the Nasdaq.
The S&P index recorded 17 new 52-week highs and no new low,
while the Nasdaq recorded 45 new highs and 40 new lows.