* Investors continue to watch geopolitical tensions
* Energy shares lead losses in S&P
* Kate Spade plunges 23 pct in busiest trading day
* Dow down 0.2 pct, S&P 500 down 0.3 percent, Nasdaq down 0.4 pct (Updates to afternoon trading, changes quote)
By Akane Otani
NEW YORK, Aug 12 U.S. stocks fell modestly on Tuesday afternoon, with energy shares leading losses as investors monitored developments in Russia and Ukraine and the price of oil fell.
Losses were broad, and seven of the S&P 500's ten primary sectors were down in afternoon trading. Telecom services gained 0.5 percent, while on the tail end, energy and consumer discretionary shares dragged.
Traders rushed to sell shares of handbag and accessories retailer Kate Spade & Co, which plummeted 23.5 percent to $29.72 in its busiest day of trading ever. Better-than-expected sales had helped lift shares to a seven-year-high in early trading, but the stock reversed course after the company warned that gross margins would be weaker than expected for the year.
Russia sent a convoy of 280 trucks carrying humanitarian aid to eastern Ukraine on Tuesday. Western officials had been wary of the gesture, fearing Russia would use the guise of a humanitarian mission to invade Ukraine, but the Russian Foreign Ministry said it would hand off the convoy to the Red Cross after crossing the border.
Investors also kept an eye on Iraq, where the U.S. ruled out sending combat forces but said it would consider "additional political, economic and security options" to help its new prime minister-designate transition into office.
"This is another lull in the market. With earnings season basically done and people on vacation, any little bit of news will move the market," said Malcolm Polley, president and chief investment officer of Stewart Capital Advisors in Indiana, Pennsylvania.
"We already know the Middle East is unstable and that Russia is sending an aid convoy to Ukraine, so this is all the continuation of a longer-term issue that has been boiling for a long time."
The Dow Jones industrial average fell 19.42 points, or 0.12 percent, to 16,550.56, the S&P 500 was down 4.32 points, or 0.22 percent, to 1,932.6 and the Nasdaq Composite lost 16.66 points, or 0.38 percent, to 4,384.67.
Biotech company Tekmira Pharmaceuticals, which is developing an Ebola treatment, saw its shares plunge 21 percent after a recent rally in the stock. The World Health Organization said it backed the use of experimental Ebola drugs to treat the outbreak in West Africa.
Sharp declines in oil prices sent the S&P 500 energy index down 0.8 percent. Consol Energy was down 2.4 percent to $39.49 and Pioneer Natural Resources Company fell 2.3 percent to $203.95. Brent crude oil fell to a 13-month low. (Editing by Nick Zieminski)