* Trump’s new threat follows last week’s tit-for-tat tariffs
* Boeing, Caterpillar lead Dow lower
* Indexes down: Dow 1.14 pct, S&P 0.41 pct, Nasdaq 0.32 pct (Updates to late afternoon, changes byline, adds NEW YORK to dateline)
By April Joyner
NEW YORK, June 19 (Reuters) - U.S. stocks fell on Tuesday as a sharp escalation in the trade dispute between the United States and China rattled the markets, though the three major indexes pared losses from earlier in the session.
Tuesday’s losses put the Dow Jones Industrial Average back in negative territory for the year.
President Donald Trump threatened to impose a 10 percent tariff on another $200 billion of Chinese goods, and Beijing warned it would retaliate.
Trump said his move followed China’s decision to raise tariffs on $50 billion in U.S. goods, which came after the White House announced similar tariffs on Chinese goods on Friday.
“Investors are waking up to the idea that all the rhetoric on trade could be more than just a negotiating tactic,” said Emily Roland, head of capital markets research at John Hancock Investments in Boston.
The Dow Jones Industrial Average fell 284.82 points, or 1.14 percent, to 24,702.65, the S&P 500 lost 11.32 points, or 0.41 percent, to 2,762.43 and the Nasdaq Composite dropped 24.94 points, or 0.32 percent, to 7,722.09.
The Dow briefly dropped below its 100-day moving average but rebounded later in the session, though the index remained below its 50-day moving average.
“A 300-point move (on the Dow) is not what it used to be,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta. “Based on a technical perspective, the market is handling this in stride.”
The CBOE Volatility Index, commonly known as Wall Street’s fear gauge, hit nearly a three-week high of 14.68 points, before easing to 13.38.
The small-cap Russell 2000 index, whose components are more domestically focused than large-cap companies, was barely changed.
Sectors seen as bond proxies due to their high dividend yields, including utilities, telecoms, consumer staples and real estate, advanced.
Shares of Boeing, which has been a proxy for trade-war tensions with China, fell 3.9 percent, weighing the most on the Dow. Construction equipment maker Caterpillar closely followed with a 3.7 percent drop.
The declines weighed on the S&P industrials index, which fell 2.0 percent, its biggest one-day percentage drop in nearly two months.
Shares of chipmakers, which depend on China for a large portion of their revenue, slipped. The Philadelphia Semiconductor index fell 1.2 percent.
Tariff worries dragged FedEx Corp down 1.9 percent. The logistics company’s shares were the biggest weight on the the Dow Transports, which fell 1.8 percent. FedEx is scheduled to issue its quarterly report after the bell on Tuesday.
Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio; on Nasdaq, a 1.25-to-1 ratio favored decliners.
The S&P 500 posted seven new 52-week highs and four new lows; the Nasdaq Composite recorded 108 new highs and 41 new lows. (Additional reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila and Chizu Nomiyama)