December 1, 2017 / 5:47 PM / a year ago

US STOCKS-Wall Street hit by ABC report on Flynn

* ABC reports Flynn to say Trump told him to talk to Russians

* Shares trim losses as McConnell says has votes for tax bill

* Dow, S&P, down half a percent, Nasdaq off 0.8 percent (Adds more quotes, updates prices)

By Sruthi Shankar

Dec 1 (Reuters) - U.S. stocks fell on Friday after ABC News reported former national security adviser Michael Flynn was prepared to tell investigators that before taking office President Donald Trump had directed him to make contact with Russians.

Wall Street’s main indexes all fell by more than 1 percent after the report, which cited an unnamed Flynn confident and added to concerns about President Trump’s exposure to a probe into Russian meddling in last year’s campaign.

But investors quickly took back some of those losses, buoyed by a promise by Senate leader Mitch McConnell that he had enough votes to pass the Republicans signature tax bill, which includes major incentives for corporate America.

By 13:11 p.m. ET (1811 GMT), the Dow Jones Industrial Average and the S&P 500 were both down around 0.5 percent on the day.

“We have to point to something that is new and that would be the Flynn announcement,” Art Hogan, chief market strategist with Wunderlich Securities in New York.

“The problem is we don’t know exactly what he’s going to say. That’s the unknown and the market doesn’t like to try to price unknowns. We have an information vacuum.”

U.S. stocks have been rising all year, helped by hopes that Trump and a Republican-controlled Congress would pass business-friendly measures to free up more growth and investment in an economy already growing solidly.

A fall back in major tech stocks on Wednesday, however, added to hints that a long-awaited halt to the market’s eight-year long rally could also be in the offing.

The S&P 500 has posted a 1-percent daily loss only four times in 2017.

All the major S&P sectors barring energy were down. The CBOE Volatility index, Wall Street’s fear gauge, jumped to its highest in more than three months.

“Although today’s Washington drama could cause some near-term volatility, the overall economy is on a very firm footing,” said Ryan Detrick, Senior Market Strategist for LPL Financial.

“At the same time, a record 13 months in a row of gains for the S&P 500 and the longest streak ever without a 3 percent correction makes the odds of a normal pullback quite high.”

Declining issues outnumbered advancers on the NYSE by 1,815 to 1,057. On the Nasdaq, 2,150 issues fell and 727 advanced.

The Dow Jones industrial average was down 92.64 points, or 0.38 percent, at 24,179.71, while the S&P 500 fell 12.59 points, or 0.475529 percent, at 2,634.99.

The Nasdaq Composite was down 53.79 points, or 0.78 percent, at 6,820.18. (Reporting by U.S. stocks team; editing by Patrick Graham and Bernard Orr)

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