US STOCKS-Wall St pressured as Huawei fallout worries spark tech sell-off

By Shreyashi Sanyal and Sruthi Shankar

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* Apple, tech stocks drop as U.S.-China trade tensions mount

* Top chipmakers to not supply Huawei - report

* Six of 11 major S&P sectors trading lower

* Sprint, T-Mobile jump as merger wins FCC chair's backing

* Indexes down: Dow 0.32%, S&P 0.54%, Nasdaq 1.23% (Updates to early afternoon, adds comments)

By Shreyashi Sanyal and Sruthi Shankar

May 20 (Reuters) - U.S. stocks dropped on Monday, as Washington's restrictions on China's Huawei Technologies stoked fears about a hit to the broader technology sector and ratcheted up trade tensions between the world's two largest economies.

Apple Inc slumped 3.4%, weighing the most on the three main indexes and driving down the S&P 500 technology sector 1.51%, the biggest decliner among the six S&P sectors trading lower.

The iPhone maker was also pressured by a warning from HSBC that higher prices for the company's products following the latest increases in tariffs could have "dire consequences" on demand.

U.S. suppliers of Huawei, including Qualcomm , Micron Technology and Broadcom Inc, fell between 3.2% and 5.3%, while the Philadelphia Semiconductor Index slid 3.19%, its lowest level in over two months.

"This whole thing is going to have an impact on earnings, consumers will probably shift buying habits and it will also turn up pressure on the U.S. and China to reach a deal sooner," said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

Huawei, the world's largest telecoms equipment maker, was added to a trade blacklist by the Trump administration on Thursday, piling on more worries for global markets reeling under uncertainties sparked by the latest round of tariffs.

Mobile phone parts maker Lumentum Holdings Inc said it would halt shipments to Huawei and cut its quarterly revenue expectations, driving its shares down 3%.

"Inventory corrections are going on in the semiconductor space and the industry is pricing in the Huawei impact on the value chain but they are not pricing in the global slowdown," said Peter Cecchini, managing director and chief market strategist at Cantor Fitzgerald in New York.

Alphabet Inc's Google has suspended some business with Huawei, Reuters reported on Sunday, while chipmakers including Intel Corp, Qualcomm, Xilinx Inc and Broadcom will not supply the Chinese company until further notice, according to a Bloomberg report.

Helping limit losses on the main indexes were gains in Sprint Corp and T-Mobile US Inc.

Sprint shares jumped 22.5%, while T-Mobile rose 5.1% after their proposed $26 billion merger won support of the U.S. telecoms regulator chairman.

Rivals Verizon Communications Inc and AT&T Inc gained about 2% each.

At 12:55 p.m. ET, the Dow Jones Industrial Average was down 81.38 points, or 0.32%, at 25,682.62. The S&P 500 was down 15.54 points, or 0.54%, at 2,843.99 and the Nasdaq Composite was down 95.85 points, or 1.23%, at 7,720.43.

After touching record highs in May, Wall Street's main indexes have succumbed to selling pressure on mounting concerns about a prolonged U.S.-China trade war. The S&P 500 is on track to post its worst monthly decline since the December sell-off, trading nearly 4% off its all-time high.

A clutch of retailers such as Home Depot, Nordstrom , Kohl's and Target report this week and investors will watch out for comments on the impact of the latest round of tariffs.

Dish Network Corp shares tumbled 9.9%, the most among S&P 500 companies, after the company said it would buy broadcast satellite service assets from EchoStar Corp in an $800 million deal.

Declining issues outnumbered advancers for a 1.59-to-1 ratio on the NYSE and for a 1.52-to-1 ratio on the Nasdaq.

The S&P index recorded 24 new 52-week highs and 11 new lows, while the Nasdaq recorded 26 new highs and 126 new lows. (Reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila)