US STOCKS-Wall St sags on China-driven economy fear, Visa off

                                

 * China growth worries, commodities weigh
 * Durable goods orders drop sharply in June
 * Shares of energy, raw materials sectors weigh down S&P 500
 * Dow off 0.3 pct; S&P 500 off 0.5 pct; Nasdaq off 0.4 pct
 * For up-to-the-minute market news click [STXNEWS/US]
 (Updates close with Visa's results and activity after the
bell, latest Nasdaq volume)
                                
 By Rodrigo Campos
                                
 NEW YORK, July 29 (Reuters) - U.S. stocks fell on
Wednesday as investors worried that China might be ready to
hit the brakes on lending, a move that could curb demand and
hinder the global economic recovery.
                                
 Concerns about China hurt commodity prices and hit shares
in the energy and raw materials sectors, while a steep drop in
U.S durable goods orders in June fed fears of more economic
weakness.
                                
 Oil futures <CLc1> fell $3.88, or 5.8 percent, to settle
at $63.35 per barrel after U.S. government data showed a
surprisingly large increase in crude inventories last week.
Shares of energy companies also slid, with Chevron Corp
<CVX.N> down 1.8 percent at $67.12. The S&P energy index
<.GSPE> dropped 2.1 percent.
                                
 "China has been a big driver of part of the global
recovery. Their stimulus is direct and quick," said Bobby
Harrington, managing director of trading for UBS in Boston.
                                
 Slower growth in China's economy "could limit upside and
create downward momentum" in the U.S. stock market, he said.
                                
 China's two biggest state-owned commercial banks have put
a lid on their 2009 lending targets, according to domestic
media reports, a move that will significantly slow overall
Chinese credit growth in the year's second half.
[ID:nPEK278491].
                                
 The Shanghai Composite Index <.SSEC> sank 5 percent on
Wednesday -- its biggest daily decline in eight months, but it
is still up about 80 percent for 2009.
                                
 Further weighing down stocks, yields of shorter-dated U.S.
Treasuries briefly hit five-week highs after the week's second
poor auction, increasing concern of a possible spike in
borrowing costs. [ID:nN29275145].
                                
 The Dow Jones industrial average <.DJI> dropped 26 points,
or 0.29 percent, to close at 9,070.72. The Standard & Poor's
500 Index <.SPX> fell 4.47 points, or 0.46 percent, to 975.15.
The Nasdaq Composite Index <.IXIC> lost 7.75 points, or 0.39
percent, to 1,967.76.
                                
 Each of the three major U.S. stock indexes gained 11
percent in the previous two weeks as upbeat corporate earnings
gave a second wind to a rally that drove the S&P 500 up 40
percent from a 12-year closing low hit in early March.
                                
 VISA FALLS LATE
                                
 After the closing bell, Visa Inc <V.N> reportedbetter-than-expected quarterly earnings after the closing
bell. But its stock fell 1.2 percent, or 78 cents, to $66.
During the regular session, Visa's stock rose 48 cents, or 0.7
percent, to close at $66.78 on the New York Stock Exchange
ahead of the earnings.
                                
 In Wednesday's regular session, the S&P 500's only
positive sectors were telecommunication services, healthcare
and consumer staples, the ones seen as able to better weather
economic downturns.
                                
 "After the big run-up, people get a bit more defensive,"
UBS's Harrington said.
                                
 The Commerce Department said June U.S. durable goods
orders fell 2.5 percent, the largest drop since January, after
rising by a downwardly revised 1.3 percent in May.
[ID:nN28158575] Durable goods are manufactured goods such as
washing machines, refrigerators and cars, intended to last
three years or more.
                                
 CATERPILLAR SLIPS, YAHOO SINKS
                                
 Natural resources stocks tracked commodity prices down,
with miner Freeport-McMoRan Copper & Gold Inc <FCX.N> down 5.2
percent at $55.51. The S&P materials index <.GSPM> fell 2.1
percent.
                                
 Caterpillar Inc <CAT.N>, a maker of bulldozers and
excavators, shed 2.5 percent to $41.83 and was a top drag on
the Dow industrials.
                                
 Among the Nasdaq's major decliners, Yahoo Inc <YHOO.O>
shares tumbled after the Internet media company announced an
advertising deal with Microsoft Corp <MSFT.O>.
                                
 Yahoo's stock plunged 12.1 percent to $15.14 as some
investors were disappointed by the deal's scope.
[ID:nN29216653] In contrast, Microsoft shares rose 1.4 percent
to $23.80.
                                
 Shares of Google Inc <GOOG.O>, a direct competitor of the
new partnership, fell 0.8 percent to $436.24.
                                
 In earnings-related news, shares of Sprint Nextel Corp
<S.N> sank 11.8 percent to $4.05 after the No. 3 U.S.
cellphone service posted a wider quarterly loss than it did a
year ago and revenue fell 10 percent. [ID:nN29312040]
                                
 Volume was light on the New York Stock Exchange during the
regular session, where about 1.25 billion shares changed
hands, less than last year's estimated daily average of 1.49
billion. On the Nasdaq, about 2.11 billion shares traded, less
than last year's daily average of 2.28 billion.
                                
 Decliners outnumbered advancers on the NYSE by a ratio of
about 3 to 2. On the Nasdaq, eight stocks fell for every five
that rose.
 (Editing by Jan Paschal)