US STOCKS-S&P 500 and Dow end lower dragged down by trade tensions

By Chibuike Oguh, Johann M Cherian and Sukriti Gupta

NEW YORK, March 4 (Reuters) - The benchmark S&P 500 and Dow finished lower on Tuesday as trade tensions escalated following U.S. President Donald Trump's new tariffs on Canada, Mexico and China.

The 25% tariffs on imports from Mexico and Canada, along with doubled duties on Chinese goods, took effect on Tuesday. China and Canada retaliated while Mexican President Claudia Sheinbaum vowed to respond likewise, without giving details.

"Equity valuations have been very elevated and there's been yellow flags all over the horizon given moves to cut government spending," said Ben McMillan, chief investment officer at IDX Insights in Tampa, Florida. "Now on top of that, we have all this rhetoric around tariffs."

Citigroup C.N and JPMorgan Chase & Co JPM.N fell, sending the bigger banks index .SPXBK lower.

The CBOE market volatility index .VIX rose 0.70% to its highest since December 20.

"The fear here is that it's going to slow (economic) growth," said Adam Sarhan, CEO of 50 Park Investments in New York. "And when you have a slowdown in economic conditions, it's a situation where banks specifically make less money because fewer goods and services are traveling through the economy."

According to preliminary data, the S&P 500 .SPX lost 71.04 points, or 1.21%, to end at 5,778.68 points, while the Nasdaq Composite .IXIC lost 67.12 points, or 0.37%, to 18,283.07. The Dow Jones Industrial Average .DJI fell 673.34 points, or 1.56%, to 42,517.90.

Car makers Ford F.N and General Motors GM.N, which have vast supply chains across North America, fell. The domestically focused Russell 2000 index .RUT dropped.

Wall Street is really concerned, McMillan said. "The likelihood of tariffs will lead to higher prices and therefore lower spending."

Target TGT.N fell after the retailer forecast full-year comparable sales below estimates.

Best Buy BBY.N slumped after the electronics retailer issued a downbeat forecast, while Walgreens WBA.O jumped as a report hinted that the pharmacy chain is closing in on a take-private deal by Sycamore Partners.