* Fed meeting on monetary policy underway
* Commodity stocks weigh after China July imports data
* Stocks off: Dow 1 pct, S&P 1.1 pct, Nasdaq 1.4 pct
* For up-to-the-minute market news see []
(Updates to early morning trade)
By Angela Moon
NEW YORK, Aug 10 (Reuters) - U.S. stocks dropped sharply on
Tuesday as commodity shares were hit by indications China's
economic growth may be slowing and by mounting uncertainty over
the Federal Reserve's assessment of the U.S. economy, due later
in the session.
The S&P 500 <.SPX> dipped below its 200-day moving average,
with commodity and energy stocks as the biggest decliners on
the index. China's July imports data showed a
slower-than-expected growth, signaling the world's
third-largest economy may be losing its steam.
"China is certainly the global growth engine for almost all
parts of the world, especially to the United States. Their
macro data is influencing the psychology of investors of all
assets here," said Craig Peckham, equity trading strategist at
Jefferies & Co in New York.
Other data showed U.S. non-farm productivity unexpectedly
dropped in the second quarter, the first decline since late
2008, adding selling pressure on equities.
The S&P 500 Index's 200-day moving average, now at
1,115.50, is a widely followed technical signal, and a close
below it could indicate a turnaround in market momentum.
The Dow Jones industrial average <> was down 104.64
points, or 0.98 percent, at 10,594.11. The Standard & Poor's
500 Index <.SPX> was down 11.91 points, or 1.06 percent, at
1,115.88. The Nasdaq Composite Index <> was down 32.07
points, or 1.39 percent, at 2,273.62.
Speculation has been growing about whether the Fed will
send a clear signal it is prepared to print more money to
support a faltering U.S. economic recovery, if necessary. The
Fed will release a statement from the meeting at around 2:15
p.m. (1815 GMT). For details, see []
Investors are bracing for a number of scenarios: While more
easy money from the Fed could encourage investors to buy
stocks, a more cautious forecast from the central bank, whose
outlook has still been for a moderate recovery, may heighten
concerns that the economic growth may be losing its steam.
A mere acknowledgment of a blip might also disappoint
investors who have been betting the Fed would make a more
concrete move, such as buying bonds to pull down market rates.
Steve Goldman, market strategist at Weeden & Co, said the
Fed will not make significant changes on its policy, but it
might "build a foundation for a possible stimulus in a few
months if the economy continues to show signs of slowing
growth, in which case the market would see a sign of relief."
In recent days, the market has reacted to the possibility
of additional action from the Fed to revive the economy,
especially after Friday's weaker-than-expected jobs report for
July.
The S&P materials index <.GSPM> was down 1.7 percent and
the energy index <.GSPE> was off 1.3 percent.
On the blue-chip index, Alcoa Inc <AA.N> fell 2.7 percent
to $11.34 and Exxon Mobil Corp <XOM.N> dropped 1.2 percent to
$61.70.
The CBOE volatility index <.VIX>, Wall Street's yardstick
of investor anxiety, rose 7.5 percent to 23.81.
(Editing by Padraic Cassidy)
