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* All 3 major indexes reverse gains as Trump announces new tariffs
* 10-year Treasury yields dip to more than 2-1/2-year low
* GM, Kellogg, Verizon, Yum Brands post better-than-expected earnings
* U.S. manufacturing grows at slowest pace in nearly 3 years
* Indexes down: Dow 0.85%, S&P 500 0.78%, Nasdaq 0.76% (Updates to late afternoon, changes byline, adds NEW YORK dateline)
By Stephen Culp
NEW YORK, Aug 1 (Reuters) – Wall Street abruptly reversed its gains on Thursday as U.S. President Donald Trump tweeted that he would impose an additional 10% tariffs on $300 billion in Chinese imports, sending the long-running U.S. China trade war that has rattled markets for months back to center stage.
After spending most of the session on track for their best day since June, all three major U.S. stock indices took a sudden U-turn as investors quickly turned into sellers following the tweet.
Trump’s remarks also sent U.S. Treasury yields lower, with the 10-year yield dropping to its lowest level since November 2016.
The CBOE Volatility Index, a gauge of investor anxiety, shot to its highest reading since June 5.
“It shows the market’s sensitivity to trade,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “This is a continuation of the fraying that seems to be going on with the trade talks.
“Nobody knows what Trump’s agenda is, what he would look at as a win,” Carlson added. “Obviously he’s seeing China’s reluctance to do anything toward a resolution and he’s throwing in a grenade.”
Earlier in the session, Wall Street got a boost from positive earnings from a wide range of companies, including General Motors Co, Kellogg Co, Verizon Communications Inc and Yum Brands Inc, among others.
In economic news, the U.S. manufacturing sector expanded at its slowest pace in almost three years in July, according to the Institute for Supply Management’s purchasing manager index (PMI).
“The manufacturing space in the U.S. is slowing,” said Robert Pavlik, chief investment strategist, senior portfolio manager at SlateStone Wealth LLC in New York. “It’s something to be mindful of.
“If you want to say the Fed had to cut rates, that’s a good reading to point to,” Pavlik added.
Investors now look to Friday’s release of the Labor Department’s closely watched jobs report, which is expected to show the U.S. economy added 164,000 jobs last month, with the unemployment rate seen holding steady at 3.7%.
The Dow Jones Industrial Average fell 227.81 points, or 0.85%, to 26,636.46, the S&P 500 lost 23.38 points, or 0.78%, to 2,957 and the Nasdaq Composite dropped 61.86 points, or 0.76%, to 8,113.56.
Of the 11 major sectors in the S&P 500, eight were trading lower, with financials and trade-sensitive industrials seeing the biggest losses.
Second-quarter earnings season continues at full throttle, with 355 of S&P 500 companies having reported. Of those, 74.4% have bested Street estimates, according to Refinitiv data.
Analysts now see S&P 500 earnings growth of 2.5%, up from just 0.3% a month ago, per Refinitiv.
Pick-ups and SUVs drove General Motors’ second-quarter profit beat, but the automaker’s stock turned negative after the Trump tweet and was last down 0.6%.
Verizon shares rose 0.6% after the largest U.S. mobile carrier surprised consensus estimates to the upside, reporting more net monthly phone subscribers than expected.
Kellogg surged 10.1% as higher North American demand helped the packaged food company beat second-quarter estimates.
Shares of Yum Brands Inc jumped 4.4% after beating analyst profit and sales expectations on better-than-expected growth at all its restaurant chains, which include Taco Bell and Pizza Hut.
Declining issues outnumbered advancing ones on the NYSE by a 1.57-to-1 ratio; on Nasdaq, a 1.60-to-1 ratio favored decliners.
The S&P 500 posted 28 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 73 new highs and 97 new lows. (Reporting by Stephen Culp; Editing by Dan Grebler)