* Chinese yuan hits four-year low, falling for second day
* Dow reaches 6-month low, Nasdaq hits 1-month low
* Alibaba falls to record low as revenue growth slows
* Traders price less than 40 pct chance for Sept rate hike
* Indexes down: Dow 1.3 pct, S&P 1.3 pct, Nasdaq 1.6 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
Aug 12 (Reuters) - Wall Street was down more than 1 percent for the second day in a row, with the S&P 500 briefly turning negative for the year, as the continued decline in the yuan exacerbated fears about a global economic slowdown.
The Dow fell to a six-month low on Wednesday, while the Nasdaq and the S&P hit a one-month low in a broad decline.
Nine of the 10 major S&P 500 sectors were lower. The financial index's 1.96 percent fall led the decliners on speculation that the yuan's devaluation might push the Fed to hold off until December to raise rates.
The yuan hit a four-year low on Wednesday, falling for a second day after Chinese authorities devalued it, and sources said clamor in government circles to help struggling exporters would put pressure on the central bank to let it drop lower still.
A cheaper yuan reduces the competitiveness of companies outside of China as it makes their goods and services more expensive, while reducing the value of revenue they generate in the country.
Shares of U.S. automakers with big exposure to China fell. General Motors Ford Motor and Fiat Chrysler were all down between 1.3 and 5.7 percent.
Apple, for whom China is key growth market, fell as much as 3.4 percent to more than a six-month low of $109.63. The stock was the biggest drag on the Nasdaq and the S&P.
"I think the market is already in correction territory on an internal level," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
"The average S&P 500 stock has already fallen about 10 percent below its 52-day average and if we were waiting for a big enough catalyst for the indexes to correct, then China is certainly big enough."
At 11:06 a.m. ET (1506 GMT) the Dow Jones industrial average was down 219.1 points, or 1.26 percent, at 17,183.74. 29 of the 30 Dow components were in the red.
The S&P 500 was down 26.16 points, or 1.26 percent, at 2,057.91 and the Nasdaq Composite was down 79.19 points, or 1.57 percent, at 4,957.60.
The falling yuan also hit commodity prices, with the 19-commodity Thomson Reuters/Core Commodity CRB index were at lows not seen since 2003.
The devaluation of the Chinese yuan has huge implications for rest of world demand and commodity prices but it was too early to judge what is happening with the Chinese currency policy, New York Fed President William Dudley said. He said the Fed was nearing a rate hike, but did not say when it would move.
As the quarterly earnings season drawing to a close, investors once again shift focus from micro to macro factors, with the timing of a Federal Reserve interest rate hike front and center on their minds.
China's surprising move has led to speculation that the Fed wait until December to raise rates. A decline in U.S. overnight indexed swap rates indicated the probability of a rate hike next month faded to less than 40 percent, from an above 50 percent probability after last week's solid U.S. jobs data.
"But on balance, the PBOC action marginally lowers the odds of Fed liftoff in September, in our view, and December liftoff remains our call," Goldman Sachs said in a note.
With more than 90 percent of the S&P 500 companies having reported, second-quarter earnings are expected to rise 1.2 percent, while revenue is expected to fall 3.5 percent, according to Thomson Reuters data.
Alibaba fell as much as 8.2 percent to an all-time low of $71.03 after the retailer's revenue growth slowed to its lowest rate in more than three years.
Macy's fell 4 percent to $64.80 after it reported weak quarterly sales as a strong dollar "significantly" reduced spending by foreign tourists.
Declining issues outnumbered advancing ones on the NYSE by 2,219 to 736. On the Nasdaq, 2,049 issues fell and 570 advanced.
The S&P 500 index showed three new 52-week highs and 19 new lows, while the Nasdaq recorded 15 new highs and 102 new lows. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza)