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* Technology shares drag the main indexes lower
* Energy stocks mirror slump in oil prices
* L Brands jumps after quarterly earnings beat
* Indexes fall: Dow 1.71%, S&P 1.72%, Nasdaq 2.09% (Updates to early afternoon)
By Shreyashi Sanyal and Sruthi Shankar
May 23 (Reuters) - U.S. stock indexes slumped 2% on Thursday, as investors dumped technology, industrial and energy stocks on fears that a spiraling trade war between the United States and China would shackle global growth.
Technology, among sectors most exposed to China, was the hardest hit. Microsoft Corp and Apple Inc were the biggest drags, while the chip index dropped 2.79%.
Oil prices plunged over 5% as trade fears dampened the demand outlook, leaving the energy index down 3.72%, the biggest decliner among the major 11 S&P sectors.
Materials, financials and consumer discretionary sectors also posted losses of about 2% in a broad-based decline.
“Investors realize that coming to a deal is going to be more challenging and that is really harmful to the economic environment,” said Luke Tilley, chief economist at Wilmington Trust in Wilmington, Delaware.
“It’s a classic risk-off movement where you’ve got the higher-bated sectors such as financials, industrials and technology selling off the most.”
Only the defensive utilities sector was up 0.22%, while real estate was flat.
U.S. Treasury yields dropped, and two yield curve indicators briefly inverted on Thursday, sending the banking index down 2.35%.
Beijing said on Thursday Washington needs to correct its “wrong actions” for trade talks to continue after the United States blacklisted Huawei Technology Co Ltd last week.
In further evidence of the trade war hitting the U.S. economy, data from IHS Markit showed manufacturing growth measured its weakest pace of activity in nearly a decade and new orders fell for the first time since August 2009.
At 13:01 p.m. ET, the Dow Jones Industrial Average was down 441.25 points, or 1.71%, at 25,335.36. The S&P 500 was down 49.14 points, or 1.72%, at 2,807.13 and the Nasdaq Composite was down 162.01 points, or 2.09%, at 7,588.83.
The newest round of U.S. tariffs on Chinese imports will cost the typical American household $831 annually, according to a Federal Reserve Bank of New York research.
Stocks have succumbed to selling pressure in May after Washington and Beijing engaged in tit-for-tat tariffs and other retaliatory measures, with the S&P 500 on track to post its worst monthly decline since the December sell-off.
Among other stocks, NetApp Inc tumbled 10.9%, the most on the S&P 500, after the data storage equipment maker forecast current-quarter profit and revenue below Wall Street estimates.
L Brands Inc jumped 11.6% after the retailer reported better-than-expected quarterly earnings.
Declining issues outnumbered advancers for a 4.40-to-1 ratio on the NYSE and a 4.75-to-1 ratio on the Nasdaq.
The S&P index recorded 23 new 52-week highs and 25 new lows, while the Nasdaq recorded 18 new highs and 159 new lows. (Reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila)