Updates with early afternoon prices

By Pranav Kashyap and Nikhil Sharma

July 8 (Reuters) - The S&P 500 and the Nasdaq struggled for direction on Tuesday, as anxiety over President Donald Trump's latest tariff salvo overshadowed investor hopes that fresh talks with U.S. trading partners might avert a full-blown global trade war.

At 11:49 a.m. the Dow Jones Industrial Average .DJI fell 58.27 points, or 0.13%, to 44,348.09, the S&P 500 .SPX gained 1.04 points, or 0.02%, to 6,231.02 and the Nasdaq Composite .IXIC gained 5.06 points, or 0.03%, to 20,417.57.

Trump warned on Monday that sweeping new U.S. tariffs would hit countries from Japan and South Korea to smaller trading partners starting Aug. 1—though he hinted at possible reprieves if fresh proposals emerged.

The threat sent all major indexes sharply lower at Monday's close, but they pared some losses earlier in the session on expectations that the economies would possibly work out favorable trade terms through negotiations before Aug. 1.

Japan's top trade negotiator, Ryosei Akazawa, held a 40-minute phone call with U.S. Commerce Secretary Howard Lutnick on Tuesday, where the two sides agreed to "actively" continue negotiations.

While investors stayed on the sidelines, the Russell 2000 small-cap index .RUT managed to eke out gains of nearly 1%.

The energy index .SPNY jumped 2.2%, while Utilities .SPLRCU, often traded as bond-proxies, dropped 1.1%.

In mega-cap stocks, shares of Tesla TSLA.O gained 2.5% after the stock recorded its steepest single-day fall in nearly a month on Monday.

"The pick up in volatility is a reminder of the degree of uncertainty surrounding trade policy," said Jordan Rizzuto, chief investment officer of GammaRoad Capital Partners.

Rizzuto also noted that the real risk was not knowing when these tariffs will hit consumers.

The subdued mood stands in sharp contrast to the market turmoil that was unleashed by the "Liberation Day" tariff announcements three months ago, which pushed the Nasdaq into bear territory and dragged the Dow and the S&P 500 into correction.

Since then, Wall Street has rebounded, with the Nasdaq and the S&P 500 powering to record highs last week, buoyed by a resilient labor market that has helped ease fears of a looming recession.

BofA Global Research and Goldman Sachs raised their year-end targets for the S&P 500 index .SPX, broadly driven by reduced policy uncertainty, resilient corporate earnings and potential interest rate cuts.

Minutes of the Fed's June rate-setting meeting are scheduled for release on Wednesday, which will offer investors more clarity on when the central bank might resume its policy easing cycle.

Shares of solar stocks fell after Trump on Monday directed federal agencies to strengthen provisions in the One Big Beautiful Bill Act that repeal or modify tax credits for solar and wind energy projects.

SunRun RUN.O dropped 12%, Enphase Energy ENPH.O lost 3.2% and SolarEdge Technologies SEDG.O declined 3.8%.

Advancing issues outnumbered decliners by a 1.71-to-1 ratio on the NYSE, and by a 1.81-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and three new lows, while the Nasdaq Composite recorded 67 new highs and 30 new lows.

(Reporting by Pranav Kashyap and Nikhil Sharma in Bengaluru; Editing by Shinjini Ganguli)

((pranav.kashyap@tr.com; +919886482111;))