US STOCKS-Tax plan worries, tepid earnings halt rally

Oct 25 (Reuters) - Wall Street's benchmark S&P 500 index was headed for its worst loss in seven weeks on Wednesday, with downbeat corporate earnings and contradicting signals on Republican plans for a popular retirement scheme weighing on sentiment.

Earnings season so far has been largely positive, with more than 72 percent of the 165 S&P 500 companies that have reported to date beating profit expectations.

However, with U.S. indexes at record levels, investors are taking a closer look at earnings to see if they justify the recent run-up in valuations.

Traders also cited a Wall Street Journal report that suggested - in contrast to commitments by President Trump - Republicans were still considering limits on 401(k) plans which for decades have helped American workers save for retirement.

"The 401k issue is causing some confusion because it is directly contradicting the President and the market doesn't like confusion," said Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee.

Republicans have struggled to deliver on a number of President Trump's promises in Congress and financial investors worry tax cuts promised by the president to support growth will see a similar fate.

Downbeat earnings from AT&T sent shares in the United States' second largest wireless carrier down as much as 4.4 percent, pulling down other telecom stocks Verizon and CenturyLink

Boeing surprised investors by revealing a $329 million charge for its troubled KC-46 aerial refueling tanker program in quarterly results. Its shares fell 3.52 percent.

"We're probably due for a pause. At this point, rising earnings are the lifeblood to the market," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.

"At some point, nothing goes straight up, so there has to be a moment of consolidation."

The S&P 500 was headed to record its biggest single-day loss since Aug. 17, and the Dow on track for its worst day since Sept. 9.

The CBOE Volatility index, a widely followed measure of market anxiety, jumped 1.91 points to 13.08, its highest since Sept. 5.

At 12:34 p.m. ET (1634 GMT), the Dow Jones Industrial Average was down 181.65 points, or 0.77 percent, at 23,260.11, the S&P 500 was down 23.92 points, or 0.93 percent, at 2,545.21 and the Nasdaq Composite was down 75.97 points, or 1.15 percent, at 6,522.46.

The dour sentiment was broad based, with all the 11 major S&P sectors lower.

AMD shares fell 13.20 percent after the chipmaker flagged competitive pressures with a forecast that pointed to a drop in revenue in the fourth quarter from the third.

Chipotle plunged 15 percent after the burrito chain posted disappointing sales and earnings, adding to a raft of bad news for the company this year.

Among gainers was Anthem, which rose 4.25 percent after reporting better-than-expected profit.

Northrop Grumman rose 2.15 percent after the defense contractor raised full-year profit forecast and reported higher quarterly profit and revenue, boosted by strength in its aerospace business. (Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D'Silva and Patrick Graham)