* Asset managers gain after labor department's 401(K)

guidelines

* Fed's Powell flags anchored inflation expectations

* Indexes: Dow up 0.3%; S&P 500 down 0.3%; Nasdaq down

0.7%

(Updates to afternoon)

By Caroline Valetkevitch and Purvi Agarwal

March 30 (Reuters) - The S&P 500 and Nasdaq edged lower

Monday afternoon as optimism from President Donald Trump's

comments on U.S.-Iran talks was offset by the president's new

warnings to Tehran and a widening of the Middle East war.

Trump said the U.S. was in serious discussions with a "more

reasonable regime" to end the war, but repeated his warning to

open the Strait of Hormuz or risk U.S. attacks on Iranian oil

wells and power plants. Iran described U.S. peace proposals as

unrealistic.

Investors have been focused on how oil prices will impact

the global economy after they shot up since the start of the

war.

"The administration continues to send mixed messages," said

Rick Meckler, partner at Cherry Lane Investments, a family

investment office in New Vernon, New Jersey.

"When the messages seem good, to the extent they are

believed, it helps the market. If something they say implies a

more aggressive approach, the market sells off."

Escalating the conflict, Yemen's Iran-backed Houthi militia

entered the war over the weekend.

All three of the major indexes started the day higher after

logging sharp declines in the previous session. Since the war

started, the Dow, the Nasdaq and the small-cap Russell 2000

have all confirmed correction territory, ending 10% lower

from their record-high closes.

The Dow Jones Industrial Average rose 116.06 points,

or 0.26%, to 45,282.70, the S&P 500 lost 20.74 points, or

0.32%, to 6,348.11 and the Nasdaq Composite lost 149.69

points, or 0.71%, to 20,798.67.

Comments from Federal Reserve Chair Jerome Powell gave some

support to stocks. Powell said longer-term inflation

expectations appear to be holding despite the current energy

shock, and the Fed does not yet need to make a decision on how

to react to the latest troubles. U.S. crude oil settled higher,

while Brent eased.

Money market participants have priced out any easing from

the Federal Reserve this year, compared with two cuts expected

before the war began, per the CME Group's FedWatch Tool.

The S&P 500 energy index was down slightly and

technology stocks were also lower.

On the flip side, the financial index gained after

the U.S. Department of Labor issued long-awaited guidelines

intended to clarify how trustees can add alternative assets to

401(k) retirement plans.

Shares of asset managers climbed with Blackstone up

3.4% and KKR up 2.4%.

Advancing issues outnumbered decliners by a 1.11-to-1 ratio

on the NYSE. There were 143 new highs and 260 new lows on the

NYSE.

On the Nasdaq, 2,088 stocks rose and 2,591 fell as declining

issues outnumbered advancers by a 1.24-to-1 ratio.