*

US stocks drop after Treasury auction

*

Tax-cut bill fuels further federal deficit concerns

*

Oil prices end lower

(Updates to late US afternoon)

By Caroline Valetkevitch

NEW YORK, May 21 (Reuters) - Major stock indexes fell on

Wednesday as investors worried about a deteriorating U.S. fiscal

outlook and as Treasury yields climbed following a $16 billion

sale of 20-year bonds by the Treasury Department.

The three major U.S. stock indexes were down more than 1%

each following the auction. The dollar also fell broadly.

Treasury yields extended their gains after the U.S. Treasury

Department saw soft demand for the $16 billion sale of 20-year

bonds. The weak bond sale reinforced the view that investors are

shying away from U.S. assets.

At the same time, concerns continued about U.S. President

Donald Trump's efforts to push through a tax-cutting bill that

could worsen the debt load by $3 trillion to $5 trillion.

Investor sentiment has been fragile since Moody's late last

Friday downgraded the United States' credit rating, stoking

concerns about the country's $36 trillion debt pile.

Trump tried to get more support from Republicans who object

to parts of his tax cut and spending bill. U.S. House of

Representatives Speaker Mike Johnson acknowledged a vote by the

full chamber may not occur on Wednesday as his Republicans

remain divided over the details of the sweeping legislation.

There are also concerns about a lack of progress on U.S.

trade talks with trading partners pressing Washington to ease or

eliminate its tariffs.

"There's no doubt the (U.S.) deficit has grown larger," said

Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in

New York. "Is there a chance that Trump over his term will bring

that down? I would be surprised."

"What we're really in is this period that's sort of a

waiting game on tariffs," he added. "Negotiations are going on

... we don't really know if progress is being made."

The Dow Jones Industrial Average fell 817.23 points,

or 1.91%, to 41,860.01, the S&P 500 fell 95.91 points, or

1.61%, to 5,844.55 and the Nasdaq Composite fell 270.07

points, or 1.41%, to 18,872.64.

MSCI's gauge of stocks across the globe fell

7.93 points, or 0.90%, to 873.69.

European stocks dipped, with British sportswear retailer JD

Sports declining. The pan-European STOXX 600

index fell 0.04%.

Bitcoin, meanwhile, hit a record high, eclipsing its

previous high from January. It was last up 0.58% at $107,569.81.

The 30-year bond yield rose 11.5 basis points to

5.0817% from 4.967% late on Tuesday.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

fell 0.36% to 99.60.

Oil prices settled lower, after Oman's foreign minister

said a new round of nuclear talks between Iran and the U.S.

would take place later this week. Also, the U.S. government

released bearish data on crude and fuel supplies.