U.S. stocks fell on Friday after media reports that the Trump administration was considering limiting U.S. investors' portfolio flows to China, raising concerns about further escalation in the U.S.-China trade war.

According to people familiar with the internal deliberations, Trump administration officials are discussing ways to limit U.S. investors' portfolio flows into China, Reuters reported. Among the options, the Trump administration is considering delisting Chinese companies from the U.S. stock exchanges.

The discussion comes ahead of the new round of trade consultations between China and the U.S. scheduled in the first half of October in Washington. This move would expose a new pressure point in the economic dispute and cause disruption well beyond the hundreds of billions in tariffs the two sides have levied against each other.

It remained unclear on Friday how this would be achieved, but it had an immediate jarring impact on trading.

"If our policies spark a major sell-off in Shanghai where that creates problems for China, that could negatively impact the trade negotiations, which are supposed to start on October 10. That is where the U.S.-based fear would come from," Reuters quoted Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

U.S. stocks plunged

The tariff-sensitive Philadelphia semiconductor index SOX extended its decline after the reports and ended down 2.4 percent on the day. The index was already under pressure from Micron Technology Inc's, which tumbled after it forecast a disappointing first-quarter profit.

The S&P technology index SPLRCT dropped 1.3 percent. U.S.-listed shares of Alibaba Group Holding Ltd, Baidu Inc and JD.com Inc all slid.

Adding to the negative momentum in afternoon trade, the S&P 500 index briefly fell below its 50-day moving average.

The Dow Jones Industrial Average fell 70.87 points, or 0.26 percent, to 26,820.25, the S&P 500 lost 15.83 points, or 0.53 percent, to 2,961.79 and the Nasdaq Composite dropped 91.03 points, or 1.13 percent, to 7,939.63.

All three indexes ended lower for the week as well, with the S&P 500 and Nasdaq registering their biggest weekly percentage drops since August. The Cboe volatility index .VIX ended at a three-week high.

Data early in the day showed U.S. consumer spending barely rose in August, suggesting that the economy's main growth engine was slowing after accelerating sharply in the second quarter.

The S&P 500 posted 11 new 52-week highs and six new lows; the Nasdaq Composite recorded 29 new highs and 118 new lows.

Volume on U.S. exchanges was 6.68 billion shares, compared to the 7.2 billion average for the full session over the last 20 trading days.

(With input from Reuters)