US STOCKS-Wall St dragged lower by Apple and banks

* Fed Chair Janet Yellen to speak at 4:00 p.m. ET

* Apple (NasdaqGS: AAPL - news) drops on Barclays (LSE: BARC.L - news) price target cut

* Indexes down: Dow 0.85 pct, S&P 0.65 pct, Nasdaq (NasdaqGS: NDAQ - news) 0.66 pct (Updates to afternoon)

By Noel Randewich

Sept 29 (Reuters) - Wall Street dropped on Thursday, weighed down by Apple as well as selling in Wells Fargo (Hanover: NWT.HA - news) , Citigroup (NYSE: C - news) and other major banks as investors worried about the health of Deutsche Bank (LSE: 0H7D.L - news) .

The S&P 500 financial index dropped 1.11 percent after Bloomberg reported that some hedge funds have withdrawn excess cash and positions held at the German lender.

Concerns over the stability of Germany's biggest bank have pushed its shares to record lows and its U.S.-listed stock on Thursday tumbled 6.6 percent.

Wells Fargo & Co lost 1.67 percent after U.S. lawmakers rebuked CEO John Stumpf over his handling of sales abuses.

Citigroup dropped 1.77 percent and JPMorgan Chase (Swiss: JPM.SW - news) fell 1.47 percent.

Apple fell 1.44 percent after Barclays cut its price target. The stock was the biggest drag on Wall Street.

The S&P healthcare index lost 1.4 percent and also weighed heavily on the S&P 500 as shares of Merck (LSE: 0O14.L - news) and Johnson & Johnson (NYSE: JNJ - news) declined.

"Equity valuations are stretched and priced for perfection," said Mike Baele, managing director with the private client reserve group at U.S. Bank in Portland, Oregon. "I would not be surprised to see additional volatility."

The CBOE Volatility Index, a gauge of near-term investor anxiety, jumped 14 percent.

At 2:32 pm ET, the Dow Jones industrial average was down 0.85 percent to 18,183.69 points and the S&P 500 had lost 0.65 percent to 2,157.28.

The Nasdaq Composite dropped 0.66 percent to 5,283.58.

The S&P utilities index, which is sensitive to interest rates, fell 1.01 percent and was on track for its fifth day of losses in a row.

Oil prices were up a day after OPEC members agreed to curb production, even as analysts raised questions about the effectiveness of the deal.

Declining issues outnumbered advancing ones on the NYSE by a 2.98-to-1 ratio; on Nasdaq, a 2.49-to-1 ratio favored decliners.

The S&P 500 posted 22 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 74 new highs and 30 new lows. (Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski)