US STOCKS-U.S. stocks fall as Wal-Mart, energy stocks weigh

* Wal-Mart hits over 2 year low after weak results

* Energy, material stocks hit by China fears

* Disney, media companies hit by Wells Fargo (Hanover: NWT.HA - news) downgrade

* Home Depot (Swiss: HD.SW - news) results, housing data a bright spot

* Indexes down: Dow 0.23 pct, S&P 0.29 pct, Nasdaq 0.50 pct (Updates to early afternoon)

By Tanya Agrawal

Aug 18 (Reuters) - U.S (Other OTC: UBGXF - news) . stocks fell in early afternoon trading on Tuesday, dragged down by Wal-Mart's weaker-than-expected results and a selloff in energy and material shares on renewed fears about China.

Wal-Mart fell as much as 3.3 percent to a nearly 2-1/2 year low of $69.55 after its weak results and forecast. The stock was the biggest drag on the Dow and the S&P.

Chinese stocks plunged again, reigniting fears that Beijing may be intent on a deeper devaluation of the yuan and pushing oil prices and industrial metals, including copper, to near six-year lows.

All 10 major S&P sectors were lower. The steepest fall was the energy index's 0.63 percent decline, led by Exxon's 1.3 percent decline. The index was down for the fourth straight session.

The materials index was down 0.6 percent, with Freeport-McMoRan's 3 percent fall leading the declines. The index previously fell as much last week when China devalued the yuan.

At 13:09 p.m. EDT (1709 GMT) the Dow Jones industrial average was down 39.48 points, or 0.23 percent, at 17,505.7. The S&P 500 was down 6.07 points, or 0.29 percent, at 2,096.37 and the Nasdaq composite was down 25.55 points, or 0.5 percent, at 5,066.15.

Dow component Disney fell 1.8 percent after Wells Fargo cut its rating on the stock and also on the stock of five other media companies, including CBS. Disney was the second-biggest drag on the Dow and S&P.

The market weakness was partially offset by strong results from Home Depot and data that showed U.S. housing starts rose to a near eight-year high in July.

Home Depot rose as much as 3.4 percent to a record high of $123.80 and gave the biggest boost to the Dow and the S&P 500.

Home improvement companies and home builders are enjoying a spot in the sun. D.R. Horton, Toll Brothers (NYSE: TOL - news) , Lennar, PulteGroup (NYSE: PHM - news) and KB Home (NYSE: KBH - news) all rose between 1 and 3 percent following the data.

"The good data on housing is certainly helpful since its 4 percent of the U.S. GDP," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"It (Other OTC: ITGL - news) 's something we know the Fed looks at relative to not only its impact on employment and things residual to the housing market but as well as to the wealth effect of homeowners."

In other retail news, TJX, jumped 6.7 percent to a lifetime high of $76.43 after it reported a better-than-expected rise in quarterly comparable store sales.

Declining issues outnumbered advancers on the NYSE by 2,057 to 933. On the Nasdaq, 1,835 issues fell and 858 advanced.

The S&P 500 index showed 40 new 52-week highs and eight new lows, while the Nasdaq recorded 63 new highs and 66 new lows. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza)