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US STOCKS-Wall St extends losses on Trump policy worries

* Gary Cohn resignation rumors knocked down

* Wal-Mart drops after reporting margin fall

* Indexes down: Dow 0.81 pct, S&P 1.03 pct, Nasdaq 1.39 pct (Updates to early afternoon)

Aug 17 (Reuters) - U.S stocks hit session lows in early afternoon trading on Thursday as investors worried about President Donald Trump's ability to pursue his pro-growth policies.

The market also remained on edge after a van crashed into dozens of people in the center of Barcelona on Thursday and Spanish media, citing police sources, said at least 13 people were killed.

Catalan's police said the van crash is being treated as a terror attack.

Trump disbanded two business councils on Wednesday after several chief executives quit in protest over his remarks on white nationalists.

Stocks were rattled earlier in the day following speculation of White House Economic Adviser Gary Cohn's possible departure.

A White House official said Cohn "intends to remain in his position as NEC director ... nothing's changed."

"The concern would be if Gary Cohn would decide that if he needs to take a safe step that a lot of CEOs did, it will be very difficult to move forward with pro-growth tax reforms," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

At 13:04 p.m. ET (1704 GMT), the Dow Jones Industrial Average was down 177.97 points, or 0.81 percent, at 21,846.9 and the S&P 500 was down 25.38 points, or 1.03 percent, at 2,442.73.

The Nasdaq Composite was down 87.89 points, or 1.39 percent, at 6,257.22.

Investors have also been assessing minutes from the Federal Reserve's July meeting that showed growing concerns over weak inflation, muddying the path of interest rate hikes.

Weak inflation has spurred concerns that the Fed may have to cool its monetary tightening pace even though the economy is growing moderately and the unemployment rate is at a 16-year low.

The central bank is also considering reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

"If they don't start selling their asset portfolio in September, which is what they have indicated, that will be a negative signal to the markets," said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts.

"The Fed is still fairly comfortable with the economics, but they're getting more concerned about the politics."

All 11 major S&P sectors were lower, with technology index's 1.17 percent fall topping the list.

Apple's 1.24 percent fall weighed the most on the S&P and the Nasdaq.

Cisco fell 4.12 percent after reporting a revenue miss in its closely-watched security business.

Wal-Mart was down 2.30 percent after the retailer reported a drop in margins due to continued price cuts and investments in its e-commerce operations.

Declining issues outnumbered advancers on the NYSE by 2,085 to 718. On the Nasdaq, 2,031 issues fell and 778 advanced. (Reporting by Sruthi Shankar and Tanya Agrawal in Bengaluru; Editing by Anil D'Silva)