* U.S. yields spike after April retail sales data
Retail sales rise 0.3 pct, in line with estimates
* US-China still 'very far apart' on trade-U.S. ambassador
* Home Depot drops as sales misses estimate, drags Lowe's
* Indexes down: Dow 0.80 pct, S&P 0.72 pct, Nasdaq 0.96 pct (Changes comment, adds details, updates prices)
By Medha Singh
May 15 (Reuters) - U.S. stocks slipped on Tuesday after the latest retail sales data indicated rising inflation and pushed up Treasury yields, while trade worries lingered with no signs of progress in U.S.-China talks.
The United States and China are still "very far apart" on resolving trade frictions, U.S. Ambassador to China Terry Branstad said, as a second round of high-level talks were set to begin in Washington.
Adding to the trade woes, Mexico's economy minister Ildefonso Guajardo said he does not expect to meet a deadline this Thursday to reach a new North American Free Trade Agreement that could be presented to the U.S. Congress.
U.S. retail sales increased a moderate 0.3 percent in April, compared with an upwardly revised 0.8 percent surge in March, as rising gasoline prices weighed on discretionary spending, the Commerce Department said.
However, the rise in core retail sales, which excluded automobiles, gasoline, building materials and food services, showed consumer spending appeared on track to accelerate after slowing sharply in the first quarter.
Following the data, benchmark U.S. Treasury yield hit 3.037 percent, a key breakout level, before gaining further to 3.058 percent, its highest since July 2011. "When yields pop like they did this morning, that was unsettling and that came on top of the big run that markets just had," said Bruce Bittles, chief investment strategist for Robert W. Baird & Co in Sarasota, Florida.
"Even from an overbought situation, the markets were a touch vulnerable and perhaps these rate rises was enough to trigger that."
Shares of retailers including J. C. Penney, Target and Macy's rose between 1.6 percent to 3.9 percent.
However, losses were broad based with ten of the 11 major S&P sectors in the red. The S&P financial was the only sector posting a slight gain of 0.1 percent.
Home Depot Inc slipped 1.7 percent after the No.1 U.S. home improvement chain missed Wall Street forecasts for sales at established stores.
Smaller rival Lowe's was down 0.6 percent.
At 11:09 a.m. EDT the Dow Jones Industrial Average was down 198.21 points, or 0.80 percent, at 24,701.20, the S&P 500 was down 19.73 points, or 0.72 percent, at 2,710.40 and the Nasdaq Composite was down 71.11 points, or 0.96 percent, at 7,340.20.
Declining issues outnumbered advancers for a 2.02-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.18-to-1 ratio on the Nasdaq.
The S&P index recorded 3 new 52-week highs and 7 new lows, while the Nasdaq recorded 49 new highs and 34 new lows.
(Reporting by Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur)