(Updated at 4 pm ET/ 2000 GMT)

* July retail sales rise more than expected

* Nvidia gains as UBS, Wells Fargo raise PT

* U.S. big banks fall as a report warns of downgrades

NEW YORK, Aug 15 (Reuters) - Wall Street's main stock indexes closed lower on Tuesday after stronger-than-expected retail sales data stoked worries interest rates could stay higher for longer, while U.S. big banks dropped on a report that Fitch could downgrade some lenders.

The Commerce Department report showed retail sales grew 0.7% last month against expectations of a 0.4% rise, suggesting the U.S. economy remains strong.

After the data, traders' bets of a pause on hikes by the Federal Reserve next month stayed intact at 89%, yet analysts said investors were worried rates could stay at current levels longer than anticipated.

Banks saw the brunt of the selling as investors grew more anxious about interest rates. The U.S. Treasury yield curve has been inverted for over a year, with longer-term bonds yielding less than short-term debt instruments. This persistent situation pressures profits that banks can earn on loans.

"We would probably end up with an inverted yield curve for longer than anticipated, even if we don't end up with an economic recession," said Sam Stovall, chief investment strategist at CFRA Research.

"That would end up curtailing lending because even if you were my brother-in-law, I wouldn't want to lend to you at a loss."

According to preliminary data, the S&P 500 lost 51.60 points, or 1.15%, to end at 4,438.12 points, while the Nasdaq Composite lost 155.81 points, or 1.13%, to 13,632.52. The Dow Jones Industrial Average fell 356.33 points, or 1.01%, to 34,951.30.

A report said ratings agency Fitch could downgrade multiple banks. Shares of JPMorgan Chase, Bank of America and Wells Fargo fell sharply.

"The story from Fitch about potential downgrades to multiple U.S. banks (is) weighing on sentiment," said Michael James, managing director of equity trading at Wedbush Securities.

"You combine that with the retail sales figures this morning that were a little hotter than estimates, (it) furthers the potential higher for longer rates scenario from the Fed."

Shares of regional lenders PacWest Bancorp, Zions Bancorp and Western Alliance Bank slipped after the Federal Deposit Insurance Corp's latest regulatory overhaul proposal.

The S&P 500 banking index hit a one-month low, while the KBW regional banking index also plunged.

All 11 major S&P 500 sectors declined, with energy stocks leading losses on weaker crude prices.

Technology stocks fared better, thanks to gains in shares of Nvidia after UBS and Wells Fargo lifted their price targets on the stock.

Nvidia posted its biggest one-day percentage gain since late May in the previous session following bullish comments from Morgan Stanley, with analysts also saying investors were piling into the stock in the run-up to its earnings next week.

U.S.-listed shares of Chinese companies also dropped with e-commerce firm Alibaba Group among those leading the slide after another round of disappointing economic data from Among other stocks, General Motors fell after Berkshire Hathaway cut its stake in the automaker.

Warren Buffett's Berkshire disclosed a new investment in homebuilder D.R. Horton, whose shares of both companies gaining.

(Reporting by Amruta Khandekar, Shristi Achar A and Shashwat Chauhan and Saeed Azhar; Additional reporting by Davide Barbuscia; Editing by Maju Samuel, Vinay Dwivedi and David Gregorio)