* S&P 500 more than 2 percent from record close
* Investors continue to watch geopolitical tensions
* Intercept, Exact Sciences jump on drug news
* Dow, S&P 500 down 0.2 percent, Nasdaq down 0.3 pct (Updates to midday trading)
By Ryan Vlastelica
NEW YORK, Aug 12 (Reuters) - U.S. stocks fell modestly on Tuesday as uncertainty continued to swirl around the tense situation in Ukraine, even as many investors bet that it would not escalate dramatically.
Equities have come under pressure because of the unrest between Russia and Ukraine, with the S&P 500 at one point down about 4 percent from a record closing high hit in late July. The benchmark has recovered some of that decline, and rose over the past two sessions, but it remains more than 2.5 percent below its record, suggesting traders may see bargains in the market.
Wall Street struggled for direction on Tuesday, at one point inching into positive territory before dipping to session lows amid ongoing concerns about Ukraine after the country reported that Russia had massed 45,000 troops on its border. Russia said a convoy of 280 trucks carrying humanitarian aid had set off for Ukraine, and Western governments warned against using help as a pretext for an invasion.
"The situation seems a bit quieter now, with the aid going in, but it will take a while for this to play out, and this doesn't seem like a time for people to stick their necks out," said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia.
Investors remained concerned about any escalation in tensions. In Germany, geopolitical anxiety hit economic sentiment in August, the ZEW think tank said, with investor morale dropping to its lowest since December 2012. Market participants also monitored other areas of unrest, including the recent violence in the Gaza Strip and Israel and U.S. air strikes in Iraq.
The Dow Jones industrial average fell 34.22 points or 0.21 percent, to 16,535.76, the S&P 500 lost 4.69 points or 0.24 percent, to 1,932.23 and the Nasdaq Composite dropped 15.16 points or 0.34 percent, to 4,386.17.
Weakness in tech companies pressured the Nasdaq, with F5 Networks Inc down 2.7 percent $113.64 and Applied Materials off 1.8 percent to $20.72.
Drug companies rallied, with Intercept Pharmaceuticals Inc up 26 percent to $299.22 a day after saying its drug to treat liver disease was effective in mid-stage trials. Exact Sciences rose 6 percent to $18.12 after the Food and Drug Administration approved its noninvasive colorectal cancer screening test.
Energy companies were the weakest of the day. The S&P Energy index fell 0.8 percent alongside a 0.7 percent fall in crude oil. Anadarko Petroleum fell 1.9 percent to $106.49 while Consol Energy was down 2.2 percent to $39.56.
Shares of clothing and accessories maker Kate Spade & Co were volatile after reporting second-quarter earnings that topped expectations. The stock initially rose more than 10 percent before moving dramatically lower. It last traded at $30.69, down 21 percent.
Mobile service provider NII Holdings Inc plummeted 70 percent to 19 cents - its biggest one-day decline ever - a day after saying it may have to file for bankruptcy after struggling in Brazil and Mexico.
(Editing by Nick Zieminski)