US STOCKS-Wall Street slumps as yuan slide intensifies trade angst

* Apple set to drop for third session on tariff worries
* Trade-sensitive Boeing, Caterpillar and chip stocks slide
* Volatility index at near 3-month high
* Tyson Foods rises after profit beats estimates
* Indexes drop: Dow 2.06%, S&P 2.12%, Nasdaq 2.77%

(Changes quote, adds details; Updates prices)
By Medha Singh
Aug 5 (Reuters) - Wall Street's main indexes fell sharply on
Monday, with the Dow Jones Industrial Average tumbling more than
500 points, as China's willingness to let the yuan slide in
response to the latest U.S. tariff threat fanned fears that it
could further aggravate an ongoing trade war.
The yuan breached the key 7-per-dollar level for the first
time in more than a decade, and President Donald Trump slammed
it as "a major violation", sending investors scurrying for the
safety of assets such as government bonds, gold and the Japanese
yen. Trump stunned financial markets last week by threatening to
impose 10% tariffs on the remaining $300 billion of Chinese
imports, abruptly abandoning a brief ceasefire.
"The currency move is part of the trade war," said Andre
Bakhos, managing director at New Vines Capital LLC in
Bernardsville, New Jersey.
"It is a bold statement to the U.S. that says if you want to
play, we could play a different way as well. It takes any
optimism out of the market that there will be a quick resolution
to trade (war)."
On Friday, the benchmark S&P 500 .SPX and the Nasdaq
.IXIC suffered their worst weekly performance of 2019, in a
week that also saw the U.S. Federal Reserve cut interest rates
for the first time in a decade.
At 11:02 a.m. ET, the Dow .DJI was down 546.37 points, or
2.06%, at 25,938.64, the S&P 500 .SPX was down 62.14 points,
or 2.12%, at 2,869.91.
The Nasdaq Composite .IXIC was down 221.50 points, or
2.77%, at 7,782.57.
The sell-off was broad, with all the 11 major S&P sectors in
the red. The S&P technology sector .SPLRCT , heavily exposed by
its chipmakers and other global technology players to Chinese
markets, dropped 3.2%.
Apple Inc AAPL.O slid 4.1% as analysts warned that the
newly proposed tariffs may hurt demand for its flagship iPhone,
while the Philadelphia chip index .SOX slipped 3.7%.
The CBOE Volatility index .VIX , a gauge of investor
anxiety, rose to its highest level in about three months at
21.36 points.
U.S. Treasury yields tumbled, with the 10-year yields
hitting their lowest level since November 2016.
The difference between the three-month Treasury bill rate
US3MT=RR and 10-year yields US10YT=RR grew to the widest
since April 2007. This curve "inversion" between the two
maturities has preceded every U.S. recession in the past 50
years. US/
Interest-rate sensitive banks .SPXBK shed 3.02%.
The rest of the high-flying FAANG group also lost ground.
Facebook Inc FB.O , Amazon.com Inc AMZN.O , Netflix Inc
NFLX.O and Google-parent Alphabet Inc GOOGL.O were down
between 2.5% and 4%.
No.1 U.S. meat processor Tyson Foods Inc TSN.N was one
bright spot, up 7.8% after beating quarterly profit estimates.
Declining issues outnumbered advancers for a 7.17-to-1 ratio
on the NYSE and for a 7.42-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and 26 new
lows, while the Nasdaq recorded nine new highs and 215 new lows.