US STOCKS-Wall Street retreats as business activity slows, raising fears over economy

* Nike hits record high after stellar quarter
* Energy stocks lead declines
* Tesla tumbles as 'Battery Day' disappoints
* Indexes off: Dow 1.33%, S&P 1.65%, Nasdaq 2.25%

(Adds comment; updates prices to mid-afternoon)
By Herbert Lash
Sept 23 (Reuters) - Wall Street's main indexes fell on
Wednesday after data showing a cooling of U.S. business activity
and the stalemate in Congress over more fiscal stimulus
heightened fears of a choppy economic recovery from the
pandemic-driven recession.
Ten of the 11 major S&P sectors were down, with energy
.SPNY - already the worst performing sector this year -
leading declines. O/R
Hopes of a strong recovery and historic stimulus fueled the
U.S. stock rally following the coronavirus-driven crash in
March, but doubts over the next relief bill and a sell-off in
heavyweight technology-related stocks have weighed on sentiment
this month.
The economy is leveling off at about 80% of activity before
the pandemic and won't get back to normal until a vaccine is in
place, said Jason Pride, chief investment officer of private
wealth at Glenmede in Philadelphia.
"We're at that phase where it's harder to get that next bit
of the recovery, that next bit of the reopening in place," Pride
said. "We're still doing it, but the progress is way slower than
it was in the first three months of the reopening."
Investors are struggling to understand where to invest with
mega-cap tech stocks overvalued, but the deep-value stocks
represent maturing industries, such as energy and brick-an-
mortar banks, he said.
The Russell 1000 Growth index .RLG was down 2%, compared
to a 1.3% decline in the Russell 1000 Value index .RLV .
"We're spending more of our time in that sweet spot in the
middle to get away from the extremes of growth," Pride said.
Federal Reserve Chair Jerome Powell said on Wednesday that
the central bank was not planning any "major" changes to its
Main Street Lending Program, while saying that both the Fed and
Congress need to "stay with it" in working to bolster the
economic recovery. "The longer we go without more stimulus, the harder it will
be to sustain the gains in the economy," said Willie Delwiche,
investment strategist at Baird in Milwaukee.
Data from IHS Markit showed gains at factories were offset
by a slowdown in the broader services sector in September,
suggesting a loss of momentum in the economy at a time when
concerns are rising about a potential surge in COVID-19 cases
heading into the colder months. Meanwhile, the U.S. Justice Department unveiled a
legislative proposal, which would need congressional approval,
that seeks to reform a legal immunity for internet companies and
follows through on President Donald Trump's bid from earlier
this year to crack down on tech giants. Wall Street favorites including Facebook Inc FB.O , Apple
Inc AAPL.O , Google-parent Alphabet Inc GOOGL.L and
Amazon.com Inc AMZN.O , which have borne the brunt of recent
losses, were down between 1.5% and 3.4% in afternoon trading.
Tesla Inc TSLA.O , another recent Wall Street darling,
tumbled 9.3% after Chief Executive Elon Musk failed to impress
with his promise to cut electric vehicle costs at the company's
much-awaited "Battery Day" event on Tuesday. At 2:30 p.m. ET, the Dow Jones Industrial Average .DJI
fell 362.01 points, or 1.33%, to 26,926.17. The S&P 500 .SPX
lost 54.65 points, or 1.65%, to 3,260.92, and the Nasdaq
Composite .IXIC dropped 246.63 points, or 2.25%, to 10,717.01.
An index of value-linked stocks .IVX such as industrials
outperformed growth-oriented sectors .IGX , suggesting
"investors (are) getting comfortable with the belief that the
turnaround story is under way for the economy," said Lindsey
Bell, chief investment strategist at Ally Invest in Charlotte,
North Carolina.
Nike Inc NKE.N surged 8.8% to a record high as its digital
sales, especially in North America, helped offset a fall in
sales at traditional brick-and-mortar stores. Declining issues outnumbered advancing ones on the NYSE by a
5.11-to-1 ratio; on Nasdaq, a 4.08-to-1 ratio favored decliners.