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* Industrials fall after weak ISM manufacturing data
* E*Trade Financial, Charles Schwab lead declines on S&P 500
* McDonald's drops on JPM comments
* Indexes end: Dow -1.28%, S&P 500 -1.23%, Nasdaq -1.13%
(Updates to close)
By Noel Randewich
Oct 1 (Reuters) - The S&P 500 and Dow suffered their worst
tumbles in over a month on Tuesday after data showed U.S.
factory activity shrank in September to its weakest in over a
decade, ratcheting up fears that the U.S.-China trade war is
hobbling the world's largest economy.
Investors moved to the safety of U.S. Treasuries after the
ISM report showed its manufacturing activity index at 47.8,
falling further from August's sharp contraction and below
economists' expectations of 50.1. A reading below 50 indicates
contraction. With lingering trade tensions weighing on exports, the U.S.
data mirrored similar patterns in the euro zone, Japan, the
United Kingdom and China.
The S&P industrials index .SPLRCI dropped 2.4%, the most
among the 11 major S&P sectors. The materials .SPLRC and
energy .SPNY indexes both fell 2.3%. All 11 sectors lost
ground.
A jobs report on Friday is expected to shed further light on
U.S. economic strength.
"This is a bad number, fitting in with the world's
manufacturing recession," Jim Bianco, head of Bianco Research in
Chicago, said of the ISM report. "I think the market is right to
be concerned, but we will have to see whether other
manufacturing numbers in the U.S. bear that out, not the least
of which being the manufacturing payroll numbers on Friday."
Despite a prolonged U.S.-China trade war that has hammered
global growth, confidence in the domestic economy has helped the
benchmark S&P 500 .SPX climb about 17% this year.
Thomas Simons, a Jefferies economist, said the manufacturing
contraction does not underpin a wider softening in the U.S.
economy, as it was the result of several factors, including
Boeing Co's BA.N production issues relating to its
best-selling jets.
"Manufacturing itself is in a recession, but it does not
mean that the overall economy is in a recession."
The Dow Jones Industrial Average .DJI fell 1.28% to end at
26,573.04, while the S&P 500 .SPX lost 1.23% to 2,940.25. Both
indexes had their biggest one-day dip since Aug. 23, when U.S.
President Donald Trump demanded that American companies seek
alternatives to doing business with China. The Nasdaq Composite .IXIC dropped 1.13% to end at
7,908.69.
Shares of online brokerage E*Trade Financial ETFC.O
tumbled 16.4%, the most on the S&P 500, after rival Charles
Schwab Corp SCHW.N said it would remove commissions for online
trading of stocks, ETFs and options listed on U.S. or Canadian
exchanges.
Charles Schwab's shares slumped 9.7%.
McDonald's Corp MCD.N dropped 2.7% after JP Morgan said
the fast food chain's third-quarter same-store sales would be
softer than analysts' estimates.
Shares of chipmaker Xilinx Inc XLNX.O declined 4.1% after
KeyBanc lowered its rating to "sector weight."
Ulta Beauty Inc ULTA.O advanced 6.1% after an independent
director bought shares.
As the final quarter of 2019 kicks off, investors will be
focusing on a range of factors, beginning with the high-stakes
Sino-U.S. trade talks in early October, corporate earnings and
the Fed's next policy meeting.
Declining issues outnumbered advancing ones on the NYSE by a
2.76-to-1 ratio; on Nasdaq, a 3.29-to-1 ratio favored decliners.
The S&P 500 posted 12 new 52-week highs and 9 new lows; the
Nasdaq Composite recorded 28 new highs and 131 new lows.
Volume on U.S. exchanges was 7.3 billion shares, compared
with the 7.2 billion average for the full session over the last
20 trading days.