US STOCKS-Wall Street tumbles on growing recession fears

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* Indexes drop: Dow 2.70%, S&P 2.71%, Nasdaq 2.99%
* U.S. Treasury bond curve inverts for 1st time since 2007
* Macy's slides after FY outlook cut; weighs on rivals
* Rate-sensitive banks slump

(Updates to early afternoon)
By Medha Singh and Arjun Panchadar
Aug 14 (Reuters) - Wall Street main indexes slumped more
than 2.5% on Wednesday, as a closely watched U.S. bond market
indicator pointed to a renewed risk of recession following poor
economic data from Germany and China.
The S&P 500 index has now sunk 4.5% since President Donald
Trump announced a fresh round of tariffs on Chinese imports at
the start of August and is on course for its worst three-week
percentage slide this year.
A brief recovery on Tuesday on signs that Washington would
delay some of those moves quickly evaporated on Wednesday
morning.
Yields on two-year Treasury notes rose above the 10-year
yield for the first time since 2007, a metric widely viewed as a
classic recession signal, spooking investors. US/
The interest-rate sensitive bank subsector .SPXBK plunged
4.3%, while the broader financial sector .SPSY fell 3.5%,
putting them on course for their biggest one-day percentage fall
this year.
"The bond market is the one that seems to be leading, the
stock market is just kind of following at this point. That tells
you we are in a headline market where investors will react
quickly to what the flavor of the day is," said Joe Saluzzi,
co-manager of trading at Themis Trading in Chatham, New Jersey.
"If you look at the U.S. fundamentals right now, growth is
decent and earnings have been good and that supports stock
market at this level."
Adding to grim mood was data showing Germany's economy
contracted in the second quarter, while Chinese industrial
output growth cooled to a more than 17-year low in July.
The CBOE Volatility index .VIX , also known as Wall
Street's "fear gauge", rose 5.2 points to 22.71.
Eight of the 11 major S&P sectors shed more than 2%. Only
the defensive utilities .SPLRCU sector was higher, while
consumer staples .SPLCS and real estates .SPLRCR posted the
smallest losses.
At 13:04 p.m. ET, the Dow Jones Industrial Average .DJI
was down 709.51 points, or 2.70%, at 25,570.40, the S&P 500
.SPX was down 79.36 points, or 2.71%, at 2,846.96. The Nasdaq
Composite .IXIC was down 239.60 points, or 2.99%, at 7,776.76.
The energy sector .SPNY shed 3.9% as oil prices slumped on
demand worries. O/R
Shares of Apple Inc AAPL.O were down 2.7% after boosting
markets a day earlier with a 4% rise. Chipmakers were also down,
with the Philadelphia chip index .SOX slumping 3.4%.
The biggest decliner on the S&P 500 index was Macy's Inc
M.N , down 14.6%, after the department store operator cut its
full-year profit forecast as it discounted heavily to clear
excess spring season inventory. Rivals Kohl's Corp KSS.N , Target Corp TGT.N and
Nordstrom Inc JWN.N slipped between 3.2% and 10.8%.
Declining issues outnumbered advancers for a 4.97-to-1 ratio
on the NYSE and for a 5.64-to-1 ratio on the Nasdaq.
The S&P index recorded eight new 52-week highs and 51 new
lows, while the Nasdaq recorded 14 new highs and 221 new lows.