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* U.S. factory sector shrinks for first time since 2016
* Tech stocks weigh most on S&P 500
* Boeing (NYSE:BA) off on fears of more delays to 737 MAX return
* Indexes fall: Dow 1.37%, S&P 500 0.85%, Nasdaq 0.98%
(Updates prices, adds comments)
By Uday Sampath Kumar
Sept 3 (Reuters) - U.S. stocks fell on Tuesday as data
showed factory activity contracted for the first time since 2016
in August, renewing fears that a drawn-out trade war between the
United States and China could tip the world's largest economy
into recession.
The Institute for Supply Management said its index of
national factory activity decreased to 49.1, compared with a
reading of 51.1 estimated by analysts polled by Reuters.
The weak data also weighed on U.S. Treasury yields, with the
benchmark 10-year yield US10YT=RR falling to its lowest since
July 2016. Shares of banks .SPXBK , which typically come under
pressure in a low interest rate environment, slid 2.1%.
"A contraction in the manufacturing sector, which we haven't
seen for a very long time, is important because it has a
tendency to be a leading indicator for the rest of the economy
including the services sector," said Randy Frederick, vice
president of trading and derivatives for Charles Schwab (NYSE:SCHW) in
Austin.
"The signals (for a recession) have been lining up and this
is one of them," Frederick said, adding that a downturn by late
next year is "very realistic."
U.S. stocks opened lower as the lack of progress on
negotiations between Washington and Beijing amid a new round of
tariffs kicking in over the weekend weighed on sentiment.
The United States on Sunday began imposing 15% tariffs on a
variety of Chinese goods, and China began imposing new duties on
U.S. crude oil.
The energy sector .SPNY tumbled 1.7%, as rising OPEC and
Russian crude output also drove a slump in oil prices. O/R
Trade-sensitive industrials .SPLRCI slipped 1.7%, while
technology stocks .SPLRCT fell 1.2%.
Chipmakers, which draw a large portion of their revenue from
China, also fell, with the Philadelphia Semiconductor index
.SOX down 1.9%.
The S&P 500 index fell 1.8% in August, its biggest monthly
drop since May, after escalating trade tensions and the
inversion of a key part of the U.S. yield curve, seen as a sign
of recession, drove investors toward safe-haven assets.
However, trade tensions were dialed down last week following
signals that Beijing and Washington would meet in September for
talks, but Bloomberg reported on Monday that the two sides were
struggling to agree on a date for the planned meeting.
At 11:23 a.m. ET the Dow Jones Industrial Average .DJI was
down 361.35 points, or 1.37%, at 26,041.93 and the S&P 500
.SPX was down 24.80 points, or 0.85%, at 2,901.66.
The Nasdaq Composite .IXIC was down 78.11 points, or
0.98%, at 7,884.78.
Weighing the most on the Dow were shares of Boeing Co
BA.N , which tumbled 3.4% after the Federal Aviation
Administration said on Friday a global panel of experts will
need a few more weeks to finish its review into the company's
737 MAX certification. U.S. casino operators felt the brunt of slowing economic
growth in China as gambling hub Macau posted weak August casino
revenue. Shares of Wynn Resorts Ltd WYNN.O , Las Vegas Sands
Corp LVS.N and MGM Resorts International MGM.N fell between
2.4% and 4.5%. Among few gainers were the defensive utilities .SPLRCU ,
real estate .SPLRCR and consumer staples .SPLRCS sectors.
Declining issues outnumbered advancers for a 2.10-to-1 ratio
on the NYSE and for a 2.80-to-1 ratio on the Nasdaq.
The S&P index recorded 33 new 52-week highs and eight new
lows, while the Nasdaq recorded 35 new highs and 103 new lows.