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US STOCKS-Wall Street tumbles on weak factory data, Apple warning

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* Apple sinks on sales forecast cut, blames China

* Factory activity slows more than expected in Dec - ISM

* Technology and trade-sensitive industrials hit the worst

* Celgene soars on Bristol-Myers' $74 bln offer (Updates to early afternoon)

By Sruthi Shankar

Jan 3 (Reuters) - U.S. stocks fell about 2 percent onThursday as a key gauge of factory activity suffered its biggestdrop in a decade, rattling investors already spooked by a rareprofit warning from Apple IncAAPL.O .

The iPhone maker's shares dropped 8.4 percent to $144.73,lowest since July 2017, after the company slashedholiday-quarter revenue forecast for its flagship device, citingslowing sales in China. urn:newsml:reuters.com:*:nL3N1Z236Y

Meanwhile, the Institute of Supply Management said itsmanufacturing index fell to 54.1 in December, its biggestdecline since October 2008, falling short of economists'estimate of 57.9. urn:newsml:reuters.com:*:nN9N1X9024

Data earlier this week showed slowing factory activity inChina and the euro zone, indicating that the ongoing U.S.-Chinatrade dispute was taking a toll on global manufacturing.

"We are seeing markets extrapolate Apple's news throughoutseveral sectors and equate it to a deceleration in the globaleconomy," said Christopher Anselmo, director at Nasdaq IRIntelligence in New York City.

"A lot of data in the past few days, including U.S. factoryactivity is pointing to a global economic slowdown. The data isjust giving a magnitude of how broad this slowdown is and whichregions it is affecting the most."

Nine of the 11 major S&P sectors fell, led by the technologyindex's .SPLRCT 3.8 percent slide. Within tech, chipmakers,which count both Apple and China as major customers, were hitthe hardest. The Philadelphia Semiconductor index .SOX slumped5 percent.

The trade-sensitive industrials .SPLRCI dropped 2.1percent, while materials .SPLRCM fell 1.9 percent.

At 12:39 p.m. ET the Dow Jones Industrial Average .DJI wasdown 460.98 points, or 1.97 percent, at 22,885.26, the S&P 500 .SPX was down 40.69 points, or 1.62 percent, at 2,469.34 andthe Nasdaq Composite .IXIC was down 133.67 points, or 2.01percent, at 6,532.27.

The weak factory data sent investors to the relative safetyof U.S. Treasuries and defensive sectors such as real estate .SPLRCR and utilities .SPLRCU .

While the recent selloff has made stocks cheaper, with theS&P 500's valuation falling to 14 times expected earnings from18 times a year earlier, earnings estimates have also been cutsharply.

Analysts on average expect earnings per share at S&P 500companies to rise nearly 7 percent this year, down from a 10percent forecast at the start of October and far below theirexpectations of 24 percent EPS growth for 2018, according toRefinitiv's IBES.

"As we head towards the earnings season, investors aregetting more and more concerned about how the global economicslowdown and the trade war are impacting U.S. companies," saidAnselmo.

One of the few bright spots was Celgene CorpCELG.O , whichsurged 24 percent after Bristol-Myers Squibb CoBMY.N offeredto buy the drugmaker for about $74 billion in cash and stock.Bristol-Myers fell 13.3 percent. urn:newsml:reuters.com:*:nL3N1Z32RL

Earlier, U.S. futures got a short-lived boost from the ADPNational Employment Report that showed U.S. private sector jobsrose far more than expected in December.

The more comprehensive nonfarm payroll report on Friday willgive a clearer picture of labor market strength. urn:newsml:reuters.com:*:nZON1YH900

Declining issues outnumbered advancers for a 1.11-to-1 ratioon the NYSE and a 1.54-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and 12 new lows,while the Nasdaq recorded one new high and 35 new lows. (Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru;Editing by Shounak Dasgupta) ((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 2238780; outside U.S. +91 80 6749 6328; Reuters Messaging:sruthi.shankar.reuters.com@reuters.net))


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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