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* US factory sector contracts for the first time since 2016
* China and the United States launch a new series of tariffs
* Technology stocks weigh most on the S & P 500
* Casino stocks under the pressure of low data from Macao
* Decline in indexes: Dow 1.48%, S & P 500 1.06%, Nasdaq 1.11% (Open Update)
By Uday Sampath Kumar
Sept. 3 (Reuters) – Wall Street yielded on Tuesday after data showed that the US manufacturing sector was contracting for the first time since 2016 in August, adding to fears that a prolonged trade war between the United States and the US China may lead to the recession of the world's largest economy.
The Institute for Supply Management said its national plant activity index had dropped to 49.1, from 51.1 estimated by analysts polled by Reuters.
Weak data also weighed on US Treasury yields, as the 10-year benchmark yield fell to its lowest level since July 2016. Banks' shares, which are generally under pressure in a low-rate environment, have fallen 2%.
Trade-sensitive industries fell 1.77%, while technology stocks fell 1.38%.
Faced with the escalation of their trade war, the United States began Sunday to impose tariffs of 15% on various Chinese products, while China imposed new rights on US crude oil.
The tariffs that came into effect on Sunday make investors more and more cynical about the trade war, said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The S & P 500 index fell 1.8% in August. This was the biggest monthly decline since May, after escalating trade tensions and the reversal of a major part of the US yield curve, seen as a sign of recession, which pushed investors to turn to safe havens.
However, trade tensions were eased last week following indications that Beijing and Washington would meet in September for talks, but Bloomberg said on Monday that the two sides had not yet agreed to any talks. A date for the scheduled meeting.
The energy sector fell by almost 2% and was the biggest loser in the 11 main sectors of the S & P industry, as the increase in OPEC and Russian crude oil production resulted in a fall 4% of the price of oil.
Flea makers, who derive much of their revenue from China, also fell, with the Philadelphia Semiconductor index shedding 2.06%.
At 10:16 am ET, the Dow Jones Industrial Average was down 391.94 points, or 1.48%, to 26,011.34, the S & P 500 down 30.94 points, or 1, 06%, at 2,895.52 and the Nasdaq Composite down 88.11 points, or 1.11%. at 7,874.77.
US casino operators felt the worst of the slowdown in economic growth in China, with Macau recording an 8.6% drop in casino sales in August.
Falling issues outnumbered defenders for a ratio of 2.47 to 1 on the NYSE and a ratio of 2.65 to 1 on the Nasdaq.
The S & P index posted 19 new highs over 52 weeks and four new lows, while the Nasdaq recorded 25 new highs and 76 new lows. (Report by Uday Sampath in Bengaluru, edited by Anil D & Silva and Arun Koyyur)
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