Thursday's early afternoon trade: Stocks fall 2 percent on weak factory data, Apple warning

US stocks fell about 2 percent on Thursday as a key gauge of factory activity suffered its biggest drop in a decade, rattling investors already spooked by a rare profit warning from Apple Inc. The iPhone maker's shares dropped 8.4 percent to $144.73, lowest since July 2017, after the company slashed holiday-quarter revenue forecast for its flagship device, citing slowing sales in China.
Meanwhile, the Institute of Supply Management said its manufacturing index fell to 54.1 in December, its biggest decline since October 2008, falling short of economists' estimate of 57.9. Data earlier this week showed slowing factory activity in China and the euro zone, indicating that the ongoing US-China trade dispute was taking a toll on global manufacturing.
"We are seeing markets extrapolate Apple's news throughout several sectors and equate it to a deceleration in the global economy," said Christopher Anselmo, director at Nasdaq IR Intelligence in New York City.
"A lot of data in the past few days, including US factory activity is pointing to a global economic slowdown. The data is just giving a magnitude of how broad this slowdown is and which regions it is affecting the most."
Nine of the 11 major S&P sectors fell, led by the technology index's 3.8 percent slide. Within tech, chipmakers, which count both Apple and China as major customers, were hit the hardest. The Philadelphia Semiconductor index slumped 5 percent.
The trade-sensitive industrials dropped 2.1 percent, while materials fell 1.9 percent.
At 12:39 p.m. ET the Dow Jones Industrial Average was down 460.98 points, or 1.97 percent, at 22,885.26, the S&P 500 was down 40.69 points, or 1.62 percent, at 2,469.34 and the Nasdaq Composite was down 133.67 points, or 2.01 percent, at 6,532.27.
The weak factory data sent investors to the relative safety of US Treasuries and defensive sectors such as real estate and utilities.
While the recent selloff has made stocks cheaper, with the S&P 500's valuation falling to 14 times expected earnings from 18 times a year earlier, earnings estimates have also been cut sharply.