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Apple ( AAPL ) falls as Berkshire cuts its stake by half

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Wall Street "fear gauge" spikes

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U.S. does not look like it is in recession: Fed's Goolsbee

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Indexes down: Dow 2.5%, S&P 500 2.9%, Nasdaq 3.4%

(Updates to 2:30 p.m. ET)

By Caroline Valetkevitch

NEW YORK, Aug 5 (Reuters) - Major U.S. stock indexes

fell sharply on Monday, with the Nasdaq down more than 3%, as

U.S. recession worries shook global markets and drove investors

out of risky assets, while Apple ( AAPL ) shares dropped as Berkshire

Hathaway ( BRK/A ) cut its stake in the company.

The recession worries followed weak economic data last week,

including Friday's U.S. payrolls report.

Indexes pared losses after data showed U.S. services sector

activity in July rebounded from a four-year low amid a rise in

orders and employment.

Shares of Apple ( AAPL ) fell 4.4% after Berkshire Hathaway ( BRK/A )

halved its stake in the iPhone maker. Billionaire

investor Warren Buffett also let cash at Berkshire soar to $277

billion.

Nvidia ( NVDA ) slid more than 6%, while Microsoft ( MSFT )

was down 3.4% and Alphabet was down 2.5%.

Chicago Fed President Austan Goolsbee downplayed recession

fears, but said Fed officials need to be cognizant of changes in

the environment to avoid being too restrictive with interest

rates.

"The consequence of higher-than-normal monetary policy is a

slowing economy. I don't know that there's justification for the

apparent panic selling that we've seen in the last few days

because the data certainly doesn't suggest a crash landing" in

the economy, said Oliver Pursche, senior vice president, adviser

for Wealthspire Advisors in Westport, Connecticut.

The Dow Jones Industrial Average fell 986.88 points,

or 2.48%, to 38,750.38, the S&P 500 lost 152.23 points,

or 2.85%, to 5,194.33 and the Nasdaq Composite dropped

563.51 points, or 3.36%, to 16,212.65.

The CBOE Volatility index, Wall Street's "fear

gauge," rose sharply.

The weak jobs report and shrinking manufacturing activity in

the world's largest economy, coupled with disappointing

forecasts from the big U.S. technology companies, and the Nasdaq

Composite on Friday confirmed it was in correction territory.

The so-called Magnificent Seven group of stocks - the main

driver for the indexes hitting record highs this year - were set

to wipe out nearly $900 billion from the combined market value

of the companies.

Traders also attributed some weakness in stocks to unwinding

of sharp positions of carry trades, where investors borrow money

from economies with low interest rates such as Japan or

Switzerland to fund their bets in high-yielding assets

elsewhere.

U.S. Treasury yields tumbled to their lowest level in a year

and a closely watched gap between two- and 10-year Treasury

notes turned positive for the first time since July 2022,

usually indicating the economy is heading into a downturn.

Traders now see a 92.5% probability that the U.S. central

bank will cut benchmark rates by 50 basis points in September,

compared with an 11% chance seen last week, according to CME's

FedWatch Tool.

Pringles maker Kellanova ( K ) soared 15.2% after a Reuters

report said candy giant Mars was exploring a potential buyout of

the company.

Declining issues outnumbered advancing ones on the NYSE by a

10.10-to-1 ratio; on the Nasdaq, a 6.64-to-1 ratio favored

decliners.

The S&P 500 posted 16 new 52-week highs and 26 new lows; the

Nasdaq Composite recorded 12 new highs and 492 new lows.