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

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Wall Street "fear gauge" spikes, last at 72.94

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

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Indexes down: Dow 2.17%, S&P 2.42%, Nasdaq 2.77%

(Updated at 11:30 a.m. ET/1530 GMT)

By Shubham Batra and Shashwat Chauhan

Aug 5 (Reuters) -

Wall Street's main indexes slumped on Monday as risk

appetite among investors dropped on fears of a U.S. recession

following weak economic data last week, sending tremors across

global markets.

Market worries eased a bit as the day progressed and

stocks 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.

Traders attributed some weakness in stocks also 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.

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

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

to lose a combined $650 billion in market value.

Apple ( AAPL ) fell 3.9% after Berkshire Hathaway ( BRK/A )

halved its stake in the iPhone maker, in a sign that billionaire

investor Warren Buffett is growing wary about the broader U.S.

economy or lofty stock market valuations.

Nvidia ( NVDA ) slid 6.1%, while Microsoft ( MSFT ) and

Alphabet fell about 3% each.

"A 5%+ stock market correction is not unusual given the 15%

return in the first half and the balanced risks in this

late-stage economic cycle," said Jason Pride and Michael

Reynolds at Glenmede.

"Investors should actively rebalance portfolios back to

long-term policies and closely monitor risks that could tip the

U.S. toward recession."

At 11:30 a.m. ET, the Dow Jones Industrial Average

was down 863.70 points, or 2.17%, at 38,873.56, the S&P 500

was down 129.55 points, or 2.42%, at 5,217.01, and the

Nasdaq Composite was down 465.25 points, or 2.77%, at

16,310.92.

A weak jobs report and shrinking manufacturing activity in

the world's largest economy, coupled with dismal forecasts from

the big U.S. technology companies, pushed the Nasdaq 100

and the Nasdaq Composite into a correction last week.

The disappointing jobs data also triggered what is known as

the "Sahm Rule", seen by many as a historically accurate

recession indicator.

Traders now see an 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.

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 CBOE Volatility index, also known as Wall

Street's "fear gauge", breached its long-term average level of

20 points last week and was now at 72.94.

U.S. Treasury yields tumbled to their lowest 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.

All the 11 major S&P 500 sectors were trading lower, with

information technology and financials the

worst hit.

Pringles maker Kellanova ( K ) soared 14.1% after a Reuters

report said candy giant Mars was exploring a potential buyout of

the company.

Declining issues outnumbered advancers for a 11.64-to-1

ratio on the NYSE and by 8.59-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and 26 new lows,

while the Nasdaq recorded nine new highs and 476 new lows.