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Indexes down: Dow 0.6%, S&P 500 0.8%, Nasdaq 1%

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PepsiCo ( PEP ) gains after Elliott discloses $4 bln stake

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Gold miners gain as bullion prices hit record high

(Updates after markets open)

By Purvi Agarwal and Ragini Mathur

Sept 2 (Reuters) -

Wall Street's main indexes hit a more than one-week low on

Tuesday, as investors returning from a long holiday weekend

worried about the legality of President Donald Trump's tariffs

and awaited crucial economic reports.

A divided U.S. appeals court ruled on Friday that most

of Trump's tariffs are

illegal

, but allowed for the levies to be in place until October

14. The Trump administration can still file an appeal with the

Supreme Court.

Yields on longer-dated U.S. Treasuries rose on Tuesday,

with ones on the 30-year notes at their highest

levels in more than a month, pressuring equities.

The CBOE Market Volatility index also touched its

highest mark in over three weeks and was last up 1.85 points at

18.

"If the Supreme Court rules the tariffs to be illegal,

the government has to pay all that money back ... if there's

more debt, yields will rise higher, which means more trouble for

the market," said Robert Pavlik, senior portfolio manager at

Dakota Wealth.

At 10:04 a.m. ET, the Dow Jones Industrial Average

fell 282.83 points, or 0.62%, to 45,262.05, the S&P 500

lost 54.25 points, or 0.84%, to 6,406.01 and the Nasdaq

Composite lost 209.65 points, or 0.98%, to 21,245.90.

Indexes pared some declines after the Institute for

Supply Management (ISM) said that its manufacturing PMI rose to

48.7 in August from 48 in July.

Still, most S&P 500 sectors traded in the red, with tech

stocks the biggest drags. Nvidia ( NVDA ) fell 1.5%,

Apple ( AAPL ) lost 0.8% while Microsoft ( MSFT ) was off 0.6%.

Conversely, a 3.6% gain in PepsiCo ( PEP ) after Elliott

Management disclosed a $4 billion stake in the beverages giant,

launching an activist campaign, limited losses on the consumer

staples sector.

Meanwhile, caution also prevailed ahead of the August

nonfarm payrolls report, due on Friday, which will follow a

monthly private payrolls reading and job openings figures.

Markets are pricing in about a 92% chance of a

25-basis-point cut in interest rates at the Fed's meeting later

this month, according to the CME Group's FedWatch tool.

Investors' dovish tilt came after July's weak job report,

with Fed Chair Jerome Powell acknowledging the growing risks to

the labor market at the Jackson Hole symposium, helping the S&P

500 and the Dow log their fourth consecutive month of gains in

August.

The Nasdaq logged its fifth straight monthly gain last

month.

Markets are entering seasonally dour September, which,

according to DataTrek Research, is the only month since 1958

where the S&P 500's mean returns are negative.

An announcement from Trump related to the U.S. defense

department later in the day will also be watched.

In stocks, gold miners gained after bullion prices hit a

record high. U.S.-listed shares of Harmony Gold rose

5.6%, Barrick Mining gained 1.2% and Newmont ( NEM ) added

1.1%.

Kraft Heinz ( KHC ) fell 3%. The packaged goods giant will

split into two listed companies.

Quarterly earnings from retailers this week will also be

on the radar.

Declining issues outnumbered advancers by a 2.91-to-1

ratio on the NYSE and by a 1.8-to-1 ratio on the Nasdaq.

The S&P 500 posted six new 52-week highs and one new

low, while the Nasdaq Composite recorded 48 new highs and 48 new

lows.