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US manufacturing gauge drops to eight-month low

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Arm Holdings down after tepid Q2 revenue forecast

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Eli Lilly ( LLY ) up as weight-loss drug cut heart failure risk in

trial

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Moderna ( MRNA ) slumps after slashing 2024 sales forecast

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Indexes down: Dow 1.10%, S&P 0.82%, Nasdaq 1.26%

(Updated at 12:15 p.m. ET/1615 GMT)

By Ankika Biswas and Shubham Batra

Aug 1 (Reuters) -

Wall Street's main indexes reversed course and slumped on

Thursday, weighed by megacap tech and chip stocks, while

small-caps bore the brunt of selling pressure on renewed fears

of a slowdown in the U.S. economy.

Fresh data showed a measure of

manufacturing activity

dropped to an eight-month low in July, keeping the sector

in a contraction and dragging Industrials stocks down

2%. Caterpillar ( CAT ) and Boeing ( BA ) were the biggest

weights on the blue-chip Dow.

"The overall market is being influenced by the weak ISM

manufacturing report, which tells the market that the economy

might actually be in a worse shape than they had expected,"

said Robert Pavlik, senior portfolio manager at Dakota Wealth.

"And (Federal Reserve Chair) Powell's still on hold with

rate cuts, so that's gotten them concerned."

The small-cap Russell 2000 slumped over 3% to a

more than one-week low after logging its biggest monthly gain so

far in 2024.

Most megacap stocks fell, with Apple ( AAPL ) and

Amazon.com ( AMZN ) down over 1% each ahead of their quarterly

results after markets close, while Tesla slumped 4%.

Nvidia ( NVDA ) dropped 3.2% in a broader chip stocks

rout sparked by Arm Holdings' conservative revenue

forecast and Qualcomm ( QCOM ) flagging a revenue hit from the

impact of trade curbs, knocking their stocks down 15% and 8%,

respectively.

At 12:15 p.m. the Dow fell 449.51 points, or

1.10%, to 40,393.28, the S&P 500 lost 45.39 points, or

0.82%, to 5,476.91, and the Nasdaq Composite lost 222.16

points, or 1.26%, to 17,377.24.

However, Meta Platforms ( META ) bucked the trend with a

6.4% jump after its second-quarter revenue beat and upbeat

third-quarter sales forecast pointed to the possibility that its

artificial intelligence costs would be covered. The S&P 500

Communication Services index also gained 1.3%.

The Facebook-owner's quarterly results were the first among

"Magnificent Seven" companies to enthuse investors, allaying

concerns around AI spending after dismal earnings from Alphabet

and Microsoft ( MSFT ) last month.

Markets have been looking for signs that tech behemoths can

hold on to their bumper gains after steering Wall Street to

record highs this year, on AI euphoria and hopes of early rate

cuts.

After Fed chief Jerome Powell offered the stock market a

likely pivot to policy easing in September, investors are now

trying to gauge if the central bank will be able to ease policy

at a pace consistent with achieving the much awaited "soft

landing" for the economy.

Earlier in the day, data showed jobless claims rose to an

11-month high, another sign of labor market weakness ahead of

Friday's Non-farm Payrolls reading.

Moderna ( MRNA ) slumped 20% after cutting its 2024

sales forecast for COVID-19 and respiratory syncytial virus

vaccines by up to 25%.

Eli Lilly ( LLY ) rose 3% after trial results showed

weight-loss drug Zepbound reduces the risk of hospitalization,

death and other outcomes for obese adults with a common type of

heart failure.

Declining issues outnumbered advancers by a 2.13-to-1 ratio

on the NYSE, and by a 3.07-to-1 ration on the Nasdaq.

The S&P 500 posted 44 new 52-week highs and five new

lows, while the Nasdaq Composite recorded 59 new highs and 113

new lows.