US STOCKS-Wall St tumbles as September factory activity hits 10-yr low

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* Industrials fall after weak ISM manufacturing data
* E*Trade Financial, Charles Schwab lead declines on S&P
* McDonald's drops on JPM comments
* Indexes down: Dow 1%, S&P 0.88%, Nasdaq 0.73%

(Updates to early afternoon)
By Medha Singh and Arjun Panchadar
Oct 1 (Reuters) - Wall Street's main indexes shed as much as
1% on Tuesday after data showed U.S. factory activity shrank in
September to its weakest in more than a decade, deepening
worries about the impact of a U.S.-China trade war on the
world's largest economy.
The indexes gave up early gains after the manufacturing
activity index showed a reading of 47.8, according to the ISM
report, falling further from August's sharp contraction and
below economists' expectations of 50.1. A reading below 50
indicates contraction. Investors moved to the safety of U.S. Treasuries following
the data that came close on the heels of a contraction in euro
zone manufacturing earlier in the day. The industrials sector .SPLRCI slipped 1.71%, the most
among the 11 major S&P sectors. Four other sectors dropped more
than 1%.
"The PMIs across the globe have continued to deteriorate and
obviously we are in line with that deterioration. It's all due
to the trade war," said Peter Cardillo, chief market economist
at Spartan Capital Securities in New York.
Despite a prolonged U.S.-China trade war that has hammered
global growth, confidence in the domestic economy has been one
of the factors that has helped the benchmark S&P 500 .SPX
climb about 18% so far this year.
However, Thomas Simons, a Jefferies economist, said the
contraction does not underpin a wider softening in the U.S.
economy, as it was the result of factors including Boeing Co's
BA.N production issues relating to its best-selling jets.
"Manufacturing itself is in a recession, but it does not
mean that the overall economy is in a recession."
A crucial jobs report on Friday is expected to shed further
light on U.S. economic growth.
At 12:28 p.m. ET, the Dow Jones Industrial Average .DJI
was down 268.11 points, or 1.00%, at 26,648.72 and the S&P 500
.SPX was down 26.31 points, or 0.88%, at 2,950.43.
The Nasdaq Composite .IXIC was down 58.50 points, or
0.73%, at 7,940.84.
Shares of online brokerage E*Trade Financial ETFC.O
tumbled 16%, the most on the S&P 500, following rival Charles
Schwab Corp's SCHW.N move to remove commissions for online
trading of stocks, ETFs and options listed on U.S. or Canadian
exchanges.
Charles Schwab's shares fell 8.9%.
McDonald's Corp MCD.N dropped 2.7% after JP Morgan said
the fast food chain's third-quarter same-store sales would be
softer than analysts' estimates.
Shares of chipmaker Xilinx Inc XLNX.O slipped 4.3% after
KeyBanc lowered its rating to "sector weight".
Ulta Beauty Inc ULTA.O advanced 4.7% as singer Jennifer
Lopez launched a new fragrance exclusively at the company's
stores in the United States and an independent director bought
back shares.
As the final quarter of 2019 kicks off, investors will be
focusing on a range of factors, beginning with the high-stakes
Sino-U.S. trade talks in early October, corporate earnings and
the Fed's next policy meeting.
Declining issues outnumbered advancers for a 2.06-to-1 ratio
on the NYSE and a 2.07-to-1 ratio on the Nasdaq.
The S&P index recorded 12 new 52-week highs and three new
lows, while the Nasdaq recorded 27 new highs and 69 new lows.