US STOCKS-Wall St slides as gloomy data adds to coronavirus fears

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* U.S. services sector contracts for first time since 2016
* Technology, oil, bank stocks lead declines
* Wall St fear gauge hits highest in nearly three weeks
* Indexes down: Dow 0.64%, S&P 0.86%, Nasdaq 1.40%

(Updates to early afternoon)
By Sruthi Shankar
Feb 21 (Reuters) - U.S. stock indexes fell on Friday after
data showed U.S. business activity stalled in February, while a
spike in new coronavirus cases in China and elsewhere sent
investors scrambling for safer assets such as gold and
government bonds.
The IHS Markit's Purchasing Managers' index of services
sector activity dropped to its lowest level since October 2013,
signalling a contraction for the first time since 2016. The
manufacturing sector also clocked its lowest reading since
August. Declines on Friday were led by heavyweights Microsoft Corp
MSFT.O , Amazon.com Inc AMZN.O and Apple Inc AAPL.O for a
second straight day.
The S&P technology index .SPLRCT dropped 1.9%. Chipmakers,
heavily reliant on China for their revenue, also took a beating,
with the Philadelphia Semiconductor index .SOX falling 2.5%.
"We are in an unknown situation and, when valuations are
expensive, any minor hint of news that is negative makes
investors run for the exits," said Phil Blancato, chief
executive officer of Ladenburg Thalmann Asset Management in New
York.
Hopes of monetary easing by major central banks had
propelled the benchmark S&P 500 .SPX and the tech-heavy Nasdaq
.IXIC to all-time highs on Wednesday, but the indexes are on
course for their first weekly decline in three weeks as the
virus appears harder to contain.
The S&P 500 was trading 1.4% below its all-time high.
"I think Apple's announcement last week is the beginning of
the hard news flow," said Hugh Anderson, managing director at
HighTower Advisors in Las Vegas, Nevada, referring to the iPhone
maker's sales warning due to the impact of the virus outbreak.
"Not only are you seeing a break in the supply chain but
also you're seeing a break in the demand for products, which is
a fundamental challenge to an already moderate global growth."
China reported a jump in new cases on Friday, while South
Korea became the latest hot spot with 100 new cases and more
than 80 people tested positive for the virus in Japan.
MKTS/GLOB
Wall Street's fear gauge, the CBOE volatility index .VIX ,
hit its highest level in nearly three weeks.
The risk-off sentiment drove up gold and bond prices, while
falling Treasury yields hit shares of lenders, with the S&P
banks index .SPXBK down 1.2%. GOL/ US/
A slide in oil prices knocked 1% off the S&P energy index
.SPNY . O/R
At 1:03 p.m. ET, the Dow Jones Industrial Average .DJI was
down 0.64% at 29,031.99. The S&P 500 .SPX fell 0.86% to
3,344.37 and the Nasdaq Composite .IXIC dropped 1.40% to
9,614.53.
Among other stocks, Dropbox Inc DBX.O jumped 21.2% after
it raised its outlook for operating margin, and Deere & Co
DE.N rose 8.2% after an unexpected rise in first-quarter
profit. Sprint Corp S.N climbed 6.1% as it announced new merger
terms with T-Mobile US TMUS.O that would reduce the stake of
major Sprint shareholder SoftBank. T-Mobile shares dipped 0.9%.
Declining issues outnumbered advancers for a 1.82-to-1 ratio
on the NYSE and a 1.94-to-1 ratio on the Nasdaq.
The S&P index recorded 26 new 52-week highs and eight new
lows, while the Nasdaq recorded 67 new highs and 49 new lows.