US STOCKS-Wall St drops as coronavirus fears, business activity data weigh

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* U.S. services sector contracts for first time since 2016
* Technology leads sector declines
* Indexes down: Dow 0.9%, S&P 1.2%, Nasdaq 1.9%

(Updates to late afternoon)
By Sruthi Shankar
NEW YORK, Feb 21 (Reuters) - U.S. stocks sold off on Friday
as a spike in new coronavirus cases in China and other countries
and as data showing U.S. business activity stalled in February
fueled investors' fears about the economy.
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 2.4%. Chipmakers,
with strong ties to China for revenue, also fell sharply, with
the Philadelphia Semiconductor index .SOX falling 3%.
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.
"It's creating a wild card," for companies and others, said
Peter Tuz, president of Chase Investment Counsel in
Charlottesville, Virginia. "Going into a weekend not so long
after the stock market was hitting highs, people are taking some
money off the table."
The impact could extend beyond the first quarter, he said.
Apple AAPL.O earlier this week warned on sales due to the
impact of the virus outbreak.
The worries pushed up Wall Street's fear gauge, the CBOE
volatility index .VIX , and caused investors to seek safe-haven
assets.
Gold and bond prices rose, while defensive equity sectors -
utilities, real estate and staples - all rose.
The IHS Markit 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. The Dow Jones Industrial Average .DJI fell 262.56 points,
or 0.9%, to 28,957.42, the S&P 500 .SPX lost 39.79 points, or
1.18%, to 3,333.44 and the Nasdaq Composite .IXIC dropped
189.39 points, or 1.94%, to 9,561.57.
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 earlier this week, but the indexes are
on course for their first weekly decline in three weeks.
Among other stocks, Dropbox Inc DBX.O jumped after it
raised its outlook for operating margin, and Deere & Co DE.N
rose after an unexpected rise in first-quarter profit.
Sprint Corp S.N climbed 5.7% 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 advancing ones on the NYSE by a
2.13-to-1 ratio; on Nasdaq, a 2.23-to-1 ratio favored decliners.
The S&P 500 posted 30 new 52-week highs and 8 new lows; the
Nasdaq Composite recorded 70 new highs and 54 new lows.