US STOCKS-Wall St slides as data shows early business impact of coronavirus

* U.S. services sectors contract for first time since 2016
* Technology, oil, bank stocks lead declines
* Wall St fear gauge hit highest in nearly three weeks
* Indexes down: Dow 0.73%, S&P 0.79%, Nasdaq 1.13%

(Updates to open)
By Sruthi Shankar and Ambar Warrick
Feb 21 (Reuters) - U.S. stock indexes fell on Friday after
data showed U.S. business activity stalled in February, and a
spike in new coronavirus cases in China and elsewhere sent
investors scrambling for safer assets such as gold and
government bonds.
A flash reading of the IHS Markit services sector Purchasing
Managers' Index 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 1.5%. Chipmakers,
heavily reliant on China for their revenue, also took a beating,
with the Philadelphia Semiconductor index .SOX slipping 2.1%.
"With the stock market overvalued and extended, especially
with tech stocks being overweight, when you get these negative
data points, it is an excuse to take some profits," said Mike
Gibbs, director of portfolio and technical strategy at Raymond
James.
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
tumbled on Thursday as the virus appeared harder to contain.
South Korea reported 100 new cases, while more than 80
people tested positive for the virus in Japan on Friday.
MKTS/GLOB
The CBOE volatility index .VIX hit its highest level in
nearly three weeks, while oil prices fell about 2%. Conversely,
gold prices rose to their highest in seven years. O/R GOL/
The risk-off sentiment drove up bond prices and sent yields
lower, hitting shares of banks including Goldman Sachs Group Inc
GS.N and JPMorgan Chase & CO JPM.N . US/
At 10:26 a.m. ET, the Dow Jones Industrial Average .DJI
was down 213.75 points, or 0.73%, at 29,006.23, the S&P 500
.SPX was down 26.57 points, or 0.79%, at 3,346.66 and the
Nasdaq Composite .IXIC was down 110.01 points, or 1.13%, at
9,640.95.
Among individual stocks, Dropbox Inc DBX.O jumped 21.3%
after it raised its outlook for operating margin, and Deere & Co
DE.N rose 9.6% after an unexpected rise in first-quarter
profit. Sprint Corp S.N climbed 5.1% 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 2.15-to-1 ratio
on the NYSE and a 2.40-to-1 ratio on the Nasdaq.
The S&P index recorded 17 new 52-week highs and eight new
lows, while the Nasdaq recorded 52 new highs and 35 new lows