Wall Street falls as rate hike looms, growth fears resurface

By Abhiram Nandakumar

REUTERS - U.S. stock indexes fell more than 1 percent on Monday afternoon, their biggest decline in six weeks, as investors braced for an increase in interest rates and fretted about weak Chinese trade data.

Nine of the 10 major S&P sectors were lower, led by consumer discretionary and energy stocks. The Dow Jones industrial average slipped into negative territory for the year, with only two of its 30 components higher on the day.

U.S. companies face the prospect of higher borrowing costs if the Federal Reserve raises interest rates next month, as is widely expected after Friday's strong jobs report.

They also now face renewed fears of a slowdown in China, a key market for many companies, as they head into the crucial holiday shopping season.

China, one of the United States' biggest trade partners, ended October with a record high trade surplus, with both exports and imports falling.

The Organisation for Economic Co-operation and Development cutting its 2015 global growth forecast added to the negative sentiment.

U.S. stocks have ended higher for six weeks in a row, buoyed by better-than-expected corporate results and signs of a strengthening domestic economy.

"We've had a rally up and I think we're just about done for now, at least for the next couple of weeks," said Gary Kaltbaum, president of Kaltbaum & Associates in Orlando, Florida.

"To me, it's more that the market is petering out here after rallying," he said, adding the rally was mostly driven by large-cap names that "made things look better than they really are".

At 12:49 p.m. ET (1749 GMT), the Dow Jones industrial average was down 201.36 points, or 1.12 percent, at 17,708.97.

The S&P 500 was down 24.36 points, or 1.16 percent, at 2,074.84, close to the level at which it started the year.

The Nasdaq Composite index was down 62.52 points, or 1.21 percent, at 5,084.60.

The CBOE Volatility index, known Wall Street's fear gauge, rose 15 percent to 16.41, the most in a single session in six weeks.

The consumer discretionary sector was the worst-hit among the S&P sectors, falling 1.9 percent, weighed down by Priceline.

Priceline slumped 8.9 percent to $1321.08 after a weak fourth-quarter profit forecast.

A fall in oil prices led to a 1.7 percent decline in the energy sector. Exxon and Chevron were down nearly 2 percent. [O/R]

Alphabet, Microsoft and Amazon were all down more than 1 percent. Dow components IBM and Goldman Sachs were about 2 percent.

Among the rare bright spots, Apache jumped 11.2 percent to $52.98 after Bloomberg reported the oil producer had rejected a takeover approach from an unidentified party.

Dean Foods rose 4.5 percent to $18.74 after reporting a better-than-expected quarterly profit.

Plum Creek Timber soared 17.6 percent to $47.38 after Weyerhaeuser said it would buy the company to create a $23 billion timber company. Weyerhaeuser was up 1.9 percent.

Declining issues outnumbered advancing ones on the NYSE by 2,583 to 463. On the Nasdaq, 1,910 issues fell and 802 advanced.

The S&P 500 index showed three new 52-week highs and nine new lows, while the Nasdaq recorded 89 new highs and 50 new lows.

(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Savio D'Souza)