US STOCKS-Wall St falls as monthly factory activity contracts to 10-yr low

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* Industrials fall after weak ISM manufacturing data
* Philip Morris rises on BofA Merrill Lynch upgrade
* McDonald's drops on JPM comments
* Indexes down: Dow 0.71%, S&P 0.56%, Nasdaq 0.36%

(Adds comment, details; updates prices)
By Medha Singh and Arjun Panchadar
Oct 1 (Reuters) - Wall Street's main indexes reversed course
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 manufacturing activity index showed a reading of 47.8,
according to the ISM report, contracting for the second straight
month 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 1.20%, the most
among the 11 major S&P sectors.
"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 bestselling 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 11:19 a.m. ET, the Dow Jones Industrial Average .DJI
was down 190.92 points, or 0.71%, at 26,725.91 and the S&P 500
.SPX was down 16.73 points, or 0.56%, at 2,960.01.
The Nasdaq Composite .IXIC was down 28.81 points, or
0.36%, at 7,970.53.
McDonald's Corp MCD.N dropped 2.5% after JP Morgan said
the fast food chain's third-quarter same-store sales would be
softer than analysts estimates.
Shares of online brokerage E*Trade Financial ETFC.O
tumbled 17.9%, 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.
Shares of Charles Schwab dropped 9.5%.
Semiconductor stocks Analog Devices ADI.O and Microchip
Technology MCHP.O rose after KeyBanc upgraded the chipmakers
to "overweight". Shares of peer Xilinx XLNX.O slipped 4.2%
after the brokerage lowered its rating to "sector weight".
Ulta Beauty ULTA.O advanced 5.8% 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.
Declining issues outnumbered advancers for a 1.62-to-1 ratio
on the NYSE and a 1.38-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 54 new lows.