US STOCKS-Wall St down sharply on economic uncertainty

                                

                                
 * Fed's downgrade of economic outlook weighs on shares
                                
 * Chinese investment and factory output slows
                                
 * Stocks off: Dow 1.7 pct, S&P 1.9 pct, Nasdaq 2.2 pct
                                
 * For up-to-the-minute market news see [STXNEWS/US]
                                
 (Updates to morning trading)
                                
 By Angela Moon
                                
 NEW YORK, Aug 11 (Reuters) - U.S. stocks fell sharply on
Wednesday after weaker manufacturing data from China and a
gloomier growth outlook from the Federal Reserve heightened
fears of a lackluster global economic recovery.
                                
 All S&P sector indexes were lower, with commodities and
energy leading the way down as data in China pointed to lower
consumption of raw materials and the International Energy
Agency warned of risks to fuel demand if the global economy
weakens.
                                
 The S&P materials sector index <.GSPM> was off 2.8 percent
and the energy sector index <.GSPE> was down 2.6 percent.
                                
 Investors fled from riskier assets to safe-haven
investments like the dollar and lower-risk government debt.
U.S. 2-year Treasury note yields hit a record low.
                                
 Defensive stocks such as utilities and telecom held up
better, with losses on the S&P utilities index <.GSPU> limited
to 1.5 percent. That move and a strong demand in bonds, are
forecasting a "major slowdown in the economy," said Ryan
Detrick, senior technical strategist at Schaffer's Investment
Research.
                                
 The U.S. dollar rose 1.8 percent against a basket of major
currencies <.DXY>.
                                
 The Dow Jones industrial average <.DJI> was down 180.58
points, or 1.70 percent, at 10,463.67. The Standard & Poor's
500 Index <.SPX> was down 21.56 points, or 1.92 percent, at
1,099.50. The Nasdaq Composite Index <.IXIC> was down 50.31
points, or 2.21 percent, at 2,226.86.
                                
 China reported a slowdown in factory output, adding to the
picture of softening domestic demand painted by other data a
day earlier that showed a sharp drop in import growth. For
details, see [ID:nTOE67A01A]
                                
 The U.S. trade deficit widened a surprising 18.8 percent in
June, its highest since October 2008, a government report
showed on Wednesday. [ID:nN10158770]
                                
 On Tuesday the Federal Reserve downgraded its outlook on
the economy and said it would begin funneling proceeds from
maturing mortgage bonds it holds into longer-term government
debt to keep borrowing costs low. [ID:nN09275781]
                                
 But a tepid response in stocks suggested investors didn't
see the actions as having much immediate impact on the weak
labor market and slowing consumer spending, two headwinds
facing the recovery.
                                
 Cisco Systems <CSCO.O>, which is due to report earnings
after the bell, was the biggest decliner on the Dow, falling
2.7 percent to $23.64.
                                
 Alcoa Inc <AA.N> fell 2.5 percent at $11.07.
                                
 But Macy's Inc <M.N> shares rose 3.9 percent to $20.12
following better-than-expected quarterly results.
[ID:nN11200899]
                                
 (Editing by Padraic Cassidy)