U.S. stocks plunge as recession fears hurt risk appetite

(Reuters) -- Wall Street's main indexes slumped on Monday as risk appetite among investors dropped on fears of a U.S. recession following weak economic data last week, sending tremors across global markets.

Market worries eased a bit as the day progressed and stocks pared losses after data showed U.S. services sector activity in July rebounded from a four-year low amid a rise in orders and employment.

Traders attributed some weakness in stocks also to unwinding of sharp positions of carry trades, where investors borrow money from economies with low interest rates such as Japan or Switzerland to fund their bets in high-yielding assets elsewhere.

The so-called Magnificent Seven group of stocks -- the main driver for the indexes hitting record highs this year -- were set to lose a combined $650 billion in market value.

Apple fell 3.9% after Berkshire Hathaway halved its stake in the iPhone maker, in a sign that billionaire investor Warren Buffett is growing wary about the broader U.S. economy or lofty stock market valuations.

Nvidia slid 6.1%, while Microsoft and Alphabet fell about 3% each.

"A 5%+ stock market correction is not unusual given the 15% return in the first half and the balanced risks in this late-stage economic cycle," said Jason Pride and Michael Reynolds at Glenmede. "Investors should actively rebalance portfolios back to long-term policies and closely monitor risks that could tip the U.S. toward recession."

At 11:30 a.m. ET, the Dow Jones Industrial Average was down 863.70 points, or 2.17%, at 38,873.56; the S&P 500 was down 129.55 points, or 2.42%, at 5,217.01; and the Nasdaq Composite was down 465.25 points, or 2.77%, at 16,310.92.

A weak jobs report and shrinking manufacturing activity in the world's largest