* Shire shares tumble as AbbVie reconsiders bid
* Retail sales drop more than expected in September
* Producer prices fall for first time in over a year
* Indexes off: Dow 1.67 pct, S&P 1.67 pct, Nasdaq 1.38 pct (Updates to late morning)
By Chuck Mikolajczak
NEW YORK, Oct 15 (Reuters) - U.S. stocks dropped on Wednesday as economic data buttressed worries over the health of the world economy and signs emerged of slowing merger activity.
Each of the major indexes fell more than 2 percent shortly after the open, sending the S&P 500 and Nasdaq into negative territory for the year, before paring losses. The Dow industrials fell into the red for 2014 on Friday.
Concern over plunging oil prices, the potential impact of global economic weakness on U.S. earnings and the spread of Ebola have rattled markets recently. The S&P 500 is on track for its sixth fall in eight sessions and is down nearly 8 percent since its Sept. 18 record closing high.
Worries about a lethargic global economy weren't helped by data that showed U.S. retail sales and producer prices fell in September, while manufacturing activity in New York slowed to its weakest pace since April.
"The clincher is that some of the concerns about Europe and the other economies slowing down has reached our shores today with the retail sales number and the PPI number," said Scott Armiger, portfolio manager at Christiana Trust in Greenville, Delaware.
"It's normal and it's long overdue - markets can't grind higher for that long without some sort of get back here."
Chicago-based AbbVie threw the pace of merger and acquisition activity into doubt. It said it was reconsidering its $55 billion takeover of Shire, weeks after the U.S. government moved to curb deals designed to reduce tax. U.S.-listed shares of Shire tumbled 21.7 percent to $191.55 while AbbVie shares dipped 0.5 percent to $53.85.
At 12:02 p.m. EDT, the Dow Jones industrial average fell 272.71 points, or 1.67 percent, to 16,042.48, the S&P 500 lost 31.28 points, or 1.67 percent, to 1,846.42 and the Nasdaq Composite dropped 58.49 points, or 1.38 percent, to 4,168.68.
In earnings news, Bank of America shares were off 4.9 percent to $15.71 after posting its third-quarter results.
The S&P financial sector fell 2.6 percent as the worst performing of the ten major S&P sectors, all of which were in negative territory.
S&P 500 companies are expected to show earnings growth of 6.7 percent in the third quarter, according to Thomson Reuters data, with revenue growth expected at 4 percent.
The largest percentage gainer on the S&P 500 was Cabot Oil & Gas, which rose 4.9 percent, while the largest percentage decliner was KeyCorp, down 8.0 percent.
The largest percentage gainer on the Nasdaq 100 was Biogen Idec, which was rising 1.6 percent, while the largest percentage decliner was Intel, down 4.2 percent.
Declining issues were outnumbering advancing ones on the NYSE by 2,301 to 757, for a 3.04-to-1 ratio on the downside; on the Nasdaq, 1,761 issues were falling and 850 advancing for a 2.07-to-1 ratio favoring decliners.
The benchmark S&P 500 index was posting 2 new 52-week highs and 70 new lows; the Nasdaq Composite was recording 7 new highs and 225 new lows. (Additional reporting by Yasmeen Abutaleb; Editing by Bernadette Baum and Nick Zieminski)