* Oil prices slide to near 12-year lows
* China circuit breaker suspended as of Friday
* Apple falls; trading below $100
* Indexes down: Dow 1.22 pct, S&P 1.28 pct, Nasdaq 1.65 pct (Updates to early afternoon)
By Tanya Agrawal
Jan 7 (Reuters) - U.S. stocks were sharply lower on Thursday as market volatility in China and a relentless slide in oil prices unnerved investors, extending the shaky start to the year.
China allowed the biggest fall in the yuan in five months, and Shanghai stocks were halted for the second time this week after another brutal selloff tripped a newly imposed circuit breaker.
Global stocks, however, recouped some losses after the Shanghai and Shenzhen stock exchanges said China would suspend the circuit breaker as of Friday.
With Beijing accelerating the yuan's depreciation to make its exports more competitive, investors fear the world's second-largest economy is even weaker than had been imagined.
Adding to the gloom, oil slipped below $33 a barrel to near 12-year lows due before regaining some ground. Still, oil prices are down about 70 percent since mid-2014.
"There is a wall of worry under full construction brought on by China, fall in oil prices and uncertainty regarding quarterly earnings," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
"There is concern regarding China's ability to manage its economy and while the Fed removed one uncertainty when it raised rates last year, it introduced another with regard to the pace of hikes," he said.
Richmond Federal Reserve President Jeffrey Lacker struck a hawkish note on Thursday, saying the central bank may need to raise interest rates more than four times this year if oil prices stabilize, the dollar stops appreciating and inflation surges toward the Fed's 2 percent target.
However, Fed funds futures contracts show that traders expect the central bank to raise rates at least twice in 2016, and are reducing bets on a third hike by December.
At 12:34 p.m. ET (1734 GMT) the Dow Jones industrial average was down 206.75 points, or 1.22 percent, at 16,699.76, the S&P 500 was down 25.49 points, or 1.28 percent, at 1,964.77 and the Nasdaq Composite index was down 79.95 points, or 1.65 percent, at 4,755.82.
Billionaire investor George Soros, speaking at an economic forum in Sri Lanka, drew similarities between the present environment and the financial crash of 2008.
He said global markets were facing a crisis and investors needed to be very cautious, Bloomberg reported.
The World Bank also cut its global economic growth forecast for 2016, saying the weak performance of major emerging market economies will tamp activity overall, as will anemic showings from developed countries such as the United States.
All 10 major S&P 500 sectors were lower with the financial index's 1.8 percent fall leading the decliners. JPMorgan's 2.6 percent fall weighed the most on the sector.
The CBOE Volatility Index, the market's favored gauge of Wall Street anxiety, was up 14 percent at 23.47, after opening at its highest level since Dec. 14.
Data showed the number of Americans filing for unemployment benefits fell last week from a more than five-month high. The report comes ahead of the government's closely watched monthly employment report due for release on Friday.
Shares of Apple were down 1.9 percent at $98.75, following reports of slowing shipments of the iPhone 6S and 6S Plus.
Yahoo fell 4.5 percent to $30.69 after Business Insider reported the company was working on a plan to cut its workforce by at least 10 percent. Alibaba, in which Yahoo has a stake, was down 4.8 percent at $73.60.
Declining issues outnumbered advancing ones on the NYSE by 2,477 to 547. On the Nasdaq, 2,269 issues fell and 513 advanced.
The S&P 500 index showed one new 52-week high and 72 new lows, while the Nasdaq recorded 12 new highs and 232 new lows. (Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)