* China factory activity at 6-1/2-yr low in September
* U.S. factory activity stays at 2-yr low in September
* Materials and industrial sectors lag
* Indexes down: Dow 0.4 pct, S&P 0.2 pct, Nasdaq 0.3 pct (Updates to early afternoon)
By Tanya Agrawal
Sept 23 (Reuters) - Wall Street was lower in volatile trading on Wednesday as weak Chinese and U.S. factory data hit material and industrial stocks.
Data showed U.S. manufacturing growth stayed at a two-year low in September, while Chinese factory activity shrank to a 6-1/2 year low in the month.
The S&P materials index was down 1.4 percent, dragged down by a 2.3 percent fall in Monsanto and a 1.2 percent fall in Dow Chemicals.
The industrial sector was lower by 0.8 percent, with United Technologies and Honeywell falling about 2 percent.
Traders said volumes were lighter than usual which could exacerbate swings in the market.
The volatility in the U.S. stock market has increased recently as investors fret over a China-led global economic slowdown, a concern the Federal Reserve alluded to last week when it left interest rates unchanged.
The S&P 500 has seen moves of at least 1 percent in more than 12 sessions since Aug. 20.
“Investors are sitting back and still assessing the Fed comments and looking more closely at global economic data,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
At 13:07 ET (1707 GMT) the Dow Jones industrial average was down 68.08 points, or 0.42 percent, at 16,262.39 and the S&P 500 was down 4.07 points, or 0.21 percent, at 1,938.67.
The Nasdaq Composite was up 0.26 points, or 0.01 percent, at 4,756.98.
Eight of the 10 major S&P sectors were lower, with the technology and utilities indexes eking out small gains. Apple was up 0.5 percent and was the biggest boost to the three major indexes.
Oil prices erased early gains with U.S. crude down as much as 3 percent after the impact of lower crude inventories was offset by large gasoline builds. Chevron was down 1.5 percent and was the biggest drag on the S&P 500.
Scott Schermerhorn, chief investment officer at Granite Investment Advisors said volatility was likely to continue until the third-quarter corporate earnings season starts.
The CBOE Volatility index, popularly known as the “fear gauge”, was down 0.8 percent at 22.26, but remained above its long-term average of 20.
First Niagara Financial was up 12.8 percent at $10.12 after Bloomberg reported the regional bank was exploring a sale.
Declining issues outnumbered advancing ones on the NYSE by 1,748 to 1,194. On the Nasdaq, 1,530 issues fell and 1,168.
The S&P 500 index showed no new 52-week highs and 35 new lows, while the Nasdaq recorded 19 new highs and 110 new lows. (Reporting by Tanya Agrawal, Additional reporting by Sinead Carew; Editing by Savio D‘Souza)