* Chinese factory activity shrinks for 14 straight months
* Pfizer higher after reporting rise in quarterly profit
* Coty falls after first profit miss in seven quarters
* Indexes down: Dow 0.91 pct, S&P 0.98 pct, Nasdaq 1.08 pct (Updates to early afternoon)
By Tanya Agrawal
May 3 (Reuters) - Wall Street was sharply lower in afternoon trading on Tuesday, with all 10 major S&P sectors in the red, after weak economic data out of China and Europe rekindled fears of a slowing global economy.
Activity at China’s factories shrank for 14 straight months in April as demand stagnated, a private survey showed. Britain’s manufacturing output last month also unexpectedly shrank to hit its lowest level in three years.
Oil prices dropped about 2 percent as rising output from the Middle East renewed concerns about global oversupply.
Exxon fell 1.5 percent and Chevron 2 percent. The stocks were the biggest drag on the S&P energy sector, which was on track for its biggest one-day decline since early March.
The CBOE Volatility index, often called Wall Street’s fear index, rose 9.2 percent to 16.03.
“We are reacting to the negative news overnight from China and Europe, and investors are waiting for the jobs data,” said Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh.
“Investors are waiting for better economic data as a justification for the current prices and till we get the jobs data, we might see some down days.”
The report on unemployment is due on Friday.
Last week, data showed tepid growth in U.S. first-quarter gross domestic product and a softening in the Fed’s preferred measure of inflation to a rate of 1.6 percent in the 12 months through March from 1.7 percent in February.
At 12:38 p.m. ET (1638 GMT) the Dow Jones industrial average was down 162.41 points, or 0.91 percent, at 17,728.75, the S&P 500 was down 20.36 points, or 0.98 percent, at 2,061.07 and the Nasdaq Composite was down 52.02 points, or 1.08 percent, at 4,765.57.
The energy index’s 2.73 percent drop led the fall among the ten major sectors. The financial index was also down 1.82 percent.
The S&P 500 has jumped 14 percent since mid-February, helped by recovering oil prices and an accommodative Federal Reserve. However, the index faltered last week due to lackluster earnings reports and mixed economic data.
The Fed, which held monetary policy steady last week, is focusing on data, while keeping the door open for a rate hike in June.
The United States could see two more interest rate hikes this year but uncertainties abound including the impact on the economy should Britain vote to leave the European Union, Atlanta Fed President Dennis Lockhart said on Tuesday.
Still, traders are pricing in only one rate hike at the end of the year.
Pfizer was up 3.2 percent at $33.85 after the company reported a rise in quarterly revenue.
Perfume maker Coty fell 4.5 percent to $29.66 after reporting its first profit miss in seven quarters.
Declining issues outnumbered advancing ones on the NYSE by 2,442 to 517. On the Nasdaq, 2,070 issues fell and 646 advanced.
The S&P 500 index showed 11 new 52-week highs and three new lows, while the Nasdaq recorded 21 new highs and 40 new lows. (Reporting by Tanya Agrawal; Editing by Anil D‘Silva)