US STOCKS-Wall St slumps as Apple drags; S&P breaks support level

* Indexes off: Dow 1.2 pct, S&P 1.22 pct, Nasdaq 1.61 pct

By Chuck Mikolajczak

NEW YORK, Sept 25 (Reuters) - U.S. stocks were sharply lower heading into the midpoint of trading on Thursday, with each of the major indexes falling more than one percent and the S&P dropping through a key support level as Apple (NasdaqGS: AAPL - news) shares slumped.

Apple shares, down 3.3 percent to $98.39, were the biggest drag on both the S&P 500 and Nasdaq 100 indexes, after it pulled back an update to its new operating system.

In broad selling, each of the ten major S&P sectors was in negative territory, with the S&P technology index the worst performer, down 2 percent. The S&P 500 also broke through its 50-day moving average around 1,976, a key support level which the index had been able to rebound off of when recently tested.

"We keep bouncing off of it, and so the question becomes, is there any kind of catalyst out there which allows us to bounce off it again and propel higher," said Keith Bliss, senior vice-president at Cuttone & Co in New York.

Durable goods orders dropped 18.2 percent in August, largely in-line with expectations, while initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 293,000 for the week ended Sept. 20, below the 300,000 forecast, indicating an acceleration in job growth for the month.

"Some people were getting back to saying it's OK to like good economic news and that should translate into higher sales and higher profits, but my suspicion is there is a very large segment of the market participants who have not gotten out of that mode," said Bliss. "Everyone is trying to get ahead of this interest rate increase."

The pace of growth in the U.S. services sector slowed in September compared with the previous month, dropping to its lowest level since May, a Markit (Stuttgart: A1139A - news) survey showed.

The Dow Jones industrial average was falling 205.7 points, or 1.2 percent, to 17,004.36, the S&P 500 was losing 24.45 points, or 1.22 percent, to 1,973.85 and the Nasdaq Composite was dropping 73.35 points, or 1.61 percent, to 4,481.87.

Each of the major indexes were on track for their worst drop since July 31.

The top percentage gainer on the New York Stock Exchange was Cone Midstream Partners, rising 33.68 percent, while the largest percentage decliner was OMNOVA Solutions (NYSE: OMN - news) , down 18.18 percent.

Declining issues were outnumbering advancing ones on the NYSE by 2,549 to 374, for a 6.82-to-1 ratio on the downside; on the Nasdaq, 2,117 issues were falling and 404 advancing for a 5.24-to-1 ratio favoring decliners.

The benchmark S&P 500 index was posting 6 new 52-week highs and 8 new lows; the Nasdaq Composite was recording 17 new highs and 115 new lows. (Editing by Nick Zieminski)