US STOCKS-Wall Street reduces losses after Apple rebounds

* Chinese market falls 8 percent

* At one point, Dow down more than 1,000 points

* Apple (NasdaqGS: AAPL - news) mostly recovers after falling as much as 13 pct

* Indexes down: S&P 2.6 pct, Nasdaq 2.2 pct, Dow 2.2 pct (Updates to afternoon trade, adds comment)

By Noel Randewich

Aug 24 (Reuters) - U.S (Other OTC: UBGXF - news) . stock indices were more than 2-percent lower in afternoon trade on Monday but were off the day's worst levels after a dramatic turnaround in shares of Apple helped boost sentiment.

The Dow Jones industrial average briefly slumped more than 1,000 points, its biggest point-drop ever.

But by 2:20 pm, the Dow had recovered somewhat to trade down 362.12 points, or 2.2 percent at 16,097.63 as bargain hunters stepped in. The Dow has never lost more than 800 points in a day.

"In all likelihood, this is a buying opportunity in what is still a global economic expansion. But we are proceeding cautiously," said Jason Pride, Director of Investment Strategy at Glenmede, with $30 billion in assets under management.

The rout in U.S. equities followed an 8.5 percent decline in Chinese markets, which sparked a selloff in global stocks along with oil and other commodities.

Apple slid as much as 13 percent before recovering most of that loss to trade 0.4 percent lower at $105.30.

Apple's dramatic turnaround helped the Nasdaq Composite and the S&P 500 indexes pull away from levels that would have put them into correction mode. An index is considered to be in correction when it closes 10 percent below its 52-week high.

The S&P 500 was down 2.56 percent at 1,920.39 while the Nasdaq Composite was off 2.2 percent at 4,602.51.

All of the 10 major S&P 500 sectors were down, with energy losing 4.08 percent. At one point, all 30 stocks on the Dow and more than 90 percent of the S&P 500 stocks were at least 10 percent below their 52-week highs.

The CBOE Volatility index, popularly known as the "fear index", jumped as much as 90 percent to 53.29, its highest since January 2009.

The S&P 500 index showed 186 new 52-week lows and just two highs, while the Nasdaq recorded 593 new lows and seven highs.

"Emotions got the best of investors," said Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in New (KOSDAQ: 160550.KQ - news) York.

"The conjecture that the Chinese economy can propel the U.S. economy into recession is ridiculous, when it's twice the size of the Chinese economy and is consumer based."

U.S. oil prices were down about 5 percent at 6-1/2-year lows, while London copper and aluminum futures hit their lowest since 2009.

Oil majors Exxon and Chevron (Swiss: CVX.SW - news) recovered somewhat to trade down about 3 percent, having fallen more then 6 percent earlier. U.S. oil and gas companies have already lost about $310 billion of market value this year.

The dollar index was down 1.48 percent. It (Other OTC: ITGL - news) fell more than 2 percent earlier to a 7-month low as the probability of a September rate hike receded.

Traders now see a 24-percent chance that the Federal Reserve will increase rates in September, down from 30 percent late on Friday and 46 percent a week earlier, according to Tullett Prebon data.

Wall Street's selloff shows investors are becoming increasingly nervous about paying high prices for stocks at a time of minimal earnings growth, tumbling energy prices, and uncertainty around a rate hike.

Alibaba was down about 2.06 percent at $66.70, below its IPO price of $68, making it the second high-profile tech company to fall below its IPO price in the past week after Twitter (Xetra: A1W6XZ - news) on Thursday.

Futures on the Nasdaq, S&P and Dow indexes were halted briefly before the market opened after hitting a circuit breaker, a step taken by exchanges to reduce volatility and give investors time to assess information.

Declining issues outnumbered advancers on the NYSE by 2,985 to 189. On the Nasdaq, 22,470 issues fell and 407 advanced. (Additional reporting by Tanya Agrawal; Editing by Nick Zieminski)