(Reuters) – Wall Street’s main indexes shed as much as 1% on Tuesday after data showed U.S. factory activity shrank in September to its weakest in more than a decade, deepening worries about the impact of a U.S.-China trade war on the world’s largest economy.

The indexes gave up early gains after the manufacturing activity index showed a reading of 47.8, according to the ISM report, falling further from August’s sharp contraction and below economists’ expectations of 50.1. A reading below 50 indicates contraction.

Investors moved to the safety of U.S. Treasuries following the data that came close on the heels of a contraction in euro zone manufacturing earlier in the day.

The industrials sector .SPLRCI slipped 1.71%, the most among the 11 major S&P sectors. Four other sectors dropped more than 1%.

“The PMIs across the globe have continued to deteriorate and obviously we are in line with that deterioration. It’s all due to the trade war,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Despite a prolonged U.S.-China trade war that has hammered global growth, confidence in the domestic economy has been one of the factors that has helped the benchmark S&P 500 .SPX climb about 18% so far this year.

However, Thomas Simons, a Jefferies economist, said the contraction does not underpin a wider softening in the U.S. economy, as it was the result of factors including Boeing Co’s (BA.N) production issues relating to its best-selling jets.

“Manufacturing itself is in a recession, but it does not mean that the overall economy is in a recession.”

A crucial jobs report on Friday is expected to shed further light on U.S. economic growth.

At 12:28 p.m. ET, the Dow Jones Industrial Average .DJI was down 268.11 points, or 1.00%, at 26,648.72 and the S&P 500 .SPX was down 26.31 points, or 0.88%, at 2,950.43.

The Nasdaq Composite .IXIC was down 58.50 points, or 0.73%, at 7,940.84.

Shares of online brokerage E*Trade Financial (ETFC.O) tumbled 16%, the most on the S&P 500, following rival Charles Schwab Corp’s (SCHW.N) move to remove commissions for online trading of stocks, ETFs and options listed on U.S. or Canadian exchanges. Charles Schwab’s shares fell 8.9%.

McDonald’s Corp (MCD.N) dropped 2.7% after JP Morgan said the fast food chain’s third-quarter same-store sales would be softer than analysts’ estimates.

Shares of chipmaker Xilinx Inc (XLNX.O) slipped 4.3% after KeyBanc lowered its rating to “sector weight”.

Ulta Beauty Inc (ULTA.O) advanced 4.7% as singer Jennifer Lopez launched a new fragrance exclusively at the company’s stores in the United States and an independent director bought back shares.

As the final quarter of 2019 kicks off, investors will be focusing on a range of factors, beginning with the high-stakes Sino-U.S. trade talks in early October, corporate earnings and the Fed’s next policy meeting.

Declining issues outnumbered advancers for a 2.06-to-1 ratio on the NYSE and a 2.07-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and three new lows, while the Nasdaq recorded 27 new highs and 69 new lows.

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