Ukraine clash sinks US stocks

Reports that Ukraine artillery destroyed three Russian armored vehicles sent US stocks tumbling Friday after a strong opening surge.

The S&P 500 was up 0.4 percent to around 1,963 before suddenly plunging 17 points when the Ukraine government confirmed that its forces had shelled the Russian armored personnel carriers after they crossed into Ukraine territory late Thursday.

That raised fears of possible clashes between Russian and Ukraine forces in the tense eastern Ukraine border region, sending European stocks tumbling as well.

Moscow's immediate reaction was a warning to Kiev not to interfere with a convoy of vehicles it deployed to carry humanitarian aid to eastern Ukraine areas controlled by pro-Moscow secessionists.

At 1130 am (1530 GMT) the Dow Jones Industrial Average was down 82.91 points (0.50 percent) at 16,630.67.

The broad-based S&P 500 lost 6.40 (0.33 percent) at 1,948.78, while the tech-rich Nasdaq Composite Index lost 4.75 (0.11 percent) to 4,448.26.

US markets had risen for two days straight, shrugging off geopolitical threats in Iraq and Ukraine amid signs the US economy continued to grow steadily with little evident threat of inflation.

Fresh data signaled continued modest growth in the US economy, with a slowdown in the producer price index to a 1.7 percent annual pace, and another 0.4 percent monthly gain in industrial output in July, led by a 1.0 percent rise in manufacturing.

Industrial capacity utilization rose to a post-recession high of 79.2 percent, which analysts said was still below any level that would force prices higher.