By Tanya Agrawal
REUTERS - Wall Street was set to open sharply lower on Tuesday after weak data from China heightened fears of a slowdown in the world's second-largest economy.
Data showed that China's manufacturing sector shrank at its fastest pace in three years. The services sector, which has been one of the lone bright spots in the country's economy, also showed signs of cooling.
China's official manufacturing Purchasing Managers' Index (PMI) fell to 49.7 in August from 50.0 in July.
"The PMI was below 50, which is a psychologically important level and puts into real focus the fact that China is contracting," said Joe Rundle, a senior sales trader at ETX Capital.
"With the weak data coming out, we're going to see the negative sentiment from the last few weeks continuing."
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S&P 500 e-minis were down 43.75 points, or 2.22 percent, with 467,530 contracts traded at 8:31 a.m. ET (1231 GMT).
Nasdaq 100 e-minis were down 99.5 points, or 2.33 percent, on volume of 69,197 contracts.
Dow e-minis were down 358 points, or 2.17 percent, with 56,074 contracts changing hands.
Wall Street ended lower on Monday and wrapped up its worst month since 2012 after comments from a senior Federal Reserve official appeared to indicate a U.S. interest hike in September.
Adding to the nervousness, the head of the International Monetary Fund, Christine Lagarde, said that global economic growth was now likely to be weaker than had been expected just a few months ago.
Oil prices fell 4 percent after the weak data from China, snapping three days of strong gains. Oil majors Chevron and Exxon were down about 2.5 percent in premarket trading.
U.S. data to be released on Tuesday includes the Institute for Supply Management's index of national factory activity at 10 a.m. ET (1400 GMT), which is expected to have slipped to 52.6 in August from 52.7 in July.
Sales data released by major automakers is expected to show U.S. auto sales declined to 17.30 million vehicles in August from 17.55 million in July.
Yahoo shares were down 2.4 percent at $31.46. CEO Marissa Mayer announced she is pregnant with identical twin girls.
Alibaba, in which Yahoo has a stake, was down 3 percent at $64.02, following the Chinese data.
Netflix was down 4.5 percent at $109.90 after Variety reported that Apple was looking to move into the original programming business to compete with video streaming companies.
(Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)