* U.S. factory data much weaker than expected
* VIX trades above 20 for first time since October
* Chinese data adds to concern about emerging markets
* Indexes down: Dow 1.6 pct, S&P 1.7 pct, Nasdaq 1.9 pct
NEW YORK, Feb 3 (Reuters) - U.S. stocks fell on Monday, with the S&P 500 hitting its lowest level in almost three months after data showed the factory sector in the world's largest economy expanded in January at a far weaker pace than expected.
U.S. manufacturing grew at a slower pace in January as new order growth plunged by the most in 33 years, while spending on construction projects barely rose in December.
Investor sentiment soured sharply after the factory data, driving the cost of protection against a drop on the S&P to its highest level in nearly four months. The CBOE volatility index jumped more than 10 percent to trade above 20 for the first time since early October.
"The data was very weak across the board. It's hard to find any good news in there. It looks like a general slowdown, though you don't know how much of this is weather related," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.
"Combine that with the fact emerging market currencies continue to sell off, and things don't look too good for the market now," he said. "Somewhere between now and 1,700 (on the S&P) there's a big buying opportunity, but people need to see some stability in emerging currencies."
The Dow Jones industrial average fell 244.94 points, or 1.56 percent, to 15,453.91, the S&P 500 lost 29.37 points, or 1.65 percent, to 1,753.22 and the Nasdaq Composite dropped 78.032 points, or 1.9 percent, to 4,025.845.
Stocks were pressured late last month by concern about growth in China and as the Federal Reserve confirmed its commitment to withdrawing its market-friendly stimulus. China's service-sector growth slowed to a five-year low in another sign of stuttering momentum in the world's second-largest economy.
For January, the Dow tumbled 5.3 percent and the S&P 500 slid 3.6 percent - their worst monthly percentage declines since May 2012.
Investors were also wary about the outlook for emerging markets, where a recent rout in currencies spurred some central banks to raise interest rates or intervene in markets to limit the swings. That, in turn, has pressured bond and stock holdings and forced investors to exit in favor of assets perceived as relatively safe, like the yen and Swiss franc.
On Monday, Japan's Nikkei share average fell to a fresh 2-1/2 month low and entered correction territory, down more than 10 percent from a high hit Dec. 30.
Charter Communications Inc is discussing raising its bid for Time Warner Cable Inc as soon as in the next two weeks, according to people familiar with the matter, a move that could pressure its reluctant rival ahead of a proxy deadline. TWC shares rose 1 percent to $134.56.
Britain's Smith & Nephew is to buy ArthroCare Corp for $1.7 billion in cash to strengthen its treatments for sports injuries, an area growing faster than its main replacement hips and knees business. ArthroCare shares rose 7.6 percent to $48.81.
Pfizer's shares rose 2.1 percent to $31.03 after its experimental breast cancer drug significantly delayed progression of symptoms in a mid-stage trial, meeting the study's primary goal.
Companies scheduled to report quarterly results on Monday include Principal Financial Group, Yum! Brands and Anadarko Petroleum.