US stocks slumped more than 1.5 per cent yesterday, with the S&P briefly falling below 2,000 and the Dow about 200 points shy of moving into correction territory, as fears of a China-led global slowdown were heightened after grim data overnight.
About three-fourths of the 30 stocks on the Dow Jones industrial average and two-thirds of S&P 500 components were in correction territory, meaning their session lows were at least 10 per cent below their 52-week highs.
The Russell 2000 also entered correction territory.
The selloff was broad based, with all 10 major S&P sectors in the red, led by the technology sector. Eight of the 10 sectors were down more than one per cent.
The CBOE Volatility index, a measure of the premium traders are willing to pay for protection against a drop in the S&P 500, jumped as much as 27.9 per cent to 24.49, a more than 20-month high. The index also notched its biggest weekly gain for the year.
Apple fell 3.8 per cent to $108.34 as investors continued to fret over its prospects in China, a key growth market for the iPhone maker. The stock was the biggest drag on the S&P and the Nasdaq.
World stock markets tumbled towards their worst week of the year on Friday and commodities had another bruising day after data from China showed its manufacturing sector shrank at the fastest pace since 2009, exacerbating worries about its health.
“I think there’s no shortage of things people can cite, from the movement in currencies, to the weakness in commodities and fears about China,” said Thomas Lee, managing partner at Fundstrat Global Advisors in New York.
“I think what everyone is looking for is a sign that markets are going to bottom. I don’t think it’s necessarily going to happen today, but I think we’re getting very close.”
At 12.30pm ET (16.30 GMT) the Dow Jones industrial average was down 294.5 points, or 1.73 per cent, at 16,696.19.
The S&P 500 was down 35.05 points, or 1.72 per cent, at 2,000.68 and the Nasdaq composite was down 92.63 points, or 1.9 per cent, at 4,784.86.
The rout in US stocks for the fourth straight day put the Nasdaq on track for its steepest weekly fall since August 2011.
The technology and the consumer discretionary were the worst performing sectors, down about 2.3 per cent. The consumer staples index fell 1.5 per cent, moving into the red for the year.
Now eight of the 10 sectors are negative for the year. Two bright spots were HP, up 3.4 per cent, and Salesforce, up 1 per cent.
The stocks were the biggest gainers on the S&P 500 after their quarterly results.