Manufacturing activity in China shrank in January, with the purchasing managers index for the sector sliding to 49.6 from 50.5 in December. Numbers under 50 indicate a contraction.
"We had some really weak data out of China, and that's scaring people," Ian Winer, director of equity trading at Wedbush Securities told the Wall Street Journal.
"If you get weakness [in China], it's something bulls have to question," Winer said.
The Dow Jones industrial average gave up 175.99 points or 1.07 percent to 16,197.35. The Standard & Poor's 500 lost 16.40 points, 0.89 percent, to reach 1,828.46. The technology-dominated Nasdaq composite index dropped 24.13 points, 0.57 percent, to 4,218.87.
On the New York Stock Exchange, 1,0415 stocks advanced and 2,111 declined on a volume of 3.9 billion shares traded.
In Japan, the Nikkei 225 index lost 125.07 points, 0.79 percent, to 15,695.89.
In Europe, London's FTSE 100 lost 53.05 points, 0.78 percent, to 6,773.28.
The 10-year U.S. treasury was yielding 2.785 percent on a gain of 23/32.
The euro traded lower at $1.3695 and the dollar was lower against the yen at 103.25 yen.
Gold added $25.20 to close at $1,263.90 an ounce on the Comex division of the New York Mercantile Exchange. Silver gained 17.1 cents to settle at $20.01 an ounce.
Crude oil picked up 65 cents to close at $97.38 per barrel on the NYMEX.
On the Chicago Board of Trade, March corn was up 2.75 cents to $4.29 per bushel. Soybeans was off 4.25 at $12.7525 and winter wheat added 8.75 cent to $5.70.
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