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Weak Chinese data leads to Dow, Nasdaq plunge

By
Tomas Monzon
Photo by Stephen Shaver/UPI
Photo by Stephen Shaver/UPI

NEW YORK, Sept. 1 (UPI) -- The Dow Jones Industrial Average, Nasdaq and the S&P 500 took a nosedive early Tuesday over fears about a sluggish manufacturing sector in China.

The Dow Jones Industrial Average dropped 400 points, or about 2 percent, Nasdaq fell by more than 1.5 percent and the S&P 500 also fell by about 2 percent.

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September is typically the worst month for stocks, but the news comes after a difficult August and reports that the manufacturing sector in China is slowing and will have an impact on the world economy.

China's official manufacturing purchasing managers' index (PMI) dwindled to 49.7 in August from 50 in July. The country's services sector, typically a positive factor in an otherwise faltering economy, also demonstrated a plateau.

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Shares of U.S. companies involved with China, such as Apple, Qualcomm, KFC owner Yum Brands, MGM and others took hits Tuesday morning.

David Kelly, the chief global strategist at J.P. Morgan Funds, told CNBC he can't understand why China's problems have such a big impact on the U.S. and the earning of its corporations.

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Ben Pace, chief investment officer at HPM Partners, told CNBC the downturn is a continuation of the volatility characterizing the stock market during the summer. The CBOE Volatility Index (VIX) has remained high (around 30) since a plunge in stocks on Monday.

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Weak Chinese data erased the gains of a Monday rally in crude oil prices sparked by a monthly market bulletin published by the Organization of Petroleum Exporting Countries indicating OPEC was ready to talk to other oil producers about stabilizing prices.

An impact on the world economy would also complicate matters for the Federal Reserve, which is due to meet in two weeks to discuss the possibility of raising interest rates. Rates have been near zero since December 2008, and traders may shy away from an environment of increased rates.

The U.S. government is due to report August job figures on Friday, which will affect the Federal Reserve's decisions.

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