Stocks Fall Sharply Amid Global Economic Worries - U.S. Commentary

(RTTNews) - Stocks saw substantial weakness during trading on Tuesday, adding to the loss posted in the previous session. With the drop on the day, the major averages further offset the recovery rally that was seen last week.

The major averages climbed off their worst levels going into the close but still ended the day firmly in the red. The Dow plunged 469.68 points or 2.8 percent to 16,058.35, the Nasdaq tumbled 140.40 points or 2.9 percent to 4,636.10 and the S&P 500 plummeted 58.33 points or 3 percent to 1,913.85.

The sell-off on Wall Street reflected ongoing concerns about the global economy following the release of some disappointing Chinese economic data.

Revised estimates released by Markit showed that the Chinese manufacturing sector contracted by the most in six years in August.

A separate report also showed that the Chinese service sector expanded at the slowest pace in the current thirteen-month growth sequence.

The manufacturing index eased to 47.3 in August, down from 47.8 in July but up from the flash estimate of 47.1. The service sector index fell to 51.5 from 53.8 in July.

Adding to the worries, the Institute for Supply Management said its index of U.S. manufacturing activity fell to its lowest level in over two years in August.

The ISM said its purchasing managers index dropped to 51.1 in August from 52.7 in July, although a reading above 50 indicates continued growth in the manufacturing sector.

The decrease came as a surprise to economists, who had expected the manufacturing index to inch up to a reading of 52.8. With the unexpected decrease, the index fell to its lowest level since May of 2013.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw considerable weakness during trading on Tuesday. Japan's Nikkei 225 Index plunged by 3.8 percent, while Hong Kong's Hang Seng Index tumbled by 2.2 percent.

The major European markets also came under pressure on the day. While the U.K.'s FTSE 100 Index plummeted by 3 percent, the French CAC 40 Index and the German DAX Index both slumped by 2.4 percent.

In the bond market, treasuries moved moderately higher amid the sharp pullback on Wall Street. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.8 basis points to 2.172 percent.

Looking Ahead

Another batch of U.S. economic data could impact trading on Wednesday, with traders likely to keep an eye on reports on private sector employment, factory orders, and labor productivity.

The Federal Reserve's Beige Book is also likely to attract attention amid recent concerns about the outlook for interest rates.