Feb 3 - Wall Street suffers its biggest percentage drop in more than six months after slower growth in the manufacturing sector adds to signs of a slowdown in China and worries trouble in emerging markets will cause more trouble for the global economy. Conway G. Gittens reports.
Wall Street had its head handed to it in another major sell-off. The Dow tumbling 326 points, now down more than 7 percent since the start of the year. The S&P 500 nose-diving to an October closing low. And the Nasdaq suffering its first triple-digit plunge in more than two years. Money leaving the stock market continues to pile into the bond market, pushing yields on the 10-year note to the lowest since November. Economic jitters ruled the day after data showed growth in the U.S. manufacturing sector hit an eight-month low. The Institute for Supply Management said new orders plunged by the most in three decades. The January reading also marked a second straight month of slower growth overall. Michael Gregory, chief U.S. economist at BMO Capital Markets, says the economy has hit a soft patch. SOUNDBITE: MICHAEL GREGORY, CHIEF U.S. ECONOMIST, BMO CAPITAL MARKETS (ENGLISH) SAYING: "The economy lost some momentum through December and January, but there was the weather, there was some concern about the fiscal situation, not so much, perhaps, passing the budget, but the debt ceiling still has to be raised. And there's a third factor: we do know through the latter part of 2013, businesses seemed to ramp up their inventories, perhaps a little bit more than they wanted to. So a lot of people were expecting that production would slow a little bit." Add more nervousness about China's slowing economy and worries about emerging markets and investors may be waking up to a common mistake - they are betting too much on stocks. Jason Hsu of Research Affiliates: SOUNDBITE: JASON HSU, CHIEF INVESTMENT OFFICER, RESEARCH AFFILIATES (ENGLISH) SAYING: "Most investors have about 80 percent of their equities in U.S. equities and they also have anywhere from 60 to 80 percent of their portfolio in stock, which is far too concentrated." Auto sales uneven last month, with top U.S. car sellers blaming bad weather for poor performances. January sales were down at Ford and General Motors but up at Fiat's Chrysler. Shares of Ford, GM and Fiat all down even though analysts say January's car sales won't derail the industry's rebound. A little bit of good news after the close, adjusted earnings at Yum Brands beat forecasts even though fourth-quarter sales missed Wall Street targets. And the parent of KFC, Taco Bell and Pizza Hut reaffirmed its growth outlook for 2014. Selling pressure -also felt in Europe where shares fell to a 1-1/2 month closing low.