China is back in the news big time today.  As we all know, China is doing business while we sleep so, based on all the bad news coming overnight from Shanghai there was an immediate panic on Wall Street that dropped the Dow 250 points right out the gate.  A continuing stream of bad news from our own shores made the plunge progressively worse until the index was down a whopping 470 points at close, a royal trouncing and another historically bad day with all the major indexes down almost 3% in one day.

So China's manufacturing sector shrunk at its fastest pace in three years last month.  Since so much of U.S. manufacturing is tied to China, our sector correspondingly shrunk too to its weakest in two years.  Then IMF chief Christine Lagarde came out with her statement that global growth is now expected to be weaker than previously forecast.  All in all, an already very nervous market just went screaming towards the exits even though most experts agree that the S&P's new valuation of 15.6 times earnings is now far more attractive than before this correction began.  There has been some editorializing that August and September are traditional slump months due to the high numbers of experienced brokers who are on vacation, leaving it to the more inexperienced and panic-prone junior brokers to be reacting to these global blips.  There may be some truth to this but I don't think junior brokers are responsible for China's mess.  Still, whatever truth there may be to this speaks highly of the current environment being a very ripe buying opportunity.  Other good news is that today's trouncing only upped the volatility index a modest 10% which still puts it just a little over half of where it was just a week ago, meaning most investors are not taking the day's events too seriously.  The relatively modest volume of 8.9 billion is further evidence that junior brokers may indeed be momentarily in charge and the rest of the market is not too worried.

Markets | Tue Sep 1, 2015 6:12pm EDT

Wall St. turbulence returns as weak China data magnifies fear

BY NOEL RANDEWICH

DJ:   16,058.35  -469.68       NAS:  4,636.11  -140.40       S&P:   1,913.85  -58.33

Turmoil returned to Wall Street on Tuesday after a brief rest, with renewed concerns about China's economy pushing major indexes down almost 3 percent and intensifying fears of a long-term selloff.

The S&P 500 is now 10 percent lower than its May record high, with the prospect of slowing global growth and an impending U.S. interest rate hike curtailing a robust bull run that saw the index gain over 200 percent from the depths of the financial crisis in 2009.

Tuesday's was the S&P's worst drop since Aug. 24, when it slumped 3.94 percent after three days of increasingly volatile losses.

"The fact we were down in August at a magnitude that is bigger than we have seen in many years rang some alarm bells," said Mohannad Aama, managing director of Beam Capital Management LLC in New York. "The continued uncertainty about China is definitely adding to worries."

China's manufacturing sector shrank at its fastest pace in three years in August. Other data showed the pace of growth in the U.S. manufacturing sector slowed last month to its weakest in over two years.

Adding to the nervousness, International Monetary Fund head Christine Lagarde said global economic growth was now likely to be weaker than had been expected just a few months ago.

The weak data pushed oil prices down more than 7 percent, ending three days of gains, and also reduced some investors' expectations that the Federal Reserve would raise interest rates this month.

The S&P energy index .SPNY fell 3.7 percent, with Exxon (XOM.N) down 4.19 percent.

The financial index .SPSY dropped 3.5 percent, with Citigroup (C.N) down 4.75 percent.

The CBOE Volatility index, known as Wall Street's "fear gauge", was up 10.45 percent at 31.40, above its long-term average of 20. The index had spiked to 53.29 last Monday.

"We haven't see this kind of volatility in a while. It reminds me of the one we saw during the 2008-2009 crisis," said Art Hogan, chief market strategist at Wunderlich Securities.

The Dow Jones industrial average .DJI fell 2.84 percent to end at 16,058.35 while the S&P500 .SPX lost 2.96 percent to 1,913.85 points.  The Nasdaq Composite .IXIC dropped 2.94 percent to 4,636.11.

For the year, the Dow is now down 9.9 percent while the S&P is 7.0 percent lower and the Nasdaq is off 9.9 percent.

Those losses have pushed the S&P 500's valuation down to a relatively more attractive 15.6 times expected earnings, compared to around 17 for much of 2015, according to Thomson Reuters StarMine data. But investors fear that the outlook for earnings may darken.

"Earnings estimates are probably higher than they should be and do not take into account the effect that a global slowdown led by China would have on the U.S.," said Aama.

Netflix (NFLX.O) fell 8.03 percent after Variety reported that Apple (AAPL.O) was looking to move into the original programming business. Apple fell 4.47 percent.

Declining issues outnumbered advancing ones on the NYSE by 2,666 to 422. On the Nasdaq, 2,291 issues fell and 563 advanced.

The S&P 500 index showed no new 52-week highs and 14 new lows, while the Nasdaqrecorded 12 new highs and 57 new lows.

Volume was lighter than in recent days. About 8.9 billion shares traded on U.S. exchanges, compared to an average of 9.4 billion in the past five sessions, according to BATS Global Markets.