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Friday, October 28, 2016

New York (AFP) – U.S. stocks Monday fell more than two percent after a surprisingly weak US manufacturing report sparked another round of selling amid concerns about the strength of the global economy.

The Dow Jones Industrial Average tumbled 326.05 points (2.08 percent) to 15,372.80.

The broad-based S&P 500 fell 40.70 (2.28 percent) to 1,741.89 and the tech-rich Nasdaq Composite Index slumped 106.92 (2.61 percent) to 3,996.96.

“This is the beginning of the correction that we have been waiting for,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

The sell-off came after a report showing U.S. manufacturing sector growth slowed sharply in January. The Institute for Supply Management’s purchasing managers index sank to 51.3 from 56.5 in December, not far above the 50 level between expansion and contraction.

Cardillo said economic data “are certainly not good,” but noted that some of the weakness could be attributed to extremely cold weather that depressed consumption and other activity.

Scott Wren, senior equity strategist, said a stocks correction was inevitable after investors excessively bid up stocks in late 2013 on improving economic data.

“We’re in a modest-growth, modest-inflation environment,” Wren said. “People got carried away with a perceived acceleration of the economy,” Wren said.

Wren predicted the S&P 500 could fall as low as 1,700, but recommended that clients use the retreat as a buying opportunity.

AFP Photo/Spencer Platt

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  • Dominick Vila

    The recent drop of the DOW is due to a number of things. One is a troubling report from the manufacturing sector that highlights the extent of the economic problems we still have, and have much remains to be done to strengthen our economy and achieve sustainable growth and economic stability. Another contributing factor involves the Fed’s decision to reduce bond purchases by $10B a month, a decision that many investors consider a precursor to an interest rate increase. Thirdly is a routine market correction, which is long overdue. Market corrections take place about every 18 months on average, this bull market lasted well over two years.
    Instead of panicking and selling, consider where the DOW was in January 2009: 6,500 points, and instead of looking at a market correction as a sign to sell, consider it an opportunity to invest and make a profit when it rebounds in weeks to come.