By Sue Chang and Anora Mahmudova, MarketWatch

Analyst sees little relief for market other than technical support

U.S. stocks suffered their third-worst loss of the year on Tuesday as part of a global rout sparked by a new round of weak Chinese economic data.

China's official manufacturing purchasing managers index fell to a three-year low (http://www.marketwatch.com/story/china-factory-activity-slips-to-3-year-low-2015-09-01), triggering a wide selloff in stocks across Asia (http://www.marketwatch.com/story/chinese-factory-data-pull-asian-shares-lower-2015-09-01) and Europe (http://www.marketwatch.com/storyno-meta-for-guid) that then spread to the U.S.

The S&P 500 sank 58.33 points, or 3%, to 1,913, with all of its 10 sectors in the red. The Dow Jones Industrial Average lost 469.68 points, or 2.8%, to 16,058.35. All 30 of its components closed lower.

The Nasdaq Composite slumped 140.40 points, or 2.9%, to 4,636.10, falling into negative territory for the year.

Tuesday marked the third-biggest daily drop of the year for the S&P 500 and the Dow, while for the Nasdaq, it is the third worst by percentage decline.

"The market is being driven by emotion," said Robert Pavlik, chief market strategist at Boston Private Wealth LLC.

Pavlik, who sees very little relief ahead for the market other than from a technical perspective, projected more market turmoil on Wednesday.

"People are going to place orders to sell with mutual funds which means the mutual funds will have to sell to raise cash," he said.

Read:'Death cross' patterns spread to all corners of the stock market (http://www.marketwatch.com/story/death-cross-patterns-spread-like-a-bearish-virus-2015-08-28)

With the S&P 500 having fallen below 1,927, which had been tapped as a short-term technical support level, there is not much to halt a further retreat in the index.

"I think the S&P can trade to around the 1900 to 1905 level before finding any significant support," said Kent Engelke, chief economic strategist at Capitol Securities Management Inc.

"This is around the level where the latest advance commenced in October 2014. It is also around the level where the market initially broke down in early October 2014 before going lower to around the 1825."

The CBOE Volatility Index jumped to 31.14, where it has hovered at for the past eight trading sessions.

When the Vix is above 20, as it is now, uncertainty is a prevailing theme among frightful stock investors and wild swings in the index can be expected, said Randy Frederick, managing director of trading & derivatives at Schwab Center for Financial Research.

Big swings in oil prices added to already volatile markets. Oil futures dropped sharply after a three-day rally, sending energy stocks sharply down.

"The summer weakness [in China] could be linked to the recent Tianjin port explosion and large-scale factory closures in Beijing ahead of the WWII victory day parade on 3 September," analysts at Barclays said in a note.

"Even so, we believe the multiyear-low PMI confirms that the economy is still not on a solid footing, and we look for a flat growth profile during the rest of 2015, with continued downside risks," they added.

On Monday, Goldman Sachs forecast China's economic data will remain pressured (http://www.marketwatch.com/story/goldman-slashes-chinas-economic-growth-targets-2015-08-31) in August, as Beijing planned to curtail construction and production from Aug. 20 through this Friday to improve air quality.

The Institute for Supply Management said its manufacturing index (http://www.marketwatch.com/story/us-manufacturing-growth-weakest-since-mid-2013-ism-says-2015-09-01) dropped to 51.1% last month from 52.7% in July, falling short of the 52.2% forecast of economists surveyed by MarketWatch.

Meanwhile, outlays for U.S. construction projects (http://www.marketwatch.com/story/us-construction-spending-jumps-07-in-july-to-highest-level-in-seven-years-2015-09-01)rose 0.7% in July to a seasonally adjusted annual rate of $1.08 trillion, the highest level since May 2008, the Commerce Department reported Tuesday.

Movers and shakers: Dollar Tree Inc.(DLTR) shares tumbled more than 8%, the worst S&P 500 loser, after the discount chain's second-quarter earnings missed analysts' estimates.

Oil-related companies were among biggest decliners as crude oil fell almost 7% (http://www.marketwatch.com/story/oil-prices-pull-back-after-breathless-rally-2015-09-01-3103369). Shares of Chevron Corp.(CVX) and Exxon Mobil Corp.(XOM) were down sharply while energy was the worst performing sector in the S&P 500.

Read:Brutal rout for Dow, S&P 500 creates winners, losers among hedge funds (http://www.marketwatch.com/story/brutal-rout-for-dow-sp-500-creates-winners-and-losers-2015-09-01)

Other markets: U.S. Treasurys rallied, sending the yield on the 10-year note down 6 basis points to 2.16%, while gold inched up 0.6% to $1,139.40 an ounce as investors flocked to havens.

The greenback traded mixed against other major currencies (http://www.marketwatch.com/storyno-meta-for-guid), with the ICE dollar index off 0.5% at 95.29.

Sara Sjolin contributed to this article.

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(END) Dow Jones Newswires

September 01, 2015 17:11 ET (21:11 GMT)

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