Fear is back in the market.
Those fears converged to start a two-day rout in global markets this week, capped by a 318-point drop in the Dow Jones industrial average Friday. It was the blue-chip indexs worst day since last June. The Dow plunged almost 500 points over the two-day stretch.
The Standard & Poors 500 index fell 38 points, or 2.1 percent, to 1,790 Friday. The Nasdaq composite fell 90 points, or 2.2 percent, to 4,128.
Investors are worried about slower economic growth in China, a gloomier outlook for U.S. corporate profits and an end to easy money policies in the U.S. and Europe.
Despite the sell-off, U.S. stocks remain near all-time highs after surging 30 percent last year. The S&P 500 is 3 percent below its record high of 1,848 on Jan. 15.
U.S. stocks have not endured a correction – a drop of 10 percent or more over time – since October 2011.
In Asia on Friday, Japans Nikkei 225 slipped 1.9 percent to close at 15,391.56; Hong Kongs Hang Seng shed 1.2 percent to 22,450.06; and Seouls Kospi dropped 0.4 percent to 1,940.56.
The turbulence coincides with a global economic shift: China and other emerging market economies appear to be running into trouble just as the developed economies of the U.S. and Europe finally show signs of renewed strength nearly five years after the end of the last recession.
The trouble began Thursday after a January survey showed a drop in Chinese manufacturing activity. Days earlier, China reported that its economic growth last year matched 2012 for the slowest pace since 1999.
It is interesting how even a mild tremor in Chinas growth causes such anxiety around the world, said Eswar Prasad, professor of trade policy at Cornell University.
Slower growth in China is bad news for countries that supply oil, iron ore and other raw materials to the worlds second-biggest economy. Some of those countries, such as Indonesia and South Africa, were already struggling with an outflow of capital as rising U.S. interest rates drew investors to the United States.