China's PMI came out at 49.7, down from 50.0. That doesn't seem that dramatic on the face of it, but it renewed fears in the investment community that China's large economy is weakening and it will take the global economy with it. That seems a little overwrought to me, but rationale isn't always relevant in the markets. SPX closed at $1914, down $58. The only bright spot was a slight bounce in the last few minutes of trading; it always worries me when the markets close at the lows for the day. RUT followed suit, losing $31 to close at $1128. $1105 is the line in the sand set last week and that isn't far away. Another strong day like today would break last week's lows on both SPX and RUT. Volatility spiked higher with the VIX gaining nearly three points to close at 31.4%.

The pessimistic take on China is surprising. Third quarter GDP estimates for China are +6.4%. We in the US would love to see numbers like those. The ISM manufacturing index reported 51.1 for August, down modestly from July's 52.7. Construction spending increased 0.7% in July, up from June's +0.1%. Our wimpy economic data continue, but it isn't nearly as negative as the market would suggest.

Batten down the hatches; it's getting rough out there.