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Stocks Extend Drop as Crude Oil Slumps on China Slowdown

NEW YORK (TheStreet) -- Stocks extended a steep drop by midday Friday, putting benchmark indexes solidly on track for their worst week of the year, as crude oil prices slumped on slowing growth in China.

The Dow Jones Industrial Average dropped 1.6% or 268 points. The blue-chip index is now down 8.4% from its all-time closing high set in May.

The S&P 500 was down 1.66%, and the Nasdaq slid 1.8%.The small-cap index Russell 2000 fell 1.3% and officially entered correction territory, dropping more than 10% since its peak on June 23.

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Worries over China continued after manufacturing activity in the country fell to a six-and-a-half-year low. The flash manufacturing PMI fell to 47.1 in August from 47.8 in July. Worries over slowing growth in the world's second-largest economy has triggered selloffs in global markets. China's Shanghai Composite fell 4.3% on Friday and 11% for the week.

"One of the most asked question about China lately has been how fast the Chinese economy is actually slowing," wrote Wei Yao, economist at SG Global Economics, in a note. "In our view, China's structural growth deceleration is only half-way through and under the weight of debt and excess capacity, weakening investment demand will remain the main culprit."

A slowdown in China's manufacturing sector pressured crude oil. West Texas Intermediate crude dropped 2.7% to...