The S&P 500 slumped 1.2 percent, falling to 1,942. A number of analysts say it could soon retest its August low of 1,867. There are 200 stocks in the S&P 500 that are in bear market territory, or more than 20 percent off their highs. Among the 200 are 35 energy companies and 17 materials names.
"This latest leg down (in commodities) seems to be about demand," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. Chandler said the selloff is the result of the Fed's focus on China at its rates meeting last week and downward revisions for Chinese growth and demand.
"At the beginning of this year, China was 10 feet tall. The swing in sentiment toward China has been so dramatic," he said. "China never really was 10 feet tall but it's not going to fall off the face of the Earth either."
Chinese President Xi Jinping is visiting the U.S. and traders are looking to him to make some clarifying comments on the Chinese economy and its policy. Xi speaks Tuesday night to business leaders in Seattle, and then with President Barack Obama on Thursday.
The Credit Suisse analysts wrote that China's outsized investment in infrastructure needs to decline by 30 to 50 percent over the next five years, and that will have negative impact on demand for commodities like iron ore, coal and zinc. They said that copper needs more curtailments in production and that will send prices lower.
"There is little to like about most commodities over the medium term, just relative degrees of unloveliness," the Credit Suisse analysts wrote. They noted, "Until China demand and emerging market currencies hit a floor, it will remain challenging to put an absolute floor on commodity prices."
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Wall Street strategists are quick to note that the China slowdown story is nothing new but the market's obsession with it is, especially now that the Fed identified China as a cause of concern for even the domestic U.S. economy. The U.S. central bank noted its concerns about international developments and it also chopped its own growth and inflation forecasts when it held off hiking rates last week. The Fed now sees inflation this year at 0.4 percent, from 0.7 percent.