Stock Selloff: Just the Beginning or Buying Opportunity?

NEW YORK (TheStreet) -- The brutal week in stocks may be over. But market watchers are left wondering if this is just the beginning of a massive selloff or a much-needed pullback that could offer a good buying opportunity. U.S. investors will get a big clue Sunday night when Asia's markets open for trading after the worst week for U.S. stocks in four years. "If there is another 5% correction (in the Shanghai Stock Index), obviously people are going to be quite nervous Monday morning," Keith Savard, a global economics expert and fellow at the Milken Institute, told TheStreet. The stock market's main gauge, the S&P 500, plunged 3.2% on Friday and is now down 7.5% since its May high, near the 10% decline which would constitute a correction. Most of the other market indicators are already there. The widely watched Dow Jones Industrial Average is down 10% from its high after skidding 3.1% on Friday. And both the tech-heavy Nasdaq and small-cap index Russell 2000 are in correction territory. And if investors needed further proof that the market is volatile, the VIX -- also known as the "fear index" -- jumped 40% on Friday to 26.81. There are a lot of reasons why stocks have sold off, ranging from worries about China's slowing economy to concern that the Federal Reserve might start raising interest rates soon and plunge the global economy into another recession. "Quite frankly, I think that's just an excuse," Savard said in a telephone interview. "Obviously there hasn't been a 10% correction in U.S. stocks in several years. People need to start looking more closely at fundamentals in this market." Some market observers see the selloff as a long-awaited buying opportunity. TheStreet's Jim Cramer said he was a buyer at Friday's close. "With interest rates low, commodity inflation nil and the dollar weaker than I thought, I had no choice but to put something to work," he wrote in one of his Real Money columns Friday. "I will be back buying if the market drops another 2% next week." Click here to read article (paywall) and watch video above. Many big-name stocks are already in correction territory, including Apple (AAPL - Get Report), General Electric (GE - Get Report), Wal-Mart Stores (WMT) and Exxon Mobil (XOM - Get Report). Click here to read article. Some experts predict the S&P 500 could be due for a huge drop not seen since the 1960s. Another market observer thinks the devaluation of the yuan could be good news for gold bulls. One thing is certain. Investors will be watching closely as the Shanghai index opens for business Monday, which will be Sunday night in the U.S. "The key thing (for Wall Street) is going to be Sunday night when we see what happens in China," said Art Cashin, UBS Director of Floor Operations at the NYSE, in an interview on CNBC Friday afternoon. "It's that simple."

By Steve Zuckerman

Source: http://www.thestreet.com/story/13263659/1/stock-selloff-just-the-beginning-or-buying-opportunity.html