NEW YORK (TheStreet) -- Stocks braced for their worst week of the year on Friday as investors feared an extended slowdown in China. 
 
 The Dow Jones Industrial Average dropped 1.3% or 225 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 1.4%, and the Nasdaq slid 1.7%.The small-cap index Russell 2000 fell 1.1% and officially entered correction territory, dropping more than 10% since its peak on June 23. 
 
 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. 
 
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 "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." 
 
 The pace of growth in the U.S. manufacturing sector slowed to its lowest rate since October 2013 in August. The Markit flash PMI index slowed to 52.9 in August, above the 50-level that indicates growth, but down from 53.8 in July. 
 
 U.S. stocks posted their biggest drop of 2015 on Thursday as high-momentum consumer and tech stocks such as Apple (AAPL - Get Report) and Twitter (TWTR - Get Report) tumbled on fears the Federal Reserve would hike rates in September despite signs of slowing global growth. 
 
 The S&P 500 turned negative for the year after falling 5.4% from its record close set in May. More than half of the S&P 500 have now entered correction territory, having fallen more than 10% from their 52-week highs, according to Forbes calculations. 
 
 Netflix (NFLX - Get Report) entered into correction territory on Thursday after falling 11% since its August 6 record close of $126.45 a share. The stock tumbled nearly 8% over the session, caught up in a broad sell-off in the tech sector. Shares fell 5.9% on Friday. 
 
 Likewise, Apple suffered a massive decline, falling 2.1% to close at its lowest point since January 27. Shares are now down 15% from its February 23 record close. Shares were down 3.5% on Friday. 
 
 Greece added to market uncertainty after Greek prime minister Alexis Tsipras submitted his resignation after losing parliamentary majority. Tsipras had squared off with members of his Syriza party who objected to the bailout agreement with eurozone creditors. Early elections will take place on September 20. 
 
 The European Central Bank confirmed it had received a 3.2 billion euro repayment from Greece on Thursday afternoon. The repayment is the last for the next 11 months. Greece recently secured a fresh 86 billion euros ($96 billion) in bailout funds. 
 
 Hewlett-Packard (HPQ - Get Report) added more than 4% despite reporting its fifteenth straight quarter of declining sales. Net income of 88 cents a share beat estimates by 3 cents, though revenue of $25.35 billion stumbled 8% and missed expectations. The company is set to split into two companies on November 1 with one company focused on its PC and printer business and the other on enterprise servers and software. 
 
 In earnings news, Deere (DE - Get Report) fell 6.9% after reporting third-quarter profit down 40% from a year earlier. The company also cut fourth-quarter guidance, expecting equipment sales down 24% on weak demand in the agricultural sector and a stronger dollar. 
 
 Foot Locker (FL) was down 1.6% despite a better-than-expected second quarter. The athletic retailer earned 84 cents a share, 15 cents above estimates, while revenue of $1.7 billion climbed 3.7% and beat expectations by $40 million. Comparable-store sales increased 9.6% compared to an expected 6% increase. 
 
 Salesforce.com (CRM) climbed 3% after reporting a better-than-expected second quarter and issuing solid guidance. The cloud software developer earned 19 cents a share, a penny higher than forecast, and revenue jumped 23.5% to $1.63 billion. 
 
 FedEx (FDX) plans to formally launch a $4.8 billion acquisition offer for TNT Express next week, the delivery company said Friday. FedEx expects the offer will pass regulatory approval. 

 The Vix is commonly referred to as the "fear index" (Source: Getty) 
 
 A widely watched "fear index" jumped 16 per cent in intraday trading to 22.19 points amid increasing concern about a slowdown in China's economy. 
 
 A purchasing managers survey released early this morning showed China's factories shrank at the fastest rate in almost six-and-a-half-years in August. The news has weighed on stock markets in Asia, Europe as well as US. 
 
 The Vix index hit its record high of 89.53 on October 24, 2008 during intraday trading. 
 
 The Chicago Board Options Exchange Volatility Index, or Vix, is thought to be a gauge of investors' nerves. The index measures the market's expectation of 30-day S&P 500 volatility implied by the prices of near-term S&P options. It's led to a belief we should be scared when the Vix ticks up, and relieved when it careers down. 
 
 But some commentators rubbish this as a market myth. 
 
 "The truth is that the Vix is not an “Index of Fear” and never has been," Steve Sedgwick, CNBC anchor, previously wrote in City AM. 
 
 "It’s a plain old measure of premium: premium in option products that are a derivative of the equity market, a market that apparently is at, or near, all-time highs in many cases." 

 The CBOE Volatility Index VIX, -1.77% jumped Friday to levels not seen since December 2011, logging its largest ever weekly percentage jump as stocks sold off for a fourth straight session. The VIX, or so called "fear index," surged more than 47% to 28.21 right after the close. For the week, the index is up nearly 120%, making it the largest weekly percentage jump in the VIX's history, according to FactSet data. The previous largest surge was back in early May 2010, when the VIX jumped nearly 86% on the week. For the week, the Dow Jones Industrial Average DJIA, +0.21% and S&P 500 Index SPX, +0.51% both dropped 5.8%, and the Nasdaq Composite Index COMP, +0.55% fell 6.8%.
– Yesterday's 300-plus plunge of the Dow was no fluke: It was down that much again today around mid-day as the markets headed toward their worst week of 2015, reports TheStreet. Fears about China's slowing economy were driving the declines, and concerns about a looming rate hike by the Fed weren't helping. In fact, MarketWatch notes that something known as the "fear index" from the Chicago Board Options Exchange was up 87% to nearly 24 for the week and on track for its highest weekly surge ever. The Volatility Index, of VIX, is essentially a "gauge of investors' nerves," explains City AM, though some think its importance is overstated. Its all-time record was 89.53, which it hit on Oct. 24, 2008.