US manufacturing activity fell in October to its lowest level for 26 years, according to a new report from the Institute for Supply Management.
The report cited "significant demand destruction", for the third consecutive month in which the sector contracted.
The figures were far worse than the market had expected and pushed the Dow Jones index briefly into negative territory in early morning trading.
However, US construction spending in September fell far less than expected.
The institute's index of national factory activity fell to 38.9 from 43.5 in September. Any score of less than 50 represents a contraction in manufacturing.
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