North American stocks dropped sharply on Friday as a selloff in emerging market assets fed through to wholesale pullbacks in equities, with the Dow falling more than 300 points, the S&P 500 posting its worst week since June 2012 and the Toronto stock exchange plunging more than 200 points.[np_storybar title=”The stock market correction is here, strategist says” link=”https://business.financialpost.com/2014/01/24/the-correction-is-here-strategist-says/”%5DThe correction many have been waiting for appears to have arrived, according to Tony Dwyer, U.S. portfolio strategist at Canaccord Genuity. Read his explanation. [/np_storybar]The S&P/TSX composite index dropped 215.21 points to 13,717.76 in a broad-based sell-off.The Canadian dollar was ahead 0.21 of a cent to 90.31 cents US as Statistics Canada said the annual inflation rate rose to 1.2% in December, compared with 0.9% in November, largely because of higher gasoline prices.Losses were even steeper in New York where the Dow Jones industrials racked up a sizable triple-digit loss for a second day, falling 318.24 points to 15,879.11 after plunging 176 points on Thursday. The Nasdaq was 90.7 points lower to 4,128.17 while the S&P 500 index was down 38.17 points to 1,790.29.Investors have been worried about sharp drops in the values of currencies in several emerging markets, including Turkey, Russia, South Africa and Argentina.These drops were sparked by moves by the U.S. Federal Reserve to cut back on its massive bond purchases, a key stimulus measure that fuelled a rally on stock markets last year and also kept long-term rates low. But U.S. bond yields have risen as the Fed moves to taper its purchases.“If the expectation is in the U.S. that yields start going up, I think the investors who are now overseas in the Turkish, Argentinian, South African or Venezuelan bond markets don’t see the need to stay there anymore — so they repatriate their money,” said John Tsagarelis, portfolio manager at Manulife Asset Management.“So there’s a pretty quick outflow and you’re seeing that through the transmission mechanisms of the currencies first and then obviously the bond market and then things follow from there.”The rout in emerging market assets began a day earlier following signs that manufacturing was contracting in China, a major driver of global economic growth.Also weighing on markets has been a slew of fourth-quarter earnings reports out this week that have disappointed on revenue growth.“Many companies last year were coming in line or just coming in slightly below revenue expectations and then beating on EPS because of cost cutting and issues related to maintaining margins and so forth,” Tsagarelis said.“But I think if you don’t have topline growth, cost reductions can only go so far.”Investors are wary of a U.S. market that hasn’t experienced a serious correction in almost 18 months. The S&P 500 soared about 30% last year.Much of last year’s rally was made possible by Fed stimulus in the form of massive bond buying. But the central bank announced last month it was cutting those purchases by US$10 billion a month to $75 billion.The Fed holds its next interest rate meeting next week and traders will be anxious to see if the Fed reduces its asset purchases further.In earnings news Friday, Procter & Gamble said its second-quarter net income fell 16% to US$3.43 billion, or $1.18 per share as the world’s largest consumer products maker faced tough comparisons from a year ago, the stronger dollar and flat sales globally. But its adjusted earnings still beat expectations. Revenue was flat at $22.28 billion, short of the $22.34 billion in revenue analysts expected but its shares headed up 1.2% to $79.18.North American indexes fell sharply during the week with the TSX down 1.23% while New York’s Dow industrials gave back 3.52%.The industrials group led decliners on Friday, down 2.55% with Canadian National Railways (TSX:CNR) losing $1.77 to $57.93 while Canadian Pacific Railway (TSX:CP) dropped $7.22 to $156.88.The base metals sector was close behind, down 1.98% as March copper declined a cent to US$3.278 a pound following a five-cent retreat Thursday on the China manufacturing data. Teck Resources lost 54 cents to C$26.61 and HudBay Minerals (TSX:HBM) lost 37 cents to $8.93.Financials were also a weight, down 1.61% with Manulife Financial (TSX:MFC) 94 cents lower to $20.86, while Royal Bank (TSX:RY) gave back 93 cents to $70.49.The energy sector lost 1.38% with the March crude oil contract down 68 cents to US$96.64 a barrel. Canadian Natural Resources (TSX:CNQ) fell 71 cents to C$35.47 and Suncor Energy (TSX:SU) shed 89 cents to $36.91.The February gold bullion contract rose $2 to US$1,264.30 an ounce as the gold sector lost early momentum and turned down about 0.7%. Barrick Gold (TSX:ABX) lost 38 cents to C$21.05 and Kinross Gold (TSX:K) faded nine cents to C$5.15.The tech sector was the main advancer, with shares in business software company Open Text Corp. (TSX:OTC) running ahead $10.81, or 10.79%, to $111 as it posted a quarterly profit of US$53.5 million or 90 cents a share, down from $61.1 million a year ago. Revenue increased to US$363.5 million from $352.2 million. Open Text also said that it will split its stock two-for-one next month.