U.S. stock prices fell sharply Monday, with major stock indexes closing down by around 1.6 percent in the first full trading day of 2016.   The selloff was sparked by a series of disappointing reports on Chinese manufacturing, and the impact of increased geopolitical tensions on oil prices.  But while some analysts say the Chinese slowdown is likely to have only a limited impact on developed economies, others say what happens over the next few days will be critical.

On Wall Street - it was a disappointing start for a brand new new year: a global sell-off sparked by a seven percent decline in Chinese stocks… one large enough to trigger a so-called circuit breaker that suspended trading in Shanghai and Shenzhen.

New York Stock Exchange head Peter Costa says the reaction in European and American markets was to be expected.

“When you have that kind of move in the second largest economy in the world, it definitely has ripple effects across U.S. markets and European markets as well," he said.

The reason for the sell off:  new data showing Chinese factory activity declining for the tenth straight month – with China likely to post its weakest economic growth in 25 years.

But that was also to be expected.  After all, China’s economy is in the midst of change - says PNC international economist Bill Adams - on Skype.

“Some of the volatility today is because China is trying to transition away from export-oriented growth towards domestically driven growth," he said.

The pace of China’s transition from an export to a more balanced, service-driven economy has fueled worries about a “hard landing” for China. But Standard and Poor’s chief economist Beth Ann Bovino says for the U.S. – the impact is likely to be limited

“Much of our economy and much of our growth comes domestically.  About 85 percent or so is domestically driven. 15 or so, 10 to 15 - comes from what happens abroad.  So even though we’ll feel the hit, say, if there is a hard landing in China, I don’t think it’s enough to really push us into recession," she said.

The big worry on Wall Street is what happens next.

“I think that if you see a continued global sell off and seeing markets retreat tomorrow and Wednesday, that could be a significant situation," said Peter Costa.

Another concern that could drive volatility:  increased friction between Saudi Arabia and Iran that some say could drive oil prices higher, even as demand around the world continues to decline.