Tuesday, 11 August 2015 20:11
NEW YORK: US stocks sank in early trade Tuesday after China’s surprise devaluation of the yuan, seen as a bid to prop up Chinese exports that would further strengthen the dollar.
After 45 minutes of trade, the Dow Jones Industrial Average was down 158.55 points (0.90 percent) at 17,456.62.
The broad-based S&P 500 dropped 14.54 (0.69 percent) to 2,089.64, while the tech-rich Nasdaq Composite Index fell 27.36 (0.54 percent) to 5,074.44.
China shook markets after announcing Tuesday a sharply lower daily reference rate for the yuan against the US dollar, signaling the world’s second-largest economy is facing a sharper slowdown after reporting a batch of weak economic data.
The Chinese government said the 1.86 percent cut — the largest since the yuan was unpegged from the greenback in 2005 — was intended to make its exchange rate regime more market-oriented.
“Market participants see an alternate agenda given the timing of things,” said Patrick O’Hare of Briefing.com, noting weak Chinese trade data released last weekend that included a sharp fall in exports.
Wall Street sentiment was “pressured by the understanding that the yuan’s weakness could ultimately translate into further dollar strength, which would further crimp earnings prospects for US multinationals and further weigh on dollar-denominated commodity prices,” O’Hare said.
The sell-off came after stocks rebounded on Monday following last week’s string of declines.
Companies with large export exposure to China were hit. On the Dow, Apple tumbled 2.6 percent, Boeing shed 1.1 and Caterpillar lost 2.4 percent. Alcoa dived 5.5 percent.
Dollar-priced commodities prices fell sharply on heightened Chinese growth worries. Oil and gas giants Chevron and ExxonMobil, both Dow members, dropped 2.3 percent and 1.7 percent, respectively.
US computer security company Symantec shed 2.1 percent after announcing it would sell its data management business Veritas to a group of investors for $ 8 billion in cash. The maker of the Norton antivirus program said the deal was expected to close by January 1.
Bond prices rose. The yield on the 10-year US Treasury dropped to 2.15 percent from 2.23 percent on Monday, while the 30-year slipped to 2.83 percent from 2.90 percent. Bond prices and yields move inversely.
