Stocks, commodities slump after China currency move
NEW YORK - U.S. stocks are sliding after the Chinese government surprised financial markets by devaluing its currency.
The decline was led by drops in energy and materials stocks as commodities prices fall. Prices for oil and copper fell sharply Tuesday after China's government lowered the value of the yuan by 2 percent. That represents the biggest one-day drop in the currency since 1994.
The Dow Jones industrial average fell 221 points, or 1.3 percent, to 17,394 as of 12:22 p.m. Eastern time.
The Standard & Poor's 500 index lost 22 points, or 1.2 percent, to 2,081. The Nasdaq declined 62 points, or 1.2 percent, to 5,039.
Chinese exports have been weakening and investors are seeing the government's move as a sign of sluggishness in China's economy. China is a huge buyer of raw materials.
Oil also fell on a report that OPEC nations increased production last month.
China's central bank said the move to reduce the value of the yuan was a one-time bid to bring the country's currency in line with market expectations. But it is leading to speculation that China could take further steps to weaken its currency to help shore up slowing economic growth.
"Markets remain skeptical... that this is not the start of an extended effort to weaken the Chinese currency in the face of weaker export performance," analysts with TD Securities said in a note.
Lindsey Piegza, chief economist with Stifel, said the adjustment to yuan is also likely to spur other countries to seek weaker exchanges rates to keep their exports competitive.