US stocks tumble on surprise yuan devaluation

Traders work on the floor of the New York Stock Exchange on Aug 11, 2015 in New York City.
Traders work on the floor of the New York Stock Exchange on Aug 11, 2015 in New York City. AFP

NEW YORK (AFP) - US stocks fell sharply Tuesday after China unexpectedly devalued its currency, as Apple, General Motors and other companies heavily exposed to China dropped.

The Dow Jones Industrial Average closed down 212.33 points (1.21 per cent) at 17,402.84.

The broad-based S&P 500 fell 20.11 (0.96 per cent) to 2,084.07, while the tech-rich Nasdaq Composite Index tumbled 65.01 (1.27 per cent) to 5,036.79.

China's central bank devalued its yuan currency Tuesday by nearly 2 per cent against the US dollar, as authorities said they were seeking to push market reforms, in the context of a slowing economy.

The move raised concerns about a strengthening US dollar and whether the Chinese economy is weaker than thought.

Among the stocks to fall sharply were Apple (-5.2 per cent) and General Motors (-3.5 per cent), both of which are relying on China as a major growth market.

GM said its exposure to fluctuations in the yuan is "limited and manageable," in part because its factories in China gives it a "natural hedge" against currency moves.

"We continue to expect strong results in China will be sustained through the remainder of the year," the automaker said in a statement.

US-listed Chinese companies fell, including Alibaba (-3.9 per cent), Baidu (-5 per cent) and (-6.8 per cent).

Metals producers Freeport-McMoRan and Alcoa sank 12.3 per cent and 6 per cent, respectively, as prices for aluminum and copper retreated following the yuan devaluation.

Google jumped 4.3 per cent after it announced a new corporate structure in which the search engine company will become part of a larger company that will be called Alphabet.

The shift is intended to let Google pursue new growth businesses such as Google Glass and Google TX without detracting from core revenues.

US computer security company Symantec tumbled 6.9 per cent after announcing it would sell its data management business Veritas to a group of investors for US$8 billion (S$11.2 billion) in cash.

Credit Suisse downgraded Symantec, saying the sale of Veritas would result in a large tax liability.

Bond prices rose. The yield on the 10-year US Treasury dropped to 2.14 per cent from 2.23 per cent on Monday, while the 30-year slipped to 2.81 per cent from 2.90 per cent. Bond prices and yields move inversely.