NEW YORK (REUTERS) - U.S. stocks fell in early trading on Tuesday in a broad-based retreat as China's surprise devaluation of the yuan pushed the dollar higher and pressured commodity-related shares.
Oil erased most of its gains from Monday following the devalution by the world's top energy consumer. Other commodities such as copper, aluminum, nickel and zinc also fell. Eight of the 10 major S&P sectors were down, with the energy index and the materials index both lower by nearly 2 per cent.
Exxon Mobil's 1.8 percent drop was the biggest drag on the energy index and Freeport-McMoRan's 12.5 per cent slump dragged on the materials index.
Concerns around the health of the second-largest economy in the world also weighed on shares of U.S. automakers and industrials.
General Motors was down nearly 3 per cent, while Caterpillar was down 2.4 per cent.
The yuan fell to its lowest against the dollar in almost three years following what the country's central bank described as a "one-off depreciation".
"We are looking at a pullback right now. The news of the yuan raises suspicion regarding the economic growth outlook for China, that's taking its toll on the markets," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
At 10:09 a.m. EDT (1009 pm Singapore time) the Dow Jones industrial average was down 156.87 points, or 0.89 per cent, at 17,458.3. The Dow briefly fell more than 1 percent.
The S&P 500 was down 14.34 points, or 0.68 per cent, at 2,089.84 and the Nasdaq composite was down 27.23 points, or 0.53 per cent, at 5,074.57. Brent crude was down 2.64 per cent and U.S. crude fell 3.29 per cent.
Prices of commodities such as copper, aluminum, nickel, and zinc slid between 2 and 3.5 percent. U.S. stocks had climbed on Monday, giving the S&P 500 its biggest increase since May, buoyed by gains in commodity-related shares and optimism over Warren Buffett's deal to buy Precision Castparts.