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U.S. Stocks Tumble as China's Currency Yuan Weakens Sharply

Strategic Insights

— 1 min read

U.S. stocks plunged on Tuesday as China's central bank made a surprise decision to loosen its control over the yuan, allowing the currency to trade more freely against the U.S. dollar. The Dow Jones Industrial Average dropped 212.33 points, or 1.21 percent, to 17,402.84, while the S&P 500 declined 20.11 points, or 0.96 percent, to 2,084.07. The Nasdaq Composite Index shed 65.01 points, or 1.27 percent, to 5,036.79.

Key Takeaways:

  • The People's Bank of China (PBOC) announced a significant change to its yuan policy, allowing the currency to trade more freely against the U.S. dollar.
  • The yuan weakened sharply by 1,136 basis points to 6.2298 against the U.S. dollar on Tuesday.
  • U.S. analysts predicted the PBOC's decision would add momentum to the strong dollar, creating a headwind for U.S. multinationals.
  • Labor productivity in the U.S. nonfarm business sector rebounded at a 1.3 percent annual rate in the second quarter, following a decline of 1.1 percent in the first quarter.
  • Google Inc. announced that Alphabet Inc. would replace Google as the publicly-traded entity, with Google becoming a wholly-owned subsidiary of Alphabet.
  • Shares of Google jumped 4.10 percent to 690.30 dollars apiece following the announcement.
  • A Berkshire deal boosted Wall Street sentiment on Monday, snapping a seven-session losing streak.

Statistics:

  • The Dow Jones Industrial Average dropped 212.33 points, or 1.21 percent, to 17,402.84.
  • The S&P 500 declined 20.11 points, or 0.96 percent, to 2,084.07.
  • The Nasdaq Composite Index shed 65.01 points, or 1.27 percent, to 5,036.79.
  • The yuan weakened by 1,136 basis points to 6.2298 against the U.S. dollar on Tuesday.
  • Labor productivity in the U.S. nonfarm business sector increased at a 1.3 percent annual rate during April-June.

Sources:

  • U.S. stocks tumbled Tuesday as China's currency yuan fell drastically in value, following a central bank decision to improve the yuan's central parity system (Xinhua via COMTEX).
  • The Labor Department announced labor productivity figures for the second quarter (Labor Department).
  • Google Inc. announced that Alphabet Inc. would replace Google as the publicly-traded entity (Google Inc.).
  • A Berkshire deal boosted Wall Street sentiment on Monday (unspecified source).

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