U.S. stocks tumbled on Monday, with the benchmark S&P 500 sliding more than 3%, as a fall in the yuan following U.S. President Donald Trump’s vow to impose additional tariffs on Chinese goods sparked fears of further escalation of the U.S.-China trade war.
The S&P 500 was on track for its biggest one-day percentage decline since February 2018. It has fallen for six straight sessions.
The yuan reached its lowest level in more than a decade after the People’s Bank of China, with the blessing of policymakers, set its daily midpoint at 6.9225 per dollar, the weakest level in eight months.
On Twitter, Trump called the action a “major violation” and “currency manipulation.”
A weaker yuan and a stronger dollar pose challenges for U.S. companies that do substantial business in China, as it effectively raises the cost of their goods for Chinese customers.
Shares of S&P 500 technology companies .SPLRCT, which are heavily exposed to Chinese markets, dropped 4.5%.
Apple Inc (AAPL.O) shares slid 5.3% as analysts warned that the newly proposed tariffs may hurt demand for the iPhone, while the Philadelphia semiconductor index .SOX dropped 4.8%.
“It’s the escalation of the trade war,” said Steven DeSanctis, equity strategist at Jefferies in New York. “The dollar strengthening presents another issue. For companies that do a lot of business outside the U.S., it all adds up.”
Adding to the tensions, China’s Commerce Ministry said that Chinese companies have stopped buying U.S. agricultural products and that China will not rule out imposing import tariffs on U.S. farm products that were bought after Aug. 3.
The Dow Jones Industrial Average .DJI fell 864.27 points, or 3.26%, to 25,620.74, the S&P 500 .SPX lost 97.94 points, or 3.34%, to 2,834.11 and the Nasdaq Composite .IXIC dropped 310.54 points, or 3.88%, to 7,693.53.
The Cboe Volatility Index .VIX, an options-based gauge of investor anxiety, rose 6.26 points to 23.87, its highest in about seven months.
No. 1 U.S. meat processor Tyson Foods Inc (TSN.N) was one bright spot. Its shares rose 5.0% after the company beat quarterly profit estimates.
Declining issues outnumbered advancing ones on the NYSE by a 6.51-to-1 ratio; on the Nasdaq, a 6.90-to-1 ratio favored decliners.
The S&P 500 posted three new 52-week highs and 30 new lows; the Nasdaq Composite recorded 12 new highs and 255 new lows.