US stock futures slump as China devalues yuan again
New York (Aug 12) US stocks were poised for another session with steep losses on Wednesday, with futures sliding in early trade after China allowed its currency to fall sharply for a second straight day.
Futures for the Dow Jones Industrial Average YMU5, -0.74% slumped 131 points, or 0.8%, to 17,224, while those for the S&P 500 index ESU5, -0.71% shaved off 14.70 points, or 0.7%, to 2,065.25. Futures for the Nasdaq-100 index NQU5, -0.76% erased 34.50 points, or 0.8%, to 4,476.25.
The main stock benchmarks also suffered from sharp selling pressure on Tuesday, with the Dow DJIA, -1.21% tumbling more than 200 points and the S&P 500 index SPX, -0.96% dropping 1% and the Nasdaq Composite Index COMP, -1.27% falling 1.3%. The losses came after the People’s Bank of China in a surprise move devalued the yuan USDCNY, +1.0039% to shift to a more market-driven exchange rate.
The central bank said Tuesday’s decision was a one-off move, but on Wednesday the PBOC allowed the yuan to fall further, essentially devaluing the currency for a second consecutive day.
A weaker yuan is good for Chinese exporters, but bad for international companies exporting to the world’s second largest economy, such as car makers, luxury-goods firms and technology companies. For example, Apple Inc. AAPL, -1.32% lost 5.2% Tuesday, as the yuan devaluation makes the iPhone maker’s gadgets more expensive for Chinese buyers. Read: These are the 20 China-exposed stocks to avoid
In premarket trade on Wednesday, Apple fell 1.2%, while chip maker Micron Technology Inc. MU, -4.99% shares shaved off 1.3% and Qualcomm Inc. QCOM, -0.95% fell 1%.
Analysts speculate that the yuan moves could force the Federal Reserve to delay its first rate hike.
Data and Fed speakers: Job openings for June are due at 10 a.m. Eastern Time, followed by the Federal budget for July at 2 p.m.
New York Federal Reserve President Dudley will give a speech in Rochester, N.Y., at 8:30 a.m. Eastern.
Earnings: Reporting ahead of the opening bell, Macy’s Inc. M, +0.22% is projected to report second-quarter earnings of 76 cents a share, according to a survey of analysts by FactSet. The department store company earned 80 cents a share a year ago.
Alibaba Group Holding Ltd. BABA, -4.95% shares slumped more than 5% ahead of the bell after the Chinese e-commerce giant reported weaker-than-expected revenue for its fiscal first quarter.
And after the market closes, Cisco Systems Inc. CSCO, -1.99% and News Corp. NWS, -2.00% —the owner of MarketWatch, the publisher of this report — are slated to release earnings.
Movers and shakers: Shares of Warren Buffett’s Berkshire Hathaway Inc. BRK.B, -0.43% BRK.A, -0.37% slipped 0.9% premarket after Standard & Poor’s Ratings Services placed the company’s ratings on review following news the conglomerate will buy Precision Castparts Corp. PCP, -0.05% for about $32 billion. S&P’s move reflects, in part, uncertainty over how Berkshire will finance the deal.
Other markets: Crude oil CLU5, +0.81% erased earlier losses and rose 1.2% after the International Energy Agency said demand for oil is increasing at its fastest pace in five years, boosted by an oil-price drop below $50 a barrel.
The ICE dollar index DXY, -0.80% was down 0.9% as investors digested the continued slide in the Chinese yuan.
European markets were also sharply lower on the yuan news, with the Stoxx Europe 600 index SXXP, -2.08% off 2%.
Asian stock markets closed lower almost across the board.
Source: MarketWatch
