New York, Aug 12 (IANS): US stocks tumbled as China's currency yuan fell drastically in value following a central bank decision to improve the yuan's central parity system.
The Dow Jones industrial average dropped 212.33 points (1.21 percent) to 17,402.84. The S&P 500 declined 20.11 points (0.96 percent) to 2,084.07. The Nasdaq composite index shed 65.01 points (1.27 percent) to 5,036.79, reported Xinhua.
The bank of China cited a strong US dollar and sharp appreciation in yuan real effective exchange rate as key considerations behind the policy change.
Following the change, the central parity rate of the yuan weakened sharply by 1,136 basis points to 6.2298 against the US dollar on Tuesday.
On the economic front, US labour productivity rebounded slightly in the second quarter of this year after falling over the previous six months.
The labour department said non-farm business sector labour productivity increased at a 1.3 percent annual rate during April-June, following a decline of 1.1 percent in the first quarter.
In corporate news, after Monday's closing bell, Google Inc. said Alphabet Inc. will replace Google Inc. as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights. Google will become a wholly-owned subsidiary of Alphabet.
Shares of Google jumped 4.10 percent to $690.30 apiece following the announcement on Tuesday.
The Chicago Board Options Exchange (CBOE) volatility index, often referred to as Wall Street's fear gauge, increased 12.10 percent to end at 13.71 on Tuesday.
In other markets, oil prices dived as crude output from the Organisation of Petroleum Exporting Countries (OPEC) increased in July.
The west Texas intermediate for September delivery moved down $1.88 to settle at $43.08 a barrel on the New York mercantile exchange, while brent crude for September delivery decreased $1.23 to close at $49.18 a barrel on the London ICE future exchange.
The US dollar fluctuated against most major currencies as Greek government sealed its third bailout deal.