Selling on Wall Street accelerated early Monday as a steep drop in the Chinese yuan escalated the US-China trade war following President Donald Trump's announcement of new tariffs last week.
Just over an hour into trading, the Dow Jones Industrial Average had lost about 550 points, dropping 2.1 percent to 25,932.44.
The broad-based S&P 500 fell 2.2 percent to 2,867.21, while the tech-rich Nasdaq Composite Index slumped 2.8 percent to 7,778.58.
Stocks opened sharply lower and then tumbled further to the two percent level following new data showing slowing growth in the US services sector. Businesses surveyed pointed to Trump's tariffs among the ongoing worries weighing on sentiment.
China's currency tumbled below seven yuan against the dollar, which investors see as a key threshold in the exchange rate, seen as a response to Trump's vow to impose tariffs on $300 billion in additional Chinese imports.
That would mean as of September 1 all of the goods imported from China will be subject to US punitive tariffs.
The tariff announcement sparked a selloff last week that led to the S&P 500's worst week so far in 2019.
In a statement on Monday morning, the People's Bank of China said the exchange rate against the US dollar had been “affected by unilateralism and trade protectionism measures and the imposition of tariff increases on China.”
Trump criticized the move, calling it “currency manipulation” and “a major violation which will greatly weaken China over time!”
The stock selloff is “a recognition that any chance for a (US-China) trade deal over the next quarter or two is probably off the table,” said Jack Ablin, chief investment officer at Cresset Asset Management.
“This demonstrates that the two sides are pretty far apart,” added Ablin.
US stocks rose in June and July on dovish commentary from the Federal Reserve ahead of an interest rate cut last week. But stocks did a U-turn after the Fed decision and have fallen sharply since Trump announced the latest round of tariffs.
Apple was the biggest loser in the Dow, shedding 4.3 percent. IMB, Intel, Visa, Dow and Goldman Sachs all lost more than three percent.