By Wallace Witkowski and Mark DeCambre, MarketWatch

Apple shares hit on how move may hurt China iPhone sales

Stocks closed sharply lower Tuesday as the Dow fell more than 200 points in the wake of a surprise devaluation of the yuan by China--the world's second-largest economy.

China's devaluation calls into question how the U.S. economy may fare as the Federal Reserve aims to start hiking interest rates for the first time since 2006 as signs of slowing growth abroad persists.

Investors sold exporters and makers of luxury goods (http://www.marketwatch.com/story/gucci-other-luxury-accessories-makers-clobbered-as-china-devalues-yuan-2015-08-11) in the wake of the currency move. Also, shares of 20 companies with significant exposure to China (http://www.marketwatch.com/story/these-are-the-20-china-exposed-stocks-to-avoid-2015-08-10), as identified by Goldman Sachs on Monday, were all trading lower Tuesday.

On the other hand, investors scooped up shares of Google Inc.(GOOGL) (GOOGL), sending them up more than 4%, signaling their approval of the tech giant's new corporate structure (http://www.marketwatch.com/story/google-announces-new-structure-with-alphabet-as-parent-firm-2015-08-10) built around a new umbrella company dubbed Alphabet Inc.

The Dow Jones Industrial Average tumbled 212.33 points, or 1.2%, to close at 17,402.84, with Apple Inc.(AAPL) posting the worst declines on the blue-chips index with a 5.2% tumble. The yuan devaluation (http://www.marketwatch.com/story/apple-stock-target-lowered-on-china-exposure-2015-08-11) means the iPhone maker's gadgets will be more expensive in a key market.

The S&P 500 declined 20.11 points, or 1%, to close at 2,084.07, led by losses in the materials sector, down 1.9%. The Nasdaq Composite Index gave up 65.01 points, or 1.3%, to finish at 5,036.79.

Tuesday's descent in the Dow pushed it into what technical analysts consider bearish territory, when the 50-day moving average dips below the 200-day moving average, a so-called "death cross" (http://www.marketwatch.com/story/dow-death-cross-is-a-bearish-omen-for-the-stock-market-2015-08-11), which the index hasn't seen since late 2011.

Read: Here are the best reactions to Google's bombshell Alphabet news (http://www.marketwatch.com/story/here-are-the-best-reactions-to-googles-bombshell-alphabet-news-2015-08-10)

The downdraft in equities comes after U.S. stocks ended Monday firmly higher (http://www.marketwatch.com/story/us-stock-futures-climb-dow-on-track-to-break-7-session-losing-run-2015-08-10) after Fed Vice Chairman Stanley Fischer suggested a September interest-rate hike may not be a done deal.

China's yuan move: The People's Bank of China early Tuesday in Asia devalued its tightly controlled currency, triggering the largest one-day loss for the yuan in two decades (http://www.marketwatch.com/storyno-meta-for-guid). That put upward pressure on the dollar and ignited speculation the Fed may not raise interest rates in September.

The strong dollar has taken a toll on U.S. exports in recent quarters, and the Fed is closely watching the effects on the economy. The ICE dollar index was slightly higher at 97.21 on Tuesday, with the dollar jumping 1.9% to 6.3249 yuan, up from an intraday low of around 6.2058 yuan, according to FactSet. Chinese stocks ended slightly lower.

The PBOC move tweaks the dynamic of the Fed's effect on stocks: Up until now, a delay in the September hike has been viewed as a positive for stocks as seen on Monday (http://www.marketwatch.com/story/us-stock-futures-climb-dow-on-track-to-break-7-session-losing-run-2015-08-10). But with lower oil prices, the effect of a China slowdown on the U.S. economy, and high stock valuations whose earnings rely on Chinese growth, a delayed rate hike may take on a more negative connotation now, said Nicholas Colas, chief market strategist at Convergex, in an interview.

"The Fed has been very good at communicating they want to hike rates in September," Colas said. "If we don't get a September hike then the market is going to say, 'What are you worried about?'"

"I think we're seeing a sharp reaction [to China's currency move] as investors try and figure out how bad this news really is," said Kate Warne investment strategist at Edward Jones. "People are inferring that the change in China's foreign exchange policy reflects a worsening economic situation," she said.

Nour Al-Hammoury, chief market strategist at ADS Securities, said in a Tuesday research note "it is clear that the 'currency war' is back, which will make the next few weeks very interesting," referring to economies devaluing their currencies to support their exports.

On the other hand, the currency war reaction to the PBOC's move may be "clearly overdone," said Julian Jessop, chief global economist at Capital Economics, in a note. For now, Jessop is going with the PBOC's explanation that the move is a "one-time correction" to the currency, rather than the first of many devaluations.

Read: What yuan move means for a September rate hike (http://www.marketwatch.com/story/return-of-currency-war-and-a-drag-on-fed-rate-hike-analysts-on-the-surprise-yuan-devaluation-2015-08-11)

Economic data: The NFIB small business index for July showed small-business owners' confidence about their economic situation modestly rebounded last month (http://www.marketwatch.com/story/small-business-optimism-rises-in-july-nfib-says-2015-08-11).

Median existing single-family home prices rose in 93% (http://www.marketwatch.com/story/us-home-prices-rose-in-93-of-metro-areas-during-the-second-quarter-2015-08-11) of 176 metro areas during the second quarter, up from 85% in the prior quarter, according to the National Association of Realtors on Tuesday.

Wholesale inventories jumped a seasonally adjusted 0.9% (http://www.marketwatch.com/story/wholesale-inventories-climb-09-in-june-2015-08-11) in June, the Commerce Department said on Tuesday.

Movers & shakers: Shares of Symantec Corp.(SYMC) fell nearly 7% after the company announced it will sell its information management business Veritas for $8 billion in cash (http://www.marketwatch.com/story/symantec-agrees-to-sell-veritas-to-the-carlyle-group-gic-for-8-billion-cash-2015-08-11).

In other deal news, shares of Symetra Financial Corp.(SYA) jumped nearly 7% after Japan's Sumitomo Life Insurance Co. said it plans to buy the life insurance company in a deal valued at about $3.8 billion (http://www.marketwatch.com/story/sumitomo-life-agrees-to-buy-symetra-financial-in-38-billion-deal-2015-08-11).

Shares of Shake Shack Inc.(SHAK) declined 3%, following an earlier jump, after the burger chain late Monday reported earnings that beat analyst forecasts.

Kraft Heinz Co.(KHC) shares declined 1.1%. The food and beverage company on Monday released its first earnings report as a merged entity, saying second-quarter revenue missed expectations.

Other markets: European stocks mainly fell, with Germany's DAX 30 index hit particularly hard (http://www.marketwatch.com/storyno-meta-for-guid). But the stock market in Athens rose after Greece said it has reached agreement with creditors (http://www.marketwatch.com/story/greece-says-it-has-agreed-on-terms-for-third-bailout-with-creditors-2015-08-11) on terms needed to unlock a third bailout.

Oil prices were also hurt by China's move (http://www.marketwatch.com/storyno-meta-for-guid), with crude futures dropping to their lowest settlement in six years. Prices stayed lower after the Organization of the Petroleum Exporting Countries said the group's production rose to its highest level in more than three years.

Prices for crude oil, like most other commodities, are pegged to the dollar, which means China's imports will become costlier. Gold prices settled higher as expectations for a rate hike are pushed back (http://www.marketwatch.com/storyno-meta-for-guid).

--Sara Sjolin in London contributed to this article.

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