USA stocks started to rebound on Tuesday from their worst loss of the year after China took steps to stabilize its currency, staving off the imminent possibility of a currency war between the world's two largest economies.
China's offshore yuan fell through the key level of 7-per-dollar mark after recovering partly on Tuesday that had sparked a 1% gain in the three main Wall Street indexes.
United States stocks have plunged once again, with the Dow Jones falling more than 450 points in early trade.
The S&P technology index, which includes companies that have a big exposure to China and were at the heart of Monday's sell-off, provided the biggest boost to the S&P index, rising 1.61 per cent. The Nasdaq Composite was down 96.50 points, or 1.23%, at 7,736.77.
U.S. stocks plunged on Monday as investors worry that U.S. President Donald Trump's threatened new tariffs on Chinese imports will worsen trade prospects.
China's central bank allowed the yuan to sink below seven per dollar.
The S&P 500 fell 93 points, or 3.2%, to 2,837.
"Markets have gone full circle again hoping for the best while preparing for the worst where even the tiniest gestures could see investors respond more positively than warranted given how emotionally invested market participants are", said Stephen Innes, managing partner at VM Markets in Singapore.
Some of the stocks that were the most beaten down on Monday staged strong comebacks on Tuesday.
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This caused the worst sell-off of the year on Wall Street, with the Dow closing 767.27 points down, a loss of nearly three percent. China struck back on Monday, allowing its currency, the yuan, to weaken against the USA dollar. JPMorgan Chase fell 2.8% and Bank of America fell 2.7%.
With the second-quarter earnings season winding down, about 73% of the 426 S&P 500 companies that have reported results so far have topped earnings estimates.
Allowing the yuan to depreciate makes Chinese exports cheaper and offsets some of the burden of punitive United States tariffs, which could soon see virtually all of the roughly Dollars 660 billion in goods traded annually between the world's top two economies subject to duties.
The Dow Jones Industrial Average lost 601 points, or 2.3%, to 25,875.
Declining issues outnumbered advancing ones on the NYSE by a 1.04-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored decliners.
Meanwhile, the Australian dollar was steady at 67.6 U.S. cents - but has risen sharply to buy $NZ1.05. The yield on the 10-year Treasury dropped to 1.64% from 1.74% late Tuesday, a large move.
Industrial and financial stocks posted the biggest drops early Monday. Ahead of Wednesday's opening bell, Dow futures and the broader S&P 500 futures were flat.
The Dow Jones Industrial Average dropped 409 points, or 1.6%, to 25,611.
That recovery in yields helped stocks, which have been tracking the movement in 10-year yields, said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee. The Nasdaq fell 104 points, or 1.3%, to 7,730.
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