U.S. stocks tumbled on Tuesday after the People's Bank of China unexpectedly depreciated the yuan by nearly 2 percent overnight. The move comes amid a slowdown in the world's second-largest economy and an 8 percent decline in exports in July.
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Among other factors, investors feared additional headwinds created by the U.S. dollar gaining more strength against the yuan. The Dow Jones industrial average plunged by more than 200 points, setting up for its eighth loss in nine days.
While China has certainly shaped markets more than other possible contagion stories like Greece or Puerto Rico, the "huge panic" on Tuesday did not seem warranted, said Ben Willis of Princeton Securities.
"China is the real story here, but it's a huge overreaction," he contended on "Power Lunch."
Other market watchers also noted the limited exposure many S&P 500 companies have to China.
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Still, the currency changes—combined with deflationary pressures from sliding commodities prices—could change the Federal Reserve's thinking as it decides when to raise the federal funds rate for the first time in nine years, said CNBC contributor Ron Insana.
"This China story just exacerbates any deflationary tendency," he said on "Power Lunch."
Insana added that he sees a less than 50 percent chance of the U.S. central bank increasing interest rates in September.