Uncertainty about US monetary policy
The Federal Reserve’s September meeting is over, but not the uncertainty surrounding the interest rate hike timing. US stock market investors are skittish over global concerns that influenced the Fed’s decision on the interest rate. Earlier, it was the uncertainty about the rate hike decision that increased volatility across the markets in the first half of September. Now that the meeting is over, it’s the timing of the rate hike that has made investors anxious, as the delay in the rate hike is a sign of the health of the domestic economy. This led to a 11.42% rise in the volatility index, Volatility S&P 500 (^VIX), on September 22.
The SPDR S&P 500 ETF (SPY) fell by 1.30% on Tuesday, September 21. Out of its 502 constituent stocks, only 39 moved into the positive territory. All the component sectors of the SPY went red on the day, as illustrated below.
The worst hit sectors were the basic material and mining sectors, followed by the technology sector. Mosaic (MOS), which deals in agricultural chemicals and fertilizers, fell by 7.03%. Mining stocks Newmont Mining (NEM) and Alcoa (AA) yielded -6.25% and -4.04%, respectively, on September 22.
China’s economic trouble trickles down globally
The market’s volatility rose in anticipation of Caixin’s latest report of China’s monthly factory data. The Asian Development Bank, or ADB, has lowered its growth forecast for China from 7.2% to 6.8% this year. This has impacted the commodity markets, especially the basic material and mining stocks.
The demand for oil and copper has also experienced declines, leading Brent crude and WTI crude prices to fall further on September 22. Companies such as Chesapeake Energy (CHK), Consol Energy (CNX), and Murphy Oil (MUR) felt the impact and lost 6.67%, 6.23%, and 4.93%, respectively, on September 22.
Let us look at the other factors influencing the US stock market.