Wall Street concerns
US stock markets have been volatile for a very long time. A number of events since August 2015 have triggered even more volatility in markets around the world. These events include the Grexit, the Eurozone market correction, the crash of the Chinese stock market, the FOMC (Federal Open Market Committee) outlook, and the oil price rout.
Let’s look now at the market movement in light of US fundamentals during the period from June 2015 through January 2016. It could reveal whether the volatility in the market is fear-based or fundamental.
In the graph, US equities are represented by the SPDR S&P 500 ETF (SPY). Oil is represented by the United States Oil Fund (USO), and the US dollar is represented by the PowerShares DB US Dollar Bullish ETF (UUP).
Overview of US equities
As we can see, US equities fell when European stocks went into correction territory due to the Chinese economic data and the Greek crisis. The Greek crisis started creating market volatility in the Eurozone around June 30, 2015. Later, we had the Chinese stock market crash from August 24 to August 27, 2015.
These global events impacted US equities. The FOMC was closely monitoring them while assessing the US economy before reaching any decision on its monetary policies.
In the wake of these global events, stocks with high beta values were impacted the worst by volatility in the US market. These included energy stocks such as Denbury Resources (DNR), Nabors Industries (NBR), Marathon Oil (MRO), Williams Companies (WMB), and mining stock Freeport-McMoRan (FCX). Their beta values range from 1.6 to 2.2. A beta value of more than 1 implies the stock is very sensitive to the broad market movement. Energy stocks, in particular, were volatile due to the oil price rout since July 2015.