This Week's Preview: Stay On The Sidelines

Jan. 11, 2016 7:30 AM ETDIA, SPY
Sarfaraz A. Khan profile picture
Sarfaraz A. Khan


  • Last week was a tough one for the S&P-500 and Dow Jones, due in large part to mounting concerns regarding China's economic growth.
  • Last week, we didn't get any significant economic data from China, but this week, we'll get the latest trade numbers that may not look good.
  • The turmoil in China may continue to impact US markets.
  • The US earnings season will also kick off from Monday when Alcoa announces its results.
  • The materials and energy sectors may continue to drag the S&P-500.

LStockast week marked the worst start of the year for global equity markets ever. Virtually every S&P-500 sector closed in red on Friday. The SPDR S&P 500 ETF (SPY), which tracks to S&P-500, and the SPDR Dow Jones Industrial Average ETF (DIA) which follows the Dow Jones, have dropped 5.8% and 6.2% respectively. The worsening geopolitical landscape, with North Korea claim regarding a successful hydrogen bomb test and growing tensions in the Middle East, has not helped. But the sell-off has been fueled in large part by fears related to a global economic slowdown in general and China in particular.

China's Shanghai composite plunged 6.9% last Monday, due to growing concerns regarding Yuan's devaluation, followed by 7% drop on Thursday. The latest drop prompted Beijing to suspend the four-day old "circuit breakers". The mechanism, which halts trading for 15 minutes following a 5% drop in CSI 300 and suspends activity for the day after a 7% decline, was meant to reduce panic selling, but seems to have 5trrrfexacerbated the sell-off - which was also partly admitted by Chinese regulators.

But more importantly, the drop in China's equity markets is the latest in a series of self-inflicted wounds which include the significant crash in mid-2015 and yuan surprise devaluation in August. Such events have highlighted policy miscalculations and raised concerns about China's commitment to reform its financial markets and competence of the policy makers. No wonder US investors seem to be losing whatever faith they had in China's equity markets, and by that extension, Chinese companies that trade here in the US.

Last week was a quiet one in terms of economic data from China, but on Wednesday, we'll get the latest trade balance numbers. The nation's trade with the rest of the world has been going downhill, with the previous

This article was written by

Sarfaraz A. Khan profile picture
Hey there, I'm Sarfaraz A. Khan - a seasoned financial writer and investor with a passion for uncovering hidden gems. I have a deep understanding of fundamental analysis and I specialize in writing about mid-cap and small-cap companies that are poised for significant growth. My investment philosophy is heavily influenced by the strategies of legendary investors like Warren Buffett and Benjamin Graham. I look for investment opportunities in companies that have strong fundamentals and can grow substantially over the long-term. I'm not afraid to venture into other areas of the market either. While I primarily write about mid and small-cap stocks, I also delve into ETFs and economic trends occasionally. I always aim to provide a balanced view and discuss risk factors in my articles so investors can make better decisions. Although I've been away from Seeking Alpha for a while, I'm excited to get back to writing and sharing my expertise with the community. Moving forward, you can expect to see two to three articles a week from me. When I'm not analyzing stocks or writing about finance, I enjoy reading about history, religion, science, economy, and following the latest developments in the energy and technology sectors.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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