China plunge hits US stocks; What happens next?

Trader on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Trader on the floor of the New York Stock Exchange.

The new year began with a big drop in the Chinese stocks, which dragged down U.S. markets with it.

China volatility was among the biggest headwinds for U.S. investors in 2015, causing the S&P 500 to reach correction territory last summer as fears of an economic slowdown there hit shares of Caterpillar, United Technologies and Apple.

If we're in for bigger trouble in big China, here are all the ways to trade it both on the short side and the long side, according to CNBC Pro's analysis of historical data using Kensho.

First off, let's look at the short-term trading reaction historically in U.S. markets when stocks in China plummet.

In the last decade, there have been 36 single trading days when the Shanghai composite dropped 5 percent or more, according to Kensho. On those days, U.S. markets take a sizable hit, with the S&P 500 posting a 0.8 percent loss on average.

The sector performance is even more informative...

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