China Data, Q3 Earnings to Guide Markets

Weak data out of China and the start of the Q3 earnings season provide the backdrop for today's trading action. The major indexes are on track to follow the lead from the Asian and European markets by starting today's session in the red.

China's trade data today has brought back questions about that country's growth outlook, which had receded a bit into the background in recent days on the back of Fed-centric optimism. The country's trade numbers for September are a tad better than expected, but they nevertheless show that growth momentum remains to the downside. Exports were down -3.7% from the same period last year following the -5.5% drop in August while imports were down -20.4% in September following the -13.8% drop in August. The bigger drop in imports is likely a function of lower oil and other commodity prices as the volume of imports remained essentially flat.

The port explosion and temporary factory closures ahead of a September parade for air-quality reasons likely played roles in the weak trade numbers. But the weakness is nevertheless a reflection of global economic weakness that has been weighing on the performance of export-centric nations - exports are down even more for Taiwan and South Korea. These trade numbers reconfirm what we saw recently from PMI surveys, and indicate that Q3 GDP growth that's coming out next week will likely be below the government's growth target.

The China angle will likely be a big part of the discussion in Q3 earnings season which takes the spotlight today with reports from Johnson & Johnson ( JNJ ), Intel ( INTC ) and JPMorgan ( JPM ). The Intel and JPMorgan reports will be coming out after the close, though JNJ came out with a mixed report this morning - beating on EPS, missing on revenues and announcing a $10 billion debt-funded buyback program.

As expected, the strong U.S. dollar was a big headwind in the JNJ report, with Q3 revenues down more than -8% as a result of this issue. The strong U.S. dollar was a big issue last earnings season, and this JNJ report shows that we will be seeing a replay of this issue in the Q3 reporting cycle as well.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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