Markets Focus On Data Out Of China And Domestic Earnings Reports

Stocks are on track to start today's session modestly in the red, with seemingly reassuring data out of China and the onset of a barrage of earnings reports as the primary backdrop. Earnings remain front and center this week, with more than a fifth of S&P 500 index members coming out with Q3 results.

China's economy grew at a +6.9% rate in Q3, modestly above the consensus estimate of +6.8% - but still the lowest growth pace since 2009, and below the government's target of +7%. These growth numbers should be reassuring to a market that has been concerned about the country's growth picture, but longstanding doubts about the quality of China's data persists. Other measures of economic activity like electricity usage, factory sector output and freight rates have been pointing towards a much sharper deceleration in growth activities.

Accompanying the GDP release were readings of industrial production, fixed asset investments and retail sales that largely came short of estimates (retail sales came inline). China bulls claim that the country's transition away from export-centered manufacturing is well in place that aren't getting captured in traditional growth metrics like electricity usage rates.

On the home front, the economic data calendar is on the light side, with a number of housing-related readings on the docket. But the focus is on earnings as we enter the heart of the Q3 earnings season, with more than 110 S&P 500 companies reporting results. It has been a weak earnings season thus far and this morning's reports from Morgan Stanley ( MS ), Halliburton ( HAL ) and others were right all those lines as well.

Including this morning reports, we now have Q3 results from 63 S&P 500 members that combined account for 18.6% of the index's total market capitalization. Total earnings for these companies are up +1% from the same period last year on -0.9% lower revenues, with 61.9% beating EPS estimates and 28.6% coming ahead of revenue estimates.

This is weak performance relative to what we saw from this same group of 63 index members in other recent periods, with the growth pace notably going down once contribution from easy comparisons at Bank of America ( BAC ) are excluded from the numbers (ex-Finance earnings growth is -7.4%). Surprises are tracking below other comparable periods, with the picture particularly weak on the revenue side. We had a similar issue in the preceding quarter and Q3 appears to be providing a replay of the top-line weakness all over again.

Looking at Q3 as a whole, combining the actual results from the 63 companies that have reported with estimates for the still-to-come 437 index members, total earnings are expected to be down -4.6% on -4.8% lower revenues. Estimates for Q4 have started to come down, with total earnings for the S&P 500 index now expected to be down -5.4% from the same period last year, down from an expected decline -4.7% last Friday.

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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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