EmailChinese manufacturing weakness has the S&P futures down about five points.
The private HSBC China Purchasing Managers Index (PMI) was 47.8 for September. That is the eleventh straight month below 50. A reading below 50 is intended to reflect a contraction in manufacturing. A continuing decline in this critical sector of the only major global economy experiencing significant growth is of serious concern. Japan's economic data is turning negative, the eurozone is already there, and the US will post another quarter of sub-2% growth. China was at 7% in the second quarter but won't match that in the third quarter.
The Shanghai stock index fell another 2.1%. The index is now down 17.3% over the past year, which is also about as much as it has fallen since May 1. The Chinese stock market never got the late-summer rebound that the US market got on the back of Fed policy announcements.
A eurozone PMI from Markit was even worse. The September reading was 46.0. That was off sharply from 47.2 in August. The reading for France was a scary 42.6. The French stock index is off 0.8%, the Spanish 1.3%, and the German 0.4%.
A reading on US manufacturing in the Philadelphia Fed region is due at 10:00 ET. A -4.0 read, reflecting contraction, is expected. US industrial production fell 1.2% in August and early indicators suggest another decline for September.
Another bad economic number comes in the form of a higher-than-expected level of new claims for unemployment for the week ended September 15. Claims fell to 382,000 from 385,000 the prior week but the prior week's number was thought to have been a weather-induced temporary pop. Claims have been trending slightly higher the past couple of months and the four-week moving average rose to 377,750 from 375,750.
This report is from the week in which the September payroll survey was conducted. It points to another lackluster payroll gain of less than 100,000.
Earnings warnings came from Adobe Systems, Bed Bath & Beyond, and Norfolk Southern. The third is of concern as transportation is still an important indicator of economic trends. The company said revenue will be lower than the year-ago quarter because of declines in coal and merchandise shipments. Earnings warnings pick up in the final weeks of any calendar quarter.
The earnings and economic trends aren't good. The market is holding up, at least for now, only because of QE3.
Founder and Chairman, Briefing.com
