As third-quarter earnings season kicks off this week, one company's report is already showing signs of stress from a decelerating Chinese economy.
Shares of Yum Brands plunged 19 percent Wednesday after reporting earnings that fell short of expectations, with China results particularly disappointing. Skin care company Nu Skin also saw its stock plummet on lower-than-expected sales in the Asian country.
And according to some traders, China could cause a lot more trouble as third-quarter earnings season heats up.
Erin Gibbs, equity chief investment officer of S&P Capital IQ, said she is concerned about companies with more than 10 percent of sales coming out of China. These include consumer discretionary stocks Delphi, BorgWarner and Leggett & Platt.
"BorgWarner had 11 percent of its sales last year come from China, and was expected to have a much higher percentage after their $550 million expansion program," Gibbs said. "They too could make missteps, or see lower-than-expected growth like Yum."
China accounts for 16 percent of sales for auto parts manufacturer Delphi, and 10 percent for bedding company Leggett & Platt.
Meanwhile, technician Todd Gordon of TradingAnalysis.com said semiconductor stocks could be the next group to fall.
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