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* Chinese exports drop 10 pct in September - report
* Financials post biggest drop in a month
* Citigroup, JPMorgan, Wells Fargo to report results on Friday
* Indexes down: Dow 0.39 pct, S&P 0.39 pct, Nasdaq 0.53 pct (Updates to early afternoon)
By Yashaswini Swamynathan and Tanya Agrawal
Oct 13 (Reuters) - The S&P 500 and the Dow Jones industrial average touched three-month lows on Thursday, dragged down by weak Chinese economic data and a potential U.S. interest rate hike by the end of the year.
Data showed China's exports fell 10 percent in September, far worse than the markets had expected, while imports unexpectedly shrank, reviving concerns about the health of the world's second-largest economy.
The Fed on Wednesday released the minutes of its last rate-setting meeting that showed several policymakers felt a move was warranted "relatively soon" if the U.S. economy continued to strengthen.
The U.S. economy is doing "pretty well" and has a strong labor market, Philadelphia Fed President Patrick Harker said on Thursday. Harker does not have a vote on monetary policy this year but will in 2017.
Investors will also be looking for further clues on the timing of the next hike when Fed Chair Janet Yellen speaks on Friday.
Traders are pricing in about a 70 percent chance for a December rate hike, data from the CME Group's FedWatch tool showed.
Losses were broad based, with ten of the 11 S&P sectors trading lower. The financial index fell the most in a month.
Berkshire Hathaway, Bank of America, Wells Fargo and JPMorgan were the biggest drags on the index, falling between 1.2 and 2 percent. JPMorgan, Citigroup and Wells Fargo are due to report quarterly results on Friday.
Prices of gold, a safe haven, ticked higher, while the dollar, which is near a seven-month high, fell 0.33 percent against a basket of major currencies.
"China's export numbers are putting pressure on the market, while the Fed prepares to raise interest rates," said Robert Pavlik, chief market strategist at Boston Private Wealth.
"There are also concerns regarding Brexit, and investors are waiting to see what banks report this quarter. It's like everything is happening at the same time."
The CBOE volatility index, a gauge of near-term investor anxiety, jumped as much as 13 percent and was near its one-month high.
At 12:45 p.m. ET (1645 GMT) the Dow Jones industrial average was down 71.66 points, or 0.39 percent, at 18,072.54, and the Nasdaq Composite was down 27.89 points, or 0.53 percent, at 5,211.13.
The S&P 500 was down 8.43 points, or 0.39 percent, at 2,130.75.
The benchmark index had closed below the 2,140 mark on Thursday, confirming a break below its 100-day moving average, which had served as technical support over the past month.
Market valuations will be put to test during the earnings season, with profits of S&P 500 companies currently expected to fall 0.7 percent, according to Thomson Reuters data.
The S&P 500 index is trading at 17 times forward earnings, compared with its 10-year median of 14.7, according to StarMine data.
Utilities, perceived as safer equity assets, were the only gainers.
Deutsche Bank's Frankfurt-listed stock closed down 2.9 percent after sources told Reuters that the bank was introducing a hiring freeze as it seeks to cut costs amid a deep strategic overhaul. The bank's U.S. shares were down 2.3 percent.
Declining issues outnumbered advancing ones on the NYSE by 1,977 to 950. On the Nasdaq, 1,865 issues fell and 842 advanced.
The S&P 500 index showed no new 52-week highs and six new lows, while the Nasdaq recorded 16 new highs and 76 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)