Market Drivers: China and Earnings Upswing

English: Gianni Versace mansion, South Beach, ...

English: Gianni Versace mansion, South Beach, Miami, Florida (Photo credit: Wikipedia)

It appears that traders are taking a breather after markets tested a new high late last week. Major averages have failed to make any significant moves this week with earning season kicking into high gear. Results have been mixed, and are still largely keeping with “earnings beats, but soft revenue numbers” trend. Here are three things that have been driving the market this week.

Asian Optimism

Chinese markets received some bullish commentary early in the week, and the optimism spilled over into the U.S. equity markets. China's Vice Premier Zhang Gaoli,  said “the Asian nation will stick to its prudent monetary policy, but will take decisive measures to support reasonable infrastructure and social welfare investment as well to develop the export sector, service industry and small firms.” Also, Chinese Premier Li Keqiang was quoted as saying, “China would not tolerate growth of less than 7%.” The world’s second largest economy has endured two straight quarters of deceleration, and the comments appeared to have eased fears of a prolonged economic slowdown from the far East.

Earnings

On the earnings-front, Halliburton reported better-than-expected second-quarter earnings and revenue and increased its stock buyback program by $4.3 billion, but shares slipped as the week progressed. Dow components Travelers and United Technologies had opposite fortunes after reporting their numbers. Travelers took a hit after reporting a beat on both lines while United Technologies rallied after posting an earnings beat on below consensus revenue. Chemical giant Dupont initially traded higher after topping earnings and coming in below estimates on the top line, however its shares gave back early gains to close out their earnings day unchanged.  n the technology sector, Apple bested both lines and saw shares rally over 5 ½% following their release and Facebook also surprised the street with solidly better numbers on both earnings and EPS.

Housing

Housing data this week was relatively favorable, and appears to support a trend toward decreasing supply (coupled with fewer transactions) which should lead to increased construction and rising prices down the line. According to the National Association of Realtors, existing home sales dropped by 1.2% in June to a 5.08 M, (versus expectations for an increase of 1.5%), and following a downwardly revised 5.14 M pace in May. We also saw existing-home sales in the United States drop by 1.2% last month compared with May, and miss estimates calling for a gain of 1.9%.  New home sales came in at a 497,000 annual rate (a new “recovery” high) in June vs. expectations looking for 481,000.  While rising mortgage rates could be seen as a deterrent for new home buyers. Tight supply and the fear of price increases could spur potential buyers into action.

Weekly Bonus- Speaking of Home Sales

While this may not be a property that appeals to the masses, a one of a kind opportunity will be hitting the auction block on September 17th. After a year on the market (with no bids), the home of deceased designer Gianni Versace will be sold to the highest bidder. The mansion, purchased for $3 million in 1992 boasts 10 bedroom suites, 11 bathrooms a view of the Atlantic Ocean, and a massive pool with tiles made of 24 karat gold. To be eligible to participate in the auction, all you need is $3 million in cash and a mere $40 million in assets. While initially offered at $125 million the last offering price was $75 million, and the bidding will start at $25 million.