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Investors look east to China trading link

Floor traders monitor share prices during afternoon trading at the Hong Kong Stock Exchange.
Bobby Yip | Reuters
Floor traders monitor share prices during afternoon trading at the Hong Kong Stock Exchange.

China stocks rallied, with the Hang Seng up 0.8 percent and the Shanghai Composite up 2.3 percent overnight. After years of discussion, the Hong Kong Stock Exchange and Shanghai will finally open a formal stock trading link on Nov. 17.

Many mainland China firms already dual list in Hong Kong, mainly large state-owned enterprises, but this trading link will open up many more smaller companies.

Read MoreUS welcomes peaceful, prosperous China: Obama

Hong Kong investors will be able to buy and sell an additional 568 Shanghai-listed equities. Mainland investors will be able to buy and sell 268 Hong Kong-listed stocks. This opens up many domestic Chinese stocks for the first time.

Some fund managers were already allowed to invest in Chinese stocks through a quota system that was capped at $105 billion. But the new system will allow most investors to buy shares on the Shanghai Stock Exchange, opening up the $2 trillion market fully to foreign investment, though there will be some quotas on inflows into China that will still be applied.

Elsewhere:

1) Not only are earnings holding up, but margins are, as well. S&P 500 margins are at 9.7 percent for the third quarter, near a record, according to S&P Capital IQ.

Read MoreStocks have a lot to prove in the week ahead

2) Toll Brothers reported preliminary revenue and orders data. Revenues of $1.35 billion were ahead of expectations. Orders were up 10.2 percent for its fiscal fourth quarter, short of most analyst estimates, although on a dollar level it appeared to be a good number.

3) Oil rig provider Transocean announced $2.6 billion in writedowns on Friday due to a decline in day rates for its rigs, but its earnings report overnight showed earnings of 96 cents, well above expectations of 83 cents. Revenues were higher as well.

4) It's a big week for retailers. Wal-Mart reports on Thursday, with expectations fairly low. How low? The company earned $1.14 in the third quarter of 2013; for Q3 2014 it is expected to earn $1.12, two cents less. Same-store sales have been flat.

Read MoreWal-Mart: Online rivals can't sway Chinese moms

JC Penney will report Wednesday, and the only good news is the retailer will likely lose a lot less. In the third quarter of 2013, it lost $1.81; this time, the loss is expected to be down to 81 cents. JC Penney has cut losses more than half, but there's still a long way to go.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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