Is top-line improving? Last quarter, almost every company came in flat or below analysts' expectations on revenues. Today, I am looking at 15 companies reporting, and only one — Jet Blue — has been below estimates. That is an important change in trend.
So far, of the 175 companies reporting in the S&P 500, 65 percent have beat revenue estimates, compared to only 38 percent last quarter. That is a huge improvement. Revenues are up 3.8 percent, earnings up 4.7 percent.
1) Housing just keeps getting better. D.R. Horton reported outstanding numbers.
Every metric was stronger than analysts' expectations: bottom line of $0.20 beat by six cents, revenues of $1.275 billion were up 41 percent, also above expectations. Orders were up 39 percent; average selling price was up 15 percent, and even gross margin of 18.8 percent was above expectations.
CEO Don Horton could barely contain his glee: "D.R. Horton is the best positioned it has been in its 35 year history. We are looking forward to the spring selling season with optimism."
With the exception of KB Home, new orders for companies reporting so far have been strong across the board:
Home Builder Orders (Fourth Quarter 2012)
What's happening: Sales for publicly traded home builders are slowly returning to more normalized levels. There has been a broad improvement in demand.
Again, the big problem is valuation: By some estimates, Horton is trading at 1.8 times book value, not cheap by historic standards.
2) Today is the 20th anniversary of the launch of the first exchange-traded fund, the SPDR S&P 500. Not only was it the first ETF in the U.S., it is also far and away the most successful. How successful? It has 126 billion in assets; that is 10 percent of the value of the entire ETF industry (about $1.3 trillion).
While ETFs are still small compared to the roughly $10 trillion in stock and bond mutual funds, mutual funds are losing assets, while ETFs are gaining. They are gaining because they can be bought and sold intraday, are more tax efficient, and — most importantly — are generally far cheaper than mutual funds.
(Read More: Are Mutual Fund Investors Really 'Dumb Money'?)
I will be speaking with Jim Ross, global head of State Street's ETF business and the man who runs the SPY, today at 3:40 ET with Maria Bartiromo and Scott Wapner.
2) Will higher interest rates be a problem for stocks? Not if it's a gradual move up.
(Read More: Interest Rates Are Climbing, but May Not Last Long)
Charles Campbell at MKM Partners notes that higher rates have never stopped the stock market from moving higher. He said that in the 1980s, the average yield of 10-year Treasury notes was 10.58 percent, but the S&P 500 produced an average annual return of 17.5 percent; in the 1990s the average 10-year yield was 6.61 percent, the S&P 500 produced an average annual return of 18.1 percent; in the 2000s, when rates dropped to 4.49 percent, the S&P 500 produced a negative 0.9 percent return.
3) Bull market? China's Shanghai Index advanced modestly today, up 0.53 percent, but the seven-week advance from the Dec. 3 multiyear low is now over 20 percent.