CHICAGO ( TheStreet -- Although all of the discussion on the broader market of late has been highly bullish, many obstacles remain in the path of substantially higher moves in equities, at least in the near term.

And with so much attention focused on the Chinese economy helping to lead us out of this global recession, any severe weakness -- witness Wednedsay's selloff -- there could undermine the recent economic optimism.

Many of the companies reporting earnings thus far have exceeded analyst estimates. But the bulk of these earnings beats have come at the hands of drastic cost-cutting measures manifested as severe product cutbacks and employee layoffs. One need only look at the top-line revenue numbers released by many of these companies to see that in fact business is down -- way down.

Caterpillar ( CAT) was a great example of this -- with quarterly revenue missing analysts expectations by approximately $1 billion. And although I do feel companies in general are doing a great job of wethering the recession, one must decide if current valuations are justified.

The disappointing results from the likes of Honeywell ( HON), Verizon ( VZ) and Sprint ( S) further demonstrate the challenges faced by companies in the current economic environment.

The market is also dealing with this morning's readings on durable goods. Although this number did reflect some possible signs of stabilization within the manufacturing sector, weaker orders for autos and airplanes did equate to a 2.5% decrease for June, considerably worse than analysts' expectations of a 0.5% drop.

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