S&P 500 Earnings Update & Economic Data Review - Saturday, April 17

S&P 500 Earnings Update

The earnings per share (EPS) for all S&P 500 companies combined increased to $184.05 this week, a gain of 0.4% for the week and +15.8% year-to-date.

8.8% of S&P 500 companies have reported Q1 results so far. 84% of those companies have beaten estimates, and results have come in a combined 30.8% above estimates. So far, Q1 earnings growth is +31%.

The S&P 500 increased +1.37% for the week, and is now +11.4% year-to-date – not including dividends.

The increase in the index (+1.37%) was greater than the increase in the EPS (+0.4%). Therefore the market got a little more expensive, as the price to earnings (PE) ratio increased to 22.7x. Investors are paying $22.70 for every $1 in S&P 500 earnings.

The S&P 500 earnings yield is currently 4.4%, compared to the 10-year treasury bond rate (which declined for the second straight week) at 1.57%. The equity risk premium (earnings yield minus treasury rate) increased to 2.82% this week. Despite another record high, stocks are still reasonably priced based on fixed income alternatives and earnings growth.

Economic Data Review

The NFIB small business optimism index for March came in at 98.2; an increase of 2.5% for the month, and 1.9% annualized. Seven of the ten index components came in stronger than last month, led by the percentage of owners expecting the economy to improve, as well as an expected increase in sales. The NFIB began reporting the data on a monthly basis in 1986, and the historical average for the index is now 98.4.

“Quality of labor” was cited as the single most important problem for small business owners (with taxes and regulations as close runner-ups). “Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force. However, owners remain determined to hire workers and grow their business.”

The Consumer Price Index (CPI) increased 0.6% in March, the highest monthly increase since June 2009. The CPI is now +2.6% on an annual basis (up from +1.7% annualized last month). The biggest contributing factor was the large increase in gasoline and fuel oil costs.

The Consumer Price Index (CPI) minus food and energy (Core CPI) increased 0.3% in March. Core CPI is now +1.6% on an annual basis (up from +1.3% annualized last month). Core inflation readings are the Fed’s preferred method of monitoring inflation. Though inflation is moving higher, as expected, it is still short of the Fed’s goal of +2% annualized.

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I/B/E/S data is from Refinitiv.

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